In the past several years, the doctrine of state action immunity has been a target for reform by judges, scholars, and policymakers across the country. After the U.S. Supreme Court issued decisions in 2012 and 2015 heightening judicial scrutiny of state action immunity, bipartisan efforts at both the state and federal levels have emerged in an attempt to minimize the potential for misuse of state action immunity, particularly among state professional licensing boards. With the Supreme Court set to hear oral arguments this month in yet another case involving state action immunity, further reform may be on the horizon.

Originally established in 1943 by the Supreme Court in Parker v. Brown, state action immunity exempts state governments from antitrust scrutiny under the Sherman Act. In its 1980 decision in California Retail Liquor Dealer Ass'n v. Midcal Aluminum, the Supreme Court established the modern two-part test for courts to use in determining whether anticompetitive actions taken by state and local regulators will receive state action immunity. Under the Midcal test, courts will grant immunity to regulations that displace competition so long as the regulator (1) is acting pursuant to a clearly articulated state policy, and (2) receives active supervision from the state government.

Renewed Supreme Court Interest Prompts the Drive for Reform

In 2012 in FTC v. Phoebe Putney Health Systems, the Supreme Court declined to extend state action immunity to a Georgia state-authorized hospital's attempted acquisition of the only other hospital in its county. The Supreme Court signaled its skepticism towards immunizing actions pursued by entities under the supervision of state regulators that appear to cause competitive harm without providing any corresponding public benefit. The Supreme Court's most recent decision in the area of state action immunity in 2015, North Carolina State Board of Dental Examiners v. FTC (NC Dental), further heightened judicial scrutiny of regulatory licensing agencies seeking state action immunity, particularly those which are controlled by active market participants, such as state professional licensing boards.

State licensing boards are established by state governments to regulate a specific industry, but many are largely autonomous and given broad mandates to regulate. Prior to NC Dental, they were largely immunized by Parker and its progeny. A 2014 study by law professors Aaron Edlin and Rebecca Haw found that nearly 800 professions (comprising nearly one-third of American workers) require a state license to legally perform the job, and concluded that state licensing boards are often controlled by active market participants who use their state-granted authority to insulate themselves from increased competition. Edlin and Haw also highlighted various economic studies claiming that such widespread licensing was estimated to cost American consumers almost $140 billion per year.