State Action and the Meaning of Agreement Under the Sherman Act: An Approach to Hybrid Restraints

Abstract:     
Under the Midcal test for state-action immunity from the federal antitrust laws, a state must clearly articulate its policy to displace competition and must actively supervise any private conduct pursuant to the policy. But state action need not meet these requirements, if it is unilateral and therefore does not not conflict with Section 1. Only if the state-authorized restraint is hybrid, combining state and private action in a way that resembles a prohibited agreement, need the restraint satisfy Midcal. In this 2003 article, we argue that a unilateral restraint is one in which government actors define the extent of consumer harm, while a hybrid restraint is one that gives private actors discretion to harm consumers in a way that resembles an antitrust violation. Under this definition, state laws that facilitate tacit collusion and serve no competitively benign purpose conflict with Section 1.

Number of Pages in PDF File: 56

Keywords: antitrust, hybrid restraints, tacit collusion, Sherman Act

JEL Classification: K21, K23, K40, L51, L51

Accepted Paper Series