The FTC and State Action: Evolving Views on the Proper Role of Government

Abstract:     
The state action doctrine was born in an era of exceptional confidence in government, with governmental entities widely regarded as unbiased and conscientious defenders of the public interest. Over time, however, more cautious and skeptical theories of government began to gain sway. In particular, the school of thought known as public choice - which holds that governmental entities, like private firms, will act in their economic self-interest - began to influence both legal theory and competition policy. Indeed, a close examination of recent state action case law suggests that public choice thinking has driven a slow, but consistent, evolution of the doctrine toward less deference to state regulators and more careful assessment of the actual incentives that drive their decision-making.

This evolution in thinking, however, has not been accompanied by the development of a systematic, analytical framework to guide the application of the state action doctrine in particular cases. Developing such a framework should therefore remain a top priority of leading antitrust policymakers, including those at the Federal Trade Commission.

Keywords: state action, public choice, antitrust law and policy, antitrust exemptions

JEL Classifications: K21, K00, H11, H70, H77

Accepted Paper Series