FTC v. PHOEBE PUTNEY HEALTH SYSTEM

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

_________________

No. 11–1160

_________________

FEDERAL TRADE COMMISSION, PETITIONER v. PHOEBE PUTNEY HEALTH SYSTEM, INC., et al.

on writ of certiorari to the united states court of appeals for the eleventh circuit

[February 19, 2013]

Justice Sotomayor delivered the opinion of the Court.

Under this Court’s state-action immunity doctrine, when a local governmental entity acts pursuant to a clearly articulated and affirmatively expressed state policy to displace competition, it is exempt from scrutiny under the federal antitrust laws. In this case, we must decide whether a Georgia law that creates special-purpose public entities called hospital authorities and gives those entities general corporate powers, including the power to acquire hospitals, clearly articulates and affirmatively expresses a state policy to permit acquisitions that substantially lessen competition. Because Georgia’s grant of general corporate powers to hospital authorities does not include permission to use those powers anticompetitively, we hold that the clear-articulation test is not satisfied and state-action immunity does not apply.

I A

In 1941, the State of Georgia amended its Constitution to allow political subdivisions to provide health care services. 1941 Ga. Laws p. 50. The State concurrently enacted the Hospital Authorities Law (Law), id., at 241, Ga. Code Ann. §31–7–70 et seq. (2012), “to provide a mechanism for the operation and maintenance of needed health care facilities in the several counties and municipalities of th[e] state.” §31–7–76(a). “The purpose of the constitutional provision and the statute based thereon was to . . . create an organization which could carry out and make more workable the duty which the State owed to its indigent sick.” DeJarnette v. Hospital Auth. of Albany, 195 Ga. 189, 200, 23 S. E. 2d 716, 723 (1942) (citations omitted). As amended, the Law authorizes each county and municipality, and certain combinations of counties or municipalities, to create “a public body corporate and politic” called a “hospital authority.” §§31–7–72(a), (d). Hospital authorities are governed by 5to 9-member boards that are appointed by the governing body of the county or municipality in their area of operation. §31–7–72(a).

Under the Law, a hospital authority “exercise[s] public and essential governmental functions” and is delegated “all the powers necessary or convenient to carry out and effectuate” the Law’s purposes. §31–7–75. Giving more content to that general delegation, the Law enumerates 27 powers conferred upon hospital authorities, including the power “[t]o acquire by purchase, lease, or otherwise and to operate projects,” §31–7–75(4), which are defined to include hospitals and other public health facilities, §31–7–71(5); “[t]o construct, reconstruct, improve, alter, and repair projects,” §31–7–75(5); “[t]o lease . . . for operation by others any project” provided certain conditions are satisfied, §31–7–75(7); and “[t]o establish rates and charges for the services and use of the facilities of the authority,” §31–7–75(10). Hospital authorities may not operate or construct any project for profit, and accordingly they must set rates so as only to cover operating expenses and create reasonable reserves. §31–7–77.

B

In the same year that the Law was adopted, the city of Albany and Dougherty County established the Hospital Authority of Albany-Dougherty County (Authority) and the Authority promptly acquired Phoebe Putney Memorial Hospital (Memorial), which has been in operation in Albany since 1911. In 1990, the Authority restructured its operations by forming two private nonprofit corporations to manage Memorial: Phoebe Putney Health System, Inc. (PPHS), and its subsidiary, Phoebe Putney Memorial Hospital, Inc. (PPMH). The Authority leased Memorial to PPMH for $1 per year for 40 years. Under the lease, PPMH has exclusive authority over the operation of Memorial, including the ability to set rates for services. Consistent with §31–7–75(7), PPMH is subject to lease conditions that require provision of care to the indigent sick and limit its rate of return.

Memorial is one of two hospitals in Dougherty County. The second, Palmyra Medical Center (Palmyra), was established in Albany in 1971 and is located just two miles from Memorial. At the time suit was brought in this case, Palmyra was operated by a national for-profit hospital network, HCA, Inc. (HCA). Together, Memorial and Palmyra account for 86 percent of the market for acute-care hospital services provided to commercial health care plans and their customers in the six counties surrounding Albany. Memorial accounts for 75 percent of that market on its own.

In 2010, PPHS began discussions with HCA about acquiring Palmyra. Following negotiations, PPHS presented the Authority with a plan under which the Authority would purchase Palmyra with PPHS controlled funds and then lease Palmyra to a PPHS subsidiary for $1 per year under the Memorial lease agreement. The Authority unanimously approved the transaction.

The Federal Trade Commission (FTC) shortly thereafter issued an administrative complaint alleging that the proposed purchase-and-lease transaction would create a virtual monopoly and would substantially reduce competition in the market for acute-care hospital services, in violation of §5 of the Federal Trade Commission Act, 38Stat. 719, 15 U. S. C. §45, and §7 of the Clayton Act, 38Stat. 731, 15 U. S. C. §18. The FTC, along with the State of Georgia, 1 subsequently filed suit against the Authority, HCA, Palmyra, PPHS, PPMH, and the new PPHS subsidiary created to manage Palmyra (collectively respondents), seeking to enjoin the transaction pending administrative proceedings. See 15 U. S. C. §§26, 53(b).

The United States District Court for the Middle District of Georgia denied the request for a preliminary injunction and granted respondents’ motion to dismiss. 793 F. Supp. 2d 1356 (2011). The District Court held that respondents are immune from antitrust liability under the state-action doctrine. See id., at 1366–1381.

The United States Court of Appeals for the Eleventh Circuit affirmed. 663 F. 3d 1369 (2011). As an initial matter, the court “agree[d] with the [FTC] that, on the facts alleged, the joint operation of Memorial and Palmyra would substantially lessen competition or tend to create, if not create, a monopoly.” Id., at 1375. But the court con-cluded that the transaction was immune from antitrust liability. See id., at 1375–1378. The Court of Appeals explained that as a local governmental entity, the Authority was entitled to state-action immunity if the challenged anticompetitive conduct was a “ ‘foreseeable result’ ” of Georgia’s legislation. Id., at 1375. According to the court, anticompetitive conduct is foreseeable if it could have been “ ‘reasonably anticipated’ ” by the state legislature; it is not necessary, the court reasoned, for an anticompetitive effect to “ be ‘one that ordinarily occurs, routinely occurs, or is inherently likely to occur as a result of the empowering legislation.’ ” Id., at 1375–1376 (quoting FTC v. Hospital Bd. of Directors of Lee Cty., 38 F. 3d 1184, 1188, 1190–1191 (CA11 1994)). Applying that standard, the Court of Appeals concluded that the Law contemplated the anticompetitive conduct challenged by the FTC. The court noted the “impressive breadth” of the powers given to hospital authorities, which include traditional powers of private corporations and a few additional capabilities, such as the power to exercise eminent domain. See 663 F. 3d, at 1376. More specifically, the court reasoned that the Georgia Legislature must have anticipated that the grant of power to hospital authorities to acquire and lease projects would produce anticompetitive effects because “[f]oreseeably, acquisitions could consolidate ownership of competing hospitals, eliminating competition between them.” Id., at 1377. 2

The Court of Appeals also rejected the FTC’s alternative argument that state-action immunity did not apply because the transaction in substance involved a transfer of control over Palmyra from one private entity to another, with the Authority acting as a mere conduit for the sale to evade antitrust liability. See id., at 1376, n. 12.

We granted certiorari on two questions: whether the Georgia Legislature, through the powers it vested in hospital authorities, clearly articulated and affirmatively expressed a state policy to displace competition in the market for hospital services; and if so, whether state-action immunity is nonetheless inapplicable as a result of the Authority’s minimal participation in negotiating the terms of the sale of Palymra and the Authority’s limited supervision of the two hospitals’ operations. See 567 U. S. ___ (2012). Concluding that the answer to the first question is “no,” we reverse without reaching the second question. 3

II

In Parker v. Brown, 317 U. S. 341 (1943) , this Court held that because “nothing in the language of the Sherman Act [ 15 U. S. C. §1 et seq.] or in its history” suggested that Congress intended to restrict the sovereign capacity of the States to regulate their economies, the Act should not be read to bar States from imposing market restraints “as an act of government.” Id., at 350, 352. Following Parker, we have held that under certain circumstances, immunity from the federal antitrust laws may extend to nonstate actors carrying out the State’s regulatory program. See Patrick v. Burget, 486 U. S. 94 –100 (1988); Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U. S. 48 –57 (1985).

But given the fundamental national values of free enterprise and economic competition that are embodied in the federal antitrust laws, “state-action immunity is disfavored, much as are repeals by implication.” FTC v. Ticor Title Ins. Co., 504 U. S. 621, 636 (1992) . Consistent with this preference, we recognize state-action immunity only when it is clear that the challenged anticompetitive conduct is undertaken pursuant to a regulatory scheme that “is the State’s own.” Id., at 635. Accordingly, “[c]loser analysis is required when the activity at issue is not directly that of” the State itself, but rather “is carried out by others pursuant to state authorization.” Hoover v. Ronwin, 466 U. S. 558, 568 (1984) . When determining whether the anticompetitive acts of private parties are entitled to immunity, we employ a two-part test, requiring first that “the challenged restraint . . . be one clearly articulated and affirmatively expressed as state policy,” and second that “the policy . . . be actively supervised by the State.” California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U. S. 97, 105 (1980) (internal quotation marks omitted).

This case involves allegedly anticompetitive conduct undertaken by a substate governmental entity. Because municipalities and other political subdivisions are not themselves sovereign, state-action immunity under Parker does not apply to them directly. See Columbia v. Omni Outdoor Advertising, Inc., 499 U. S. 365, 370 (1991) ; Lafayette v. Louisiana Power & Light Co., 435 U. S. 389 –413 (1978) (plurality opinion). At the same time, however, substate governmental entities do receive immunity from antitrust scrutiny when they act “pursuant to state policy to displace competition with regulation or monopoly public service.” Id., at 413. 4 This rule “preserves to the States their freedom . . . to use their municipalities to administer state regulatory policies free of the inhibitions of the federal antitrust laws without at the same time permitting purely parochial interests to disrupt the Nation’s free-market goals.” Id., at 415–416.

As with private parties, immunity will only attach to the activities of local governmental entities if they are undertaken pursuant to a “clearly articulated and affirmatively expressed” state policy to displace competition. Community Communications Co. v. Boulder, 455 U. S. 40, 52 (1982) . But unlike private parties, such entities are not subject to the “active state supervision requirement” because they have less of an incentive to pursue their own self-interest under the guise of implementing state policies. Hallie v. Eau Claire, 471 U. S. 34 –47 (1985). 5

“[T]o pass the ‘clear articulation’ test,” a state legislature need not “expressly state in a statute or its legislative history that the legislature intends for the delegated action to have anticompetitive effects.” Id., at 43. Rather, we explained in Hallie that state-action immunity applies if the anticompetitive effect was the “ foreseeable result” of what the State authorized. Id., at 42. We applied that principle in Omni, where we concluded that the clear-articulation test was satisfied because the suppression of competition in the billboard market was the foreseeable result of a state statute authorizing municipalities to adopt zoning ordinances regulating the construction of buildings and other structures. 499 U. S., at 373.

III A

Applying the clear-articulation test to the Law before us, we conclude that respondents’ claim for state-action immunity fails because there is no evidence the State affirmatively contemplated that hospital authorities would displace competition by consolidating hospital ownership. The acquisition and leasing powers exercised by the Authority in the challenged transaction, which were the principal powers relied upon by the Court of Appeals in finding state-action immunity, see 663 F. 3d, at 1377, mirror general powers routinely conferred by state law upon private corporations. 6 Other powers possessed by hospital authorities that the Court of Appeals characterized as having “impressive breadth,” id., at 1376, also fit this pattern, including the ability to make and execute contracts, §31–7–75(3), to set rates for services, §31–7–75(10), to sue and be sued, §31–7–75(1), to borrow money, §31–7–75(17), and the residual authority to exercise any or all powers possessed by private corporations, §31–7–75(21).

Our case law makes clear that state-law authority to act is insufficient to establish state-action immunity; the substate governmental entity must also show that it has been delegated authority to act or regulate anticompetitively. See Omni, 499 U. S., at 372. In Boulder, we held that Colorado’s Home Rule Amendment allowing municipalities to govern local affairs did not satisfy the clear-articulation test. 455 U. S., at 55–56. There was no doubt in that case that the city had authority as a matter of state law to pass an ordinance imposing a moratorium on a cable provider’s expansion of service. Id., at 45–46. But we rejected the proposition that “the general grant of power to enact ordinances necessarily implies state authorization to enact specific anticompetitive ordinances” because such an approach “would wholly eviscerate the concepts of ‘clear articulation and affirmative expression’ that our precedents require.” Id., at 56. We explained that when a State’s position “is one of mere neutrality respecting the municipal actions challenged as anticompetitive,” the State cannot be said to have “ ‘contemplated’ ” those anticompetitive actions. Id., at 55.

The principle articulated in Boulder controls this case. Grants of general corporate power that allow substate governmental entities to participate in a competitive marketplace should be, can be, and typically are used in ways that raise no federal antitrust concerns. As a result, a State that has delegated such general powers “can hardly be said to have ‘contemplated’ ” that they will be used anticompetitively. Ibid. See also 1A P. Areeda & H. Hovenkamp, Antitrust Law ¶225a, p. 131 (3d ed. 2006) (hereinafter Areeda & Hovenkamp) (“When a state grants power to an inferior entity, it presumably grants the power to do the thing contemplated, but not to do so anticompetitively”). Thus, while the Law does allow the Authority to acquire hospitals, it does not clearly articulate and affirmatively express a state policy empowering the Authority to make acquisitions of existing hospitals that will substantially lessen competition.

B

In concluding otherwise, and specifically in reasoning that the Georgia Legislature “must have anticipated” that acquisitions by hospital authorities “would produce anticompetitive effects,” 663 F. 3d, at 1377, the Court of Appeals applied the concept of “foreseeability” from our clear-articulation test too loosely.

In Hallie, we recognized that it would “embod[y] an unrealistic view of how legislatures work and of how statutes are written” to require state legislatures to explicitly authorize specific anticompetitive effects before state-action immunity could apply. 471 U. S., at 43. “No legislature,” we explained, “can be expected to catalog all of the anticipated effects” of a statute delegating authority to a substate governmental entity. Ibid.  Instead, we have approached the clear-articulation inquiry more practically, but without diluting the ultimate requirement that the State must have affirmatively contemplated the displacement of competition such that the challenged anticompetitive effects can be attributed to the “state itself.” Parker, 317 U. S., at 352. Thus, we have concluded that a state policy to displace federal antitrust law was sufficiently expressed where the displacement of competition was the inherent, logical, or ordinary result of the exercise of authority delegated by the state legislature. In that scenario, the State must have foreseen and implicitly endorsed the anticompetitive effects as consistent with its policy goals.

For example, in Hallie, Wisconsin statutory law regulating the municipal provision of sewage services expressly permitted cities to limit their service to surrounding unincorporated areas. See 471 U. S., at 41. While unincorporated towns alleged that the city’s exercise of that power constituted an unlawful tying arrangement, an unlawful refusal to deal, and an abuse of monopoly power, we had no trouble concluding that these alleged anticompetitive effects were affirmatively contemplated by the State because it was “clear” that they “logically would result” from the grant of authority. Id., at 42. As described by the Wisconsin Supreme Court, the state legislature “ ‘viewed annexation by the city of a surrounding unincorporated area as a reasonable quid pro quo that a city could require before extending sewer services to the area.’ ” Id., at 44–45, n. 8 (quoting Hallie v. Chippewa Falls, 105 Wis. 2d 533, 540–541, 314 N. W. 2d 321, 325 (1982)). Without immunity, federal antitrust law could have undermined that arrangement and taken completely off the table the policy option that the State clearly intended for cities to have.

Similarly, in Omni, where the respondents alleged that the city had used its zoning power to protect an incumbent billboard provider against competition, we found that the clear-articulation test was easily satisfied even though the state statutes delegating zoning authority to the city did not explicitly permit the suppression of competition. We explained that “[t]he very purpose of zoning regulation is to displace unfettered business freedom in a manner that regularly has the effect of preventing normal acts of competition” and that a zoning ordinance regulating the size, location, and spacing of billboards “necessarily protects existing billboards against some competition from newcomers.” 499 U. S., at 373. Other cases in which we have found a “clear articulation” of the State’s intent to displace competition without an explicit statement have also involved authorizations to act or regulate in ways that were inherently anticompetitive. 7

By contrast, “simple permission to play in a market” does not “foreseeably entail permission to roughhouse in that market unlawfully.” Kay Elec. Cooperative v. Newkirk, 647 F. 3d 1039, 1043 (CA10 2011). When a State grants some entity general power to act, whether it is a private corporation or a public entity like the Authority, it does so against the backdrop of federal antitrust law. See Ticor Title, 504 U. S., at 632. Of course, both private parties and local governmental entities conceivably may transgress antitrust requirements by exercising their general powers in anticompetitive ways. But a reasonable legislature’s ability to anticipate that (potentially undesirable) possibility falls well short of clearly articulating an affirmative state policy to displace competition with a regulatory alternative.

Believing that this case falls within the scope of the foreseeability standard applied in Hallie and Omni, the Court of Appeals stated that “[i]t defies imagination to suppose the [state] legislature could have believed that every geographic market in Georgia was so replete with hospitals that authorizing acquisitions by the authorities could have no serious anticompetitive consequences.” 663 F. 3d, at 1377. Respondents echo this argument, noting that each of Georgia’s 159 counties covers a small geographical area and that most of them are sparsely populated, with nearly three-quarters having fewer than 50,000 residents as of the 2010 Census. Brief for Respondents 46.

Even accepting, arguendo, the premise that facts about a market could make the anticompetitive use of general corporate powers “foreseeable,” we reject the Court of Appeals’ and respondents’ conclusion because only a relatively small subset of the conduct permitted as a matter of state law by Ga. Code Ann. §31–7–75(4) has the potential to negatively affect competition. Contrary to the Court of Appeals’ and respondents’ characterization, §31–7–75(4) is not principally concerned with hospital authorities’ ability to acquire multiple hospitals and consolidate their operations. Section 31–7–75(4) allows authorities to acquire “projects,” which includes not only “hospitals,” but also “health care facilities, dormitories, office buildings, clinics, housing accommodations, nursing homes, rehabilitation centers, extended care facilities, and other public health facilities.” §31–7–71(5). Narrowing our focus to the market for hospital services, the power to acquire hospitals still does not ordinarily produce anticompetitive effects. Section 31–7–75(4) was, after all, the source of power for newly formed hospital authorities to acquire a hospital in the first instance—a transaction that was unlikely to raise any antitrust concerns even in small markets because the transfer of ownership from private to public hands does not increase market concentration. See 1A Areeda & Hovenkamp ¶224e(c), at 126 (“[S]ubstitution of one monopolist for another is not an antitrust violation”). While subsequent acquisitions by authorities have the potential to reduce competition, they will raise federal antitrust concerns only in markets that are large enough to support more than one hospital but sufficiently small that the merger of competitors would lead to a significant increase in market concentration. This is too slender a reed to support the Court of Appeals’ and respondents’ inference.

IV A

Taking a somewhat different approach than the Court of Appeals, respondents insist that the Law should not be read as a mere authorization for hospital authorities to participate in the hospital-services market and exercise general corporate powers. Rather, they contend that hospital authorities are granted unique powers and responsibilities to fulfill the State’s objective of providing all residents with access to adequate and affordable health and hospital care. See, e.g., Ga. Code Ann. §31–7–75(22). Respondents argue that in view of hospital authorities’ statutory objective, their specific attributes, and the regulatory context in which they operate, it was foreseeable that authorities facing capacity constraints would decide they could best serve their communities’ needs by acquiring an existing local hospital rather than incur the additional expense and regulatory burden of expanding a facility or constructing a new one. See Brief for Respondents 33–39.

In support of this argument, respondents observe that hospital authorities are simultaneously empowered to act in ways private entities cannot while also being subject to significant regulatory constraints. On the power side, as the Court of Appeals noted, 663 F. 3d, at 1376–1377, hospital authorities may acquire through eminent domain property that is “essential to the [authority’s] purposes.” §31–7–75(12). 8 On the restraint side, hospital authorities are managed by a publicly accountable board, §§31–7–74.1, 31–7–76, they must operate on a nonprofit basis, §31–7–77, and they may only lease a project for others to operate after determining that doing so will promote the community’s public health needs and that the lessee will not receive more than a reasonable rate of return on its investment, §31–7–75(7). Moreover, hospital authorities operate within a broader regulatory context in which Georgia requires any party seeking to establish or significantly expand certain medical facilities, including hospitals, to obtain a certificate of need from state regulators. See §31–6–40 et seq. 9

We have no doubt that Georgia’s hospital authorities differ materially from private corporations that offer hospital services. But nothing in the Law or any other provision of Georgia law clearly articulates a state policy to allow authorities to exercise their general corporate powers, including their acquisition power, without regard to negative effects on competition. The state legislature’s objective of improving access to affordable health care does not logically suggest that the State intended that hospital authorities pursue that end through mergers that create monopolies. Nor do the restrictions imposed on hospital authorities, including the requirement that they operate on a nonprofit basis, reveal such a policy. Particularly in light of our national policy favoring competition, these restrictions should be read to reflect more modest aims. The legislature may have viewed profit generation as incompatible with its goal of providing care for the indigent sick. In addition, the legislature may have believed that some hospital authorities would operate in markets with characteristics of natural monopolies, in which case the legislature could not rely on competition to control prices. See Cantor v. Detroit Edison Co., 428 U. S. 579 –596 (1976).

We recognize that Georgia, particularly through its certificate of need requirement, does limit competition in the market for hospital services in some respects. But regulation of an industry, and even the authorization of discrete forms of anticompetitive conduct pursuant to a regulatory structure, does not establish that the State has affirmatively contemplated other forms of anticompetitive conduct that are only tangentially related. Thus, in Goldfarb v. Virginia State Bar, 421 U. S. 773 (1975) , we rejected a state-action defense to price-fixing claims where a state bar adopted a compulsory minimum fee schedule. Although the State heavily regulated the practice of law, we found no evidence that it had adopted a policy to displace price competition among lawyers. Id., at 788–792. And in Cantor, we concluded that a state commission’s regulation of rates for electricity charged by a public utility did not confer state-action immunity for a claim that the utility’s free distribution of light bulbs restrained trade in the light-bulb market. 428 U. S., at 596.

In this case, the fact that Georgia imposes limits on entry into the market for medical services, which apply to both hospital authorities and private corporations, does not clearly articulate a policy favoring the consolidation of existing hospitals that are engaged in active competition. Accord, FTC v. University Health, Inc., 938 F. 2d 1206, 1213, n. 13 (CA11 1991). As to the Authority’s eminent domain power, it was not exercised here and we do not find it relevant to the question whether the State authorized hospital authorities to consolidate market power through potentially anticompetitive acquisitions of existing hospitals.

B

Finally, respondents contend that to the extent there is any doubt about whether the clear-articulation test is satisfied in this context, federal courts should err on the side of recognizing immunity to avoid improper interference with state policy choices. See Brief for Respondents 43–44. But we do not find the Law ambiguous on the question whether it clearly articulates a policy authorizing anticompetitive acquisitions; it does not.

More fundamentally, respondents’ suggestion is inconsistent with the principle that “state-action immunity is disfavored.” Ticor Title, 504 U. S., at 636. Parker and its progeny are premised on an understanding that respect for the States’ coordinate role in government counsels against reading the federal antitrust laws to restrict the States’ sovereign capacity to regulate their economies and provide services to their citizens. But federalism and state sovereignty are poorly served by a rule of construction that would allow “essential national policies” embodied in the antitrust laws to be displaced by state delegations of authority “intended to achieve more limited ends.” 504 U. S., at 636. As an amici brief filed by 20 States in support of the FTC contends, loose application of the clear-articulation test would attach significant unintended consequences to States’ frequent delegations of corporate authority to local bodies, effectively requiring States to disclaim any intent to displace competition to avoid inadvertently authorizing anticompetitive conduct. Brief for State of Illinois et al. as Amici Curiae 12–17; see also Surgical Care Center of Hammond, L. C. v. Hospital Serv. Dist. No. 1, 171 F. 3d 231, 236 (CA5 1999) (en banc). We decline to set such a trap for unwary state legislatures.

*  *  *

We hold that Georgia has not clearly articulated and affirmatively expressed a policy to allow hospital authorities to make acquisitions that substantially lessen competition. The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

__________________________________

1  Georgia did not join the notice of appeal filed by the FTC and is no longer a party in the case.

2  In tension with the Court of Appeals’ decision, other Circuits have held in analogous circumstances that substate governmental entities exercising general corporate powers were not entitled to state-action immunity. See Kay Elec. Cooperative v. Newkirk, 647 F. 3d 1039, 1043, 1045–1047 (CA10 2011); First Am. Title Co. v. Devaugh, 480 F. 3d 438, 456–457 (CA6 2007); Surgical Care Center of Hammond, L. C. v. Hospital Serv. Dist. No. 1, 171 F. 3d 231, 235–236 (CA5 1999) (en banc); Lancaster Community Hospital v. Antelope Valley Hospital Dist., 940F. 2d 397, 402–403 (CA9 1991).

3  After issuing its decision, the Court of Appeals dissolved the temporary injunction that it had granted pending appeal and the transaction closed. The case is not moot, however, because the District Court on remand could enjoin respondents from taking actions that would disturb the status quo and impede a final remedial decree. See Knox v. Service Employees, 567 U. S. ___, ___ (2012) (slip op., at 7) (“A case becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party” (internal quotation marks omitted)); see also FTC v. Whole Foods Market, Inc., 548 F. 3d 1028, 1033–1034 (CADC 2008) (opinion of Brown, J.) (rejecting a mootness argument in a similar posture).

4  An amicus curiae contends that we should recognize and applya “market participant” exception to state-action immunity because Georgia’s hospital authorities engage in proprietary activities. Brief for National Federation of Independent Business 6–24; see also Columbia v. Omni Outdoor Advertising, Inc., 499 U. S. 365 –375, 379 (1991) (leaving open the possibility of a market participant exception). Because this argument was not raised by the parties or passed on by the lower courts, we do not consider it. United Parcel Service, Inc. v. Mitchell, 451 U. S. 56, 60, n. 2 (1981) .

5  The Eleventh Circuit has held that while Georgia’s hospital authorities are “unique entities” that lie “somewhere between a local, general-purpose governing body (such as a city or county) and a corporation,” they qualify as “an instrumentality, agency, or ‘political subdivision’ of Georgia for purposes of state action immunity.” Crosby v. Hospital Auth. of Valdosta & Lowndes Cty., 93 F. 3d 1515, 1524–1526 (1996). The FTC has not challenged that characterization of Georgia’s hospital authorities, and we accordingly operate from the assumption that hos-pital authorities are akin to political subdivisions.

6  Compare Ga. Code Ann. §§31–7–75(4), (7) (2012) (authorizing hospital authorities to acquire projects and enter lease agreements), with §14–2–302 (outlining general powers of private corporations in Georgia, which include the ability to acquire and lease property), §14–2–1101 (allowing corporate mergers), and §§14–2–1201, 14–2–1202 (allowing sales of corporate assets to other corporations).

7  See Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U. S. 48 , and n. 25 (1985) (finding that a state commission’s decision to encourage collective ratemaking by common carriers was entitled to state-action immunity where the legislature had left “[t]he details of the inherently anticompetitive rate-setting process . . . tothe agency’s discretion”); Hallie v. Eau Claire, 471 U. S. 34, 42 (1985) (describing New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co., 439 U. S. 96 (1978) , as a case where there was not an “express intent to displace the antitrust laws” but where the regulatory structure at issue restricting the establishment or relocation of automobile dealerships “inher-ently displaced unfettered business freedom” (internal quotation marks and brackets omitted)).

8  The Court of Appeals also invoked Ga. Code Ann. §31–7–84, which provides that hospital authorities do not have the power to assess taxes, but allows the applicable governing body in the authority’s area of operation to impose taxes to cover the authority’s expenses. See 663 F. 3d, at 1377. This provision applies in cases in which the county or municipality has entered into a contract with a hospital authority for the use of its facilities. See §§31–7–84(a), 31–7–85. No such contract exists in this case, and respondents have not relied on this provision in briefing or argument before us.

9  Georgia first adopted certificate of need legislation in 1978 in part to comply with a since-repealed federal law conditioning federal funding for a number of health care programs on a State’s enactment of certificate of need laws. See 1978 Ga. Laws p. 941, as amended, Ga. Code Ann. §31–6–40 et seq. (2012); see also National Health Planning and Resources Development Act of 1974, 88Stat. 2246, repealed by §701(a), 100Stat. 3799. Many other States also have certificate of need laws. See National Conference of State Legislatures, Certificate of Need: State Health Laws and Programs, online at http://www.ncsl.org/issues-research/health/con-certificate-of-need-state-laws.aspx (as visited Feb. 15, 2013, and available in Clerk of Court’s case file) (indicating in “States with CON Programs” table that 35 States retained some type of certificate of need program as of December 2011 while 15 other States had such programs but have repealed them).

Print this transcript Transcript: 

ORAL ARGUMENT OF BENJAMIN J. HORWICH ON BEHALF OF THE PETITIONER

Chief Justice John G. Roberts: We'll hear argument first this morning in Case 11-1160, the Federal Trade Commission v. Phoebe Putney Health System.

Mr. Horwich.

Benjamin J. Horwich: Thank you, Mr. Chief Justice, and may it please the Court:

The state action doctrine provides a defense to a Federal antitrust suit when a state has clearly articulated and affirmatively expressed an intent to displace competition with respect to the particular activity at issue in the suit.

Now, in practical terms, what that comes down to is whether application of Federal competition law would somehow subvert a sovereign state policy choice that's clearly evident in state law.

Now, that policy might be expressed in mandatory or compulsory terms, but, short of that, it would also be enough, if the -- the state had specifically permitted conduct that is inherently anticompetitive.

But a grant of general power to act--

Justice Sonia Sotomayor: You don't think that the grant of powers in this case would permit the hospital authorities, the corporation, to set prices for their services that are below the competitive prices in order to serve the needy?

Benjamin J. Horwich: --Well--

Justice Sonia Sotomayor: Isn't that inherent in the regulations?

Benjamin J. Horwich: --I think it is, although for reasons that don't affect the analysis of the question about an anticompetitive acquisition.

And let me explain why the analysis might be different with respect to prices.

There is specific authorization in the statute for the hospital authorities, in conjunction with the counties, to partly fund -- or, I guess, entirely, in principle -- fund their services through tax revenues.

So they have another source of funding that would allow them to price in ways that a competitive actor would not necessarily price its services.

So if we're talking about particular pricing decisions -- say -- I guess it would be below cost pricing that is alleged to somehow be anticompetitive -- then there might very well be a state action defense to that because it -- because the state -- the power to price services subsidized in a way that an ordinary actor wouldn't be able to do--

Justice Antonin Scalia: Do you have--

Benjamin J. Horwich: --might very well displace competition in that regard.

Justice Antonin Scalia: --Do you have any cases in which we -- we slice it that fine--

Benjamin J. Horwich: Well, I do think--

Justice Antonin Scalia: --that -- that you are a state actor for some anticompetitive purposes and not for others?

Benjamin J. Horwich: --Yeah, absolutely, Justice Scalia.

I think -- I think the best example comes from Goldfarb v. Virginia State Bar.

So in that case, the issue was a challenge to a practice of minimum fee schedules that were set by -- not by the state, but agreed upon by a bar organization.

Now, the state in that case of course regulated the practice of law.

It regulated admission into the practice of law.

It regulated certain aspects of the conduct of the practice of law.

And this Court held in Bates v. Arizona State Bar that those sort of regulations do constitute state action.

But the Court did not accept the submission that the state action defense covered the setting of minimum prices that was at issue in that case, because that was not something that there was state action over.

And as a -- and taking a step back, the justification for the state action doctrine is that the state is trying to pursue some policy that is part of its traditional sovereign prerogatives to regulate its own economy, and that Federal law was not understood to intrude upon that.

But if the state is not actually trying to advance some other policy with respect to the particular conduct at issue, then it can't be said that the state has done something that Federal law should stand aside for.

The--

Justice Ruth Bader Ginsburg: Mr. Horwich, you said in -- in your reply brief that if the Hospital Authorities Law specifically authorized local hospital authorities to acquire any and all hospitals within their geographic area, then the clear articulation requirement would be satisfied.

But the Authorities Law does authorize the acquisition of other hospitals.

And it doesn't say one or two; it says other facilities.

So why doesn't the hospital laws law do exactly what you said would satisfy the clear articulation requirement?

Benjamin J. Horwich: --Well, I think the key difference there, Justice Ginsburg, between the hypothetical we offered in the reply brief and the statute here is that the -- the additional words “ any and all ” make it clear that the state is contemplating that there could -- the county might opt for socializing its hospital services, putting all of them under the control of the hospital authority.

And by contrast, what we have here is an ordinary corporate power to acquire property.

And like all of the ordinary corporate powers that the authority possesses that are -- that resemble those that an ordinary business corporation would have, the most natural understanding of them is that the state expects them to be exercised in conformity with the background principles that bind everybody.

So--

Chief Justice John G. Roberts: Just so I understand your answer to Justice Ginsburg, you're saying there would be a difference if the charter said the authority may require -- acquire any properties to fulfill its mission, and if it said the authority may acquire properties to promote its mission?

Benjamin J. Horwich: --Well, I think it's probably in our -- the hypothetical offered in our reply brief, it's probably the “ all ” -- the “ any and all ” that would I think be what communicates the state's--

Chief Justice John G. Roberts: So you think a general saying they may acquire properties doesn't implicitly say they may acquire all properties.

That seems a pretty thin--

Benjamin J. Horwich: --No, I don't think it does.

Well -- but I think, in this area, it's -- it's important, for a couple reasons, that we actually have -- have some substantial assurance of what the state is trying to do here.

And a power to grant proper -- excuse me -- a power to acquire properties, generally speaking, unadorned with any particular expression from the state about how -- how that power is to be used, is something that can be used competitively or anticompetitively, and you can't infer from that that the state really has an objective of, as I say, such as socializing its hospital services because -- and -- and that clarity of expression from the state is really important here, for several reasons.

First of all, this is an odd rule to begin with, in that it allows state law to displace Federal law.

So we would want some clarity from--

Justice Antonin Scalia: I assume that the normal corporate charter contains such a provision, the authority to acquire property, right?

Benjamin J. Horwich: --Yeah, it absolutely does.

And--

Justice Antonin Scalia: And we don't -- that charter is issued by the state, right?

Benjamin J. Horwich: --It is issued by the state.

Justice Antonin Scalia: And we don't -- we don't think that that enables all corporations to ignore the Sherman Act, do we?

Benjamin J. Horwich: No, we don't.

And we don't generally think that those corporate powers express an intent to displace any other background--

If I could give some examples, maybe we could look at some--

Justice Elena Kagan: Mr. Horwich, could I just -- before you give examples, just make sure I understand your basic position.

Suppose this statement said very clearly that these hospital authorities had the power to engage in acquisitions of hospitals that, for a normal actor, would violate the antitrust laws, but -- but basically said the hospital authorities had the discretion to do that or not.

And the state didn't know the hospital authority might do it, but it also might not do it.

That would be subject to the immunity; is that correct?

Benjamin J. Horwich: --I -- I think the defense would be available if the beginning of your hypothetical was kind of quoting the statute, yes.

Justice Elena Kagan: Yes.

The sheer grant of authority, but the authority is completely discretionary.

So the state is basically saying, we don't know; we're going to let the hospital authority figure it out.

Benjamin J. Horwich: Well, certainly, the hospital authority can figure it -- figure out, but what it's figuring out is whether to actually invoke a displacement of competition that the state has expressly put on the table.

And that's what is different in this case--

Justice Elena Kagan: What I'm trying to get at is the state has put it on the table only as a completely discretionary action.

The state has not expressed a preference for it.

The state has only said that the hospital authority can think about conditions on the ground in its particular locality and can decide whether such an anticompetitive acquisition is appropriate.

Benjamin J. Horwich: --Yes, that's fine.

We don't have any quarrel with states setting up a clear set of tools, some of which, in your example, might inherently displace competition--

Justice Elena Kagan: So all of this language--

Benjamin J. Horwich: --and having it exercised, actually, at a local level.

That's fine.

Justice Elena Kagan: --So all this language in your brief about necessarily and inherently and compelled, all of those things really are not part of your -- your governing test.

Benjamin J. Horwich: No.

I disagree with that.

The reason they are part of our governing test is this, is that a state can certainly give a -- a menu of specific options that sub-state entities can select from.

And it might be that some of those are, in fact, not anticompetitive.

Let me give you an example from this Court's cases.

Southern Motor Carriers involved the submission of -- by motor carriers of their rates to a public service commission that was -- that would accept them as filed rates.

Now, the states -- some of the states there said, well, you can file them individually, or you can file them jointly, and we don't necessarily have a preference one way or the other for it.

But the fact that the states had said you can file them jointly, which is a horizontal agreement among competitors and sure looked anticompetitive, the fact that the state had said that and put that option on the table qualified as a clear articulation from the state that it intended the displacement of competition to occur if that specific option was chosen.

The difference here is that if you are willing to say in a case like what we have here with a statute that confers a -- a power that is entirely neutral as to how it would be -- how it could be exercised, you have the problem of not really knowing what the state would intend.

And so you can't say that the state clearly intended that there be displacement of competition--

Justice Stephen G. Breyer: Well, what about the other?

The next line that they give is they give to the hospital authority the power to acquire and operate projects and the power to form and operate one or more networks of hospitals, physicians and other health care providers.

Now, as I read that, it certainly includes the rather specific power of acquiring a hospital.

And having read that -- not just something you might see in General Motors' charter.

And that's the language of the grant of power.

Now, I want to know what you want us to do, because in my mind, reading this, it's a statute that provides for regulation, price regulation of hospitals.

And you say -- and I have no doubt you thought of one way in which that could be; I can think of 100, that you could have prices that are different from those set by a free market.

So I have no doubt that this sets -- I start from.

Now, what is it -- I go back to Justice Scalia's original question.

What is it you want us to say?

Even though this -- this statute is immune, does grant immunity from attack on a basis of cost and price regulation, it is not immune in respect to mergers, okay?

I can, unfortunately, think of about 50 examples where a merger might be anticompetitive and yet it would lead to lower prices.

And the Department of Justice might attack it, but this statute, and that's what's bothering me, seems to want to further that kind of thing.

That's where I am, and I'm not at all decided.

Benjamin J. Horwich: --Sure.

Well, I guess I would -- I guess I would first point out that price competition is not the be-all and end-all of anticompetitive consequences, right.

Justice Stephen G. Breyer: Yes, I think I know that.

Benjamin J. Horwich: I mean, we have this concern -- obviously, we have a concern here that without -- and this is detailed very clearly in the complaint.

I mean, I think starting with paragraph 8, it talks about some of the price -- some of the pricing constraints.

But you get on to the later paragraphs of the complaint, you have all these descriptions of loss of quality competition here.

So you have--

Justice Stephen G. Breyer: You are not understanding my question, I guess.

You have to take as a given that, even though what you say is true, I would find that this statute clearly prohibits the application of the antitrust laws to pricing decisions.

That's the job of the authority.

Now, if I start with that, then you will say, okay, I have to decide against you.

Or you might say, even so I win, because mergers are different.

Now, that's what I'm trying to get you to say.

Benjamin J. Horwich: --Yes, and I guess that is what I'm -- I guess that is what I'm trying to say, is that mergers are different because the challenged anticompetitive act here is not a pricing decision by the hospitals.

Justice Stephen G. Breyer: I want to ask you, why are they different?

After all, we have, one, the specific language I read; and, two, I can think of examples where a merger would be anticompetitive under the DOJ and your FTC rules--

Benjamin J. Horwich: Yeah.

Justice Stephen G. Breyer: --and yet probably would further the purposes of the statute by lowering the cost.

Do you think that's the null set?

I don't think that's--

Benjamin J. Horwich: No, I -- well, I don't -- I don't know whether that is -- I don't know whether that is true or not, but I think we're relying on the more -- I think you can't simply start with the idea that, well -- you can't start with the premise that this act exists to pursue an objective and to pursue it at any cost, without regard to whether it displaces competition in the market for paid health care services, without regard to whether it displaces competition for quality among these hospitals.

I mean, on that logic -- and I think it might help to look at some of the other powers here.

If you go to the back of the Government's brief on page 6A, the authority has the power to make and execute contracts.

Well, I don't think that that implies a privilege to enter price-fixing contracts.

That's part of the background principles of antitrust law.

I also don't think it implies the power to enter contracts against public policy.

A State presumably doesn't wish to abandon that background principle simply because it wants the authority to pursue its mission.

Chief Justice John G. Roberts: --Well, you've already told us that it can be State action for some purposes and not others.

Benjamin J. Horwich: Exactly.

Chief Justice John G. Roberts: So the fact that you have examples where you might conclude, no, they didn't mean to do that, doesn't seem to categorically suggest that you prevail with respect to another one of the powers that are granted.

Benjamin J. Horwich: No, I agree with that, that it doesn't categorically.

But it does -- it does seem to me that -- that if we're looking through this list of powers that the hospital authorities have, there is not anything meaningfully different about the power to acquire property versus make contracts versus, as Justice Scalia said, any other powers that are -- that exist in a general corporation's business charter.

Chief Justice John G. Roberts: This may be completely wrong.

You can tell me.

I would doubt that in counties or municipalities of this size you are going to have, you know, five hospitals, and so that the authority could acquire a hospital and yet still it not have any significant merger consequences on its face.

In other words, when this law was passed giving them the power to acquire hospitals, wasn't it the case that there would likely be only one other hospital or two, so that any acquisition of another hospital would have the merger consequences that this one had?

Benjamin J. Horwich: Well, no, because I think the baseline when the statute was enacted was that the hospital authorities didn't even exist.

So they didn't own any hospitals.

And the first acquisition of a hospital can't raise a competitive concern because it's not concentrating the market in any way.

It's simply transferring ownership of the hospital from one actor to another.

Justice Anthony Kennedy: Well, but to follow the Chief Justice's question, suppose it were shown that there were many rural counties, rural areas in Georgia very much like this one.

Would that change this case?

I thought that was the purport of the -- the thrust of the question.

Benjamin J. Horwich: I think you'd have to imagine a very stylized hypothetical to see that the State had clearly intended to displace competition.

You would want to see, for example -- let me give you an example--

Justice Anthony Kennedy: Well, I know Georgia has 158 counties or something.

Benjamin J. Horwich: --Right.

Justice Anthony Kennedy: So I think they probably have many rural areas with one or two hospitals.

That's just a guess.

Benjamin J. Horwich: Well, right, but I suppose that the guesswork is not going to be a basis for saying a State has clearly intended to displace competition.

The situation in which I think you might recognize it is if the hospital authorities were already in existence, but they -- and they all each owned a hospital, but they had never had the power to acquire a hospital, and you knew that they were all -- that each of them had their neighboring competitor, and then the legislature comes in and says: You know, we would like you now to actually be able to acquire -- acquire additional hospitals.

I mean, the power here is not the power to acquire additional hospitals.

But if the legislature had said, we have the power to acquire additional hospitals and we know you already have one, and we know that the one you are going to acquire is going to be your neighbor and we know there is not lots of hospitals out there, then you might say that, yes, the clear implication of that is that that's going--

Justice Stephen G. Breyer: --What does the words mean,

"to form and operate one or more major networks of hospitals? "

Benjamin J. Horwich: --Well, I think the--

Justice Stephen G. Breyer: Which follow the words

"to acquire and operate projects, defined to include hospitals? "

So what about those words?

Why aren't they good enough?

Benjamin J. Horwich: --Well, I guess I'm not sure where Your Honor is looking.

They aren't actually -- they don't follow themselves in the statute, but--

Justice Stephen G. Breyer: I'm looking at Section 30 -- well, where are we?

31-7-75(3).

Benjamin J. Horwich: --Right.

And so I think what you are referring to is number -- number 27 on the list.

And I think in the health care industry the idea of forming a network is not the idea of socializing all of the available resources under government control.

A network is an integrated system where you can go to the hospital for your emergency care and they can refer you to an outpatient clinic that they have somewhere else, and there is a physician who has an arrangement with both of those who can track your care.

And you can go acquire your durable medical equipment from some -- from some store they operate.

Justice Sonia Sotomayor: Tying.

Benjamin J. Horwich: That's what a network is.

That's not vertical integration.

Justice Sonia Sotomayor: A network is tying products, to tie products.

Benjamin J. Horwich: Yes, exactly right.

That's a tying situation.

This is -- this is a merger within -- within one relevant market.

And that's what's different.

So I don't think the 27--

Justice Stephen G. Breyer: And that falls within the words “ to acquire and operate projects ”.

Benjamin J. Horwich: --It does.

But so -- it does, but there is nothing about acquiring a project that is inherently -- that's inherently anticompetitive.

Acquisitions are not always anticompetitive.

Justice Sonia Sotomayor: I guess that just adds on to the issues that we have a price-fixing mechanism, we have a tying mechanism that is expressed.

So what's left after that?

Just this?

Mergers and acquisitions?

Benjamin J. Horwich: Well, no, I think -- I think horizontal--

Justice Sonia Sotomayor: At what point--

Benjamin J. Horwich: --generally horizontal agreements, I think you -- so the contracting power doesn't -- doesn't allow the hospital authority to go -- I don't think the hospital here could any more merge with Palmyra than it could go enter into a contract with Palmyra that says, hey, we are going to, you know, fix the prices that we--

Justice Stephen G. Breyer: And can't -- in other words, the two hospitals in the town, when they say the price here, you shall see that the price is not higher than 38 cents, whatever, and would you please get together and be certain that you have similar terms and you have similar agreements and similar prices there, we don't want either of you to be higher, you would then proceed against them for that?

Benjamin J. Horwich: --Absolutely, Your Honor.

This statute -- and take a step back--

Justice Stephen G. Breyer: And would you also do the same if the electricity regulator in any State or telephone, a local telephone regulator--

Benjamin J. Horwich: --No, Your Honor.

I think that--

Justice Stephen G. Breyer: --or gas pipeline regulator -- what they did is the same thing; they said, our prices are -- you're to file tariffs and the tariffs are to be reached after you go meet in committee; and that would also fall within the antitrust laws?

Benjamin J. Horwich: --No, I think those would likely be very different.

I want to be clear about--

Justice Stephen G. Breyer: How is that?

Benjamin J. Horwich: --the point.

The point of this law is to grant counties the opportunity to participate in this market by providing care to indigents.

This is not a law about public utility regulation.

If you think that this is a law about public utility regulation, that all hospitals are supposed to be -- that the state intends counties to be able to elect to put all hospitals under their control and manage them as such and manage them in the way that a public service commission would regulate all of the utilities--

Justice Stephen G. Breyer: Well, the language is awfully similar to what you find in public utility statutes: To set reasonable rates, to be certain that nobody is higher than a reasonable rate.

Benjamin J. Horwich: --Well, the authority does not have the power to -- Justice Breyer, the authority does not have the power to establish rates at private hospitals.

And that -- that would be a signal difference between the authority's power in this case and the power of a public service regulator over a -- over a utility.

Justice Stephen G. Breyer: What does it mean, to establish rates and charges for the services and use of the facilities of the authority?

Benjamin J. Horwich: The facilities of the authority, yes, but not other hospitals within the jurisdiction.

It's only -- it's only the hospitals that the authority itself is -- is operating.

And so -- so I guess we also have here -- I want to be clear that in all of this discussion we are operating on the premise that it's actually the authority itself that is operating the hospital.

Of course, that is not what this case is.

The hospital--

Justice Sonia Sotomayor: --Could you define “ necessity ” as you use it?

I am hearkening back to Justice Kagan.

We have plenty of cases that say you don't need to find out whether the exemption is necessary to make the program work.

Benjamin J. Horwich: --Right.

No, we don't think it means that.

Justice Sonia Sotomayor: We don't make that judgment.

Benjamin J. Horwich: No, it's not a normative judgment.

Justice Sonia Sotomayor: The state makes that judgment.

Exactly.

Benjamin J. Horwich: Correct.

Justice Sonia Sotomayor: And in your answer, you conceded that whether -- if there is discretion, it's not necessary to make it work because the authority can say yes or no--

Benjamin J. Horwich: Exactly.

Justice Sonia Sotomayor: --So what's your definition of “ necessity ”?

Benjamin J. Horwich: Our definition -- our definition -- well, I have to be honest with you, it's hard to define it because it's going to arise in a number of different contexts.

But what this -- but the times where this Court has used it, it has used it to convey the idea that the choice that the state is offering is no choice at all if Federal law is going to come in; that Federal law would just negate the choice.

So to be concrete about this, in Hallie, for example, the choice that the state provided at the end of kind of a complicated line of statutory rules about how cities do or don't have to provide their sewage treatments to their neighbors, at the end of the day the city had a choice to say, fine, we will give you sewage treatment services, but you have to be annexed to us and take the other things that come with annexation to the city.

Now, if that choice is -- is -- if that choice is anticompetitive, it's going to be taken away by Federal law.

And the choice that the State has tried to offer is no choice at all.

It's going to be negated, and the only choice left for the city in Hallie is going to be to opt -- to just relent and get the sewage treatment service--

Justice Samuel Alito: If the state legislature articulates clearly and expresses affirmatively that it wants municipalities to share the state's antitrust immunity, is that sufficient, or is there a degree of specificity that's necessary as to the particular anticompetitive conduct that the state wants to cover?

Benjamin J. Horwich: --Well, I think in your hypothetical we are imagining kind of a municipality enabling act that just has, you know, a section in it that says: Municipalities shall enjoy the state's exemption--

Justice Samuel Alito: Well, that's what's here.

Benjamin J. Horwich: --Yes.

So that -- that's not a clear articulation problem because it's plenty clear what the state's trying to do.

There might be what I would call an affirmative expression problem there because simply saying that the state doesn't want the antitrust laws to apply, that's not the basis in federalism for the state action doctrine.

The basis in federalism is that the state has made some affirmative choice that it wants to accomplish something else, and that it's offered some principle on which the sub-state actors can act to serve the state's policy interests.

And so I think you might have to hesitate in a case like that to say, well, if the state is just passing out indulgences to -- to get out of Federal competition law, that may not be something substantively Federal law will stand aside for.

Justice Samuel Alito: Well, I don't want to take up your rebuttal time, but I don't see how that's consistent with your answer to Justice Kagan about a grant of discretionary authority.

Benjamin J. Horwich: Well, I was assuming in Justice Kagan's hypothetical that we had some of the other things going on here that manifested a particular objective that the state was trying to pursue.

So sort of a state trying to pursue municipal governance doesn't seem to me to be enough of an affirmative state policy to say that works.

So I think that would distinguish the two.

And if I could reserve.

Thank you.

Chief Justice John G. Roberts: Thank you, counsel.

Mr. Waxman.

ORAL ARGUMENT OF SETH P. WAXMAN ON BEHALF OF THE RESPONDENTS

Seth P. Waxman: Mr. Chief Justice, and may it please the Court:

In the specific area of local hospital services, the Georgia legislature has adopted a model of local public choice, including the choice to reduce or eliminate competition.

There is no issue here, Justice Scalia, with respect to your earlier question, of general corporate powers.

The Hospital Authorities Law creates local public authorities to, quote,

"exercise public and essential government functions to provide hospital care for residents, especially residents who cannot pay. "

It empowers authorities to acquire projects, plural, specifically including each authority the ability to acquire hospitals, plural, but with limitations.

They have to -- it has to be within a very confined geographic and demographic jurisdiction.

And for authority hospitals, it replaces any pure market model with statutory mandates, a mandate to provide services to all indigent in the community, and to price all services on a not-for-profit basis and with a statutory limitation on rate of return.

Justice Antonin Scalia: Well, I don't see how any of that pertains to whether they can create a hospital monopoly.

You can do all of that, even though you are not the only hospital in the area.

Seth P. Waxman: I guess my point here is that the legislature's -- the powers that the legislature has given hospital authorities are not by any means general corporate powers.

They are broader than what a corporation may have in certain represents and much narrower in other respects.

Justice Antonin Scalia: Well, but the only respect relevant here is -- the only respect relevant is the ability to acquire other hospitals.

Seth P. Waxman: That's right.

And there is--

Justice Antonin Scalia: And that's -- and that's a general corporate power.

Every corporation in Georgia has the power to acquire, including acquire other businesses.

Seth P. Waxman: --There -- there -- these -- these are -- the supervening wish, mandate, of the legislature, and this is well explained in Georgia Supreme Court cases, particularly DeJarnette, which was decided right after Georgia amended its constitution, enacted the Hospital Authorities Law, was the desire to, the goal to provide adequate hospital services, particularly for the indigent.

Justice Ruth Bader Ginsburg: Georgia wasn't so sure, because didn't it come in originally on the side of the FTC in this case?

Seth P. Waxman: It did.

And Georgia's complaint and its theory in the district court, which it did not pursue in the court of appeals or here, was not that the authorities weren't exercising state power, but the contention that the operation of the hospital by the special purpose corporations that the hospital authority created was not adequately supervised.

That is what the State was arguing in the district court.

And when it lost that point, it withdrew from the case and has remained absent ever since.

Justice Elena Kagan: Mr. Waxman, we do have a brief from quite a number of states, and the brief basically says: We do this all the time; we set up these local authorities, and then we give them powers because they have to act in the world.

We give them normal powers, like the ability to make contracts and the ability to buy property.

And when we do that, we don't mean that they can do anything they want notwithstanding the antitrust laws.

And to construe these very normal powers that we would give to a state entity in order to allow it to operate as a permission to violate the antitrust laws is not at all consistent with our own intentions.

Seth P. Waxman: I have no problem with the amicus brief filed by the states supporting the FTC in this case, which is positive, quite expressly and at the outset, on an understanding that what is involved here is simply a State authorization of creation of a local entity with general corporate powers and nothing more.

That could not be farther from this case.

These special purpose authorities do not simply have general corporate powers.

They have a mandate.

There is a Georgia constitutional amendment that coincided with the enactment of the Hospital Authorities Law that derogated the State's duty to provide indigent care to its -- hospital care to its citizens.

Justice Anthony Kennedy: Is it a fair characterization of your argument -- is it a fair characterization of your argument to say that the possibility that the hospital authority can use this general power in this way is tantamount to or equivalent to the legislature intending that it be used that way?

Is that your argument?

Seth P. Waxman: No.

We take seriously the standard that this Court announced in self-consciously clarifying the level of explicitness that a legislature has to used in Town of Hallie.

This Court said -- the Court asked whether, quote,

"suppression of competition was a foreseeable result of what the State legislature authorized. "

and it derived that formulation expressly from its earlier decision in City of Lafayette, which explains that a, quote,

"adequate state mandate exists when it can reasonably be inferred. "

quote,

"from the authority given a local entity to operate in a given area that the legislature contemplated the kind of action complained of. "

In other words, as I understand this Court's test, whether what was done by the hospital authority or any sub-State entity was foreseeable by a reasonable legislator, which in this case is that -- was it foreseeable that in -- in pursuing the State-imposed mandate to serve the indigent in a confined jurisdiction, especially in rural counties which abound in Georgia, a hospital authority might require market power or even a public service monopoly, because that--

Justice Sonia Sotomayor: Would you--

Seth P. Waxman: --is the natural way to acquit the statutory mandate.

Justice Sonia Sotomayor: --There is a problem here, which is, I understand the public mandate to serve the indigent, but you are asking us to take this a step further.

You're elevating that public mandate to a public command that serving the indigent has to override the needs of the majority in terms of price competition.

Seth P. Waxman: No.

I don't, I don't--

Justice Sonia Sotomayor: And that, that step, that further step that the State intended to immunize their -- the monopoly power, is the step we are trying to find in this grant.

And that's what I don't see.

I see the compulsion to serve the needy.

I hear that much of Georgia is rural, but your adversary says in most instances there is only one hospital, so the municipality's taking it over is not going to be a merger issue.

To the extent that they step in and take over one of two hospitals, there is no merger issue because it's only substituting one owner for another.

This situation they claim is a rarity, where there are only two or three providers and a hospital's going to -- and a public -- a municipality is going to then get monopoly power by an acquisition.

Seth P. Waxman: --So, Justice Sotomayor, as to your first point, our position is not that the only mandate is to serve the indigent.

The actual mandate in the constitution and the Hospital Authorities Law is to provide hospital services for all residents, with a particular note to the obligation to serve indigent clients.

Second of all, we are not here to -- I mean, I don't know where the Government is coming up with its speculation that out of Georgia's, I think it's 154 counties for a population of 10 million people, it is the rare instance in which there will be anything other than just one or, you know, a multiplicity of hospitals.

I mean the Federal Trade Commission guidelines for market concentration is anything up to four, four or fewer participants.

The notion that the legislature in 1941 was providing the express authority to acquire multiple hospitals in a single municipality or county was focused only on huge metropolises, of which there was only one, or on counties that were so small that they couldn't otherwise even attempt to support more than one hospital is just fanciful; it's made up.

Justice Elena Kagan: Mr. Waxman, could I understand where you think this expressed approval is coming from?

Because you said general corporate powers is not enough.

So the general ability to buy property, you said, is insufficient.

Then you have this idea they have a mission.

But the mission can be accomplished in all kinds of ways that are perfectly consistent with the antitrust laws, so that doesn't seem to get you all that far.

So what else have you got to show that the State actually thought about this issue and approved this power for the hospital authorities?

Seth P. Waxman: Okay.

I mean, for one -- one other thing is in section 7-77, as was noted before, the authorities are subject to regulation of rate of return.

Now, if that doesn't bespeak the foreseeable consequence of market power, I don't know what does.

That is the hallmark of a regulated public service monopoly or at least the regulation of a return by a participant with market power.

The other thing that exists and the Government pooh-poohs it as somehow not part of the Hospital Authorities Law is that the Georgia State legislature has -- this law was enacted in the backdrop of other laws in which Georgia has quite deliberately displaced, quote, “ unfettered private market competition ”.

The certificate of need law is the paradigmatic example of the imposition of regulation at the expense of free market competition and in fact--

Justice Antonin Scalia: Well, a lot of States have that.

You can't open a new hospital without getting a certificate of need.

Are you saying that in all of those States the result is that the antitrust laws can be ignored?

Seth P. Waxman: --No, no, no.

Our argument is not that the certificate -- that the existence of the certificate of need law indicates an intent by the legislature to fully displace the antitrust laws with respect to anybody else.

My point is in the context of other Georgia systems that strictly limit entry into or expansion into these local markets, combined with very severe rate restrictions and obligations and mandates to serve--

Justice Stephen G. Breyer: Your point -- I don't mean to interrupt, but the point that he's making in response to my earlier questions along these lines I think was the following: Where do they get their hospitals, these authorities?

The law sets up a hospital authority.

All right.

Where did they get their hospitals?

Seth P. Waxman: --They can -- I mean, the legislature permits them to be built, bought--

Justice Stephen G. Breyer: Do you know what actually happened?

Do you know in fact where these hospital authorities got their hospitals from?

Seth P. Waxman: --You mean all of the hospitals authorities in Georgia?

Justice Stephen G. Breyer: No, I mean -- I now am in a county and suddenly I'm a mayor and I see this law and it says we can set up a hospital authority.

So Joe, I say, you are the boss, you are the hospital authority guy.

And he says -- you are to run the hospital, and he says, what hospital?

We don't have a hospital.

So I want to know where did they get their hospitals?

Seth P. Waxman: The answer, Justice Breyer, I think -- I mean there is nothing in the record to indicate where all the hospitals--

Justice Stephen G. Breyer: I don't need to know all of them.

I just want some rough idea where they come from.

Seth P. Waxman: --Well, let's take the example--

Justice Stephen G. Breyer: You may not know.

Seth P. Waxman: --No, no, no.

Let's take the example of this county in terms of what was done and what is now being challenged.

So when the hospital -- there was a public hospital beginning in 1911 in Dougherty County.

When the State constitution was amended to impose on counties the State's obligation to provide adequate hospitalization care, it enacted the Hospital Authority Law for counties that chose to make use of that device in order to acquit their public service mandate.

And Dougherty County did soon thereafter--

Justice Stephen G. Breyer: Okay.

Seth P. Waxman: --establish an authority, and the assets, all of the assets and all of the operations of the existing hospital, were transferred.

There then -- and there was a natural monopoly in that county.

Justice Stephen G. Breyer: Okay.

I've got it, I've got it.

Then--

Seth P. Waxman: Then--

Justice Stephen G. Breyer: --Then he says this: I have been thinking of it the wrong way.

I have been thinking of it like the California State Public Utilities Commission.

They regulate all the electricity producers.

That isn't this.

Seth P. Waxman: --Right.

Justice Stephen G. Breyer: These were a group of people that ran some hospitals, some municipal hospitals.

And now they can acquire not just general.

I agree with you, it isn't just general.

They have a lot of power there to acquire other hospitals from outside the system; but, when they do that, there's no reason to think that that gives them the power to acquire it where it's anticompetitive.

Seth P. Waxman: Well, I think that--

Justice Stephen G. Breyer: The fact that you can regulate your own hospitals, which is one track and one group, doesn't say that you have to bring in anticompetitive people -- I mean, you have to bring in others where they're anticompetitive.

That -- that I think is his point.

Seth P. Waxman: --Yes.

Justice Stephen G. Breyer: Don't think of it as one thing, think of it as two separate systems.

Seth P. Waxman: We're not arguing that the Hospital Authority Law gives the hospital authorities the right to regulate non-authority hospitals.

We're not arguing that.

Justice Stephen G. Breyer: No, no.

I know that.

But once you don't, once you don't, he says, you see, they don't regulate prices at non-authority hospitals, they don't do this for non-authority, they don't do that for non-authority, even though they might have the power to bring them in; but, when they have the power to bring them in, why read this -- it's at least ambiguous -- why read this as saying you can bring them in where it's anticompetitive to do so?

Seth P. Waxman: I mean, this doesn't say you can bring them in where it's anticompetitive to do so.

That's their any and all hypothetical.

And this Court has never required, for good reason, express authority.

That was the whole point of City of Hallie and City of Lafayette -- Town of Hallie and City of Lafayette.

The point here is, okay, so they created a hospital authority, it ran a public hospital, it was a natural monopoly.

The county grew.

A private hospital developed.

The public hospital, which is serving more than ten times the number of indigent patients than the private hospital, which is very underused, the county hospital has been -- the hospital authority has been saying for years and years and years, we need more capacity, we need more capacity.

There are -- in order to accomplish our mission, there are two ways to do it.

We can only operate in this confine.

We can build a new hospital, and here's what it would cost, and here's what we would get.

And we would, by the way, have to satisfy the state authorities that we are entitled to a certificate of need in the context in which the private hospital is severely underutilized.

Or we can talk with the private hospital about whether they would like to be acquired.

And the record shows that they did that for many, many years, even before the Phoebe Putney entities were created.

Justice Sonia Sotomayor: Mr. Waxman, I'm showing my ignorance.

Is this -- would this merger be subject to the rule of reason?

Seth P. Waxman: You mean if it--

Justice Sonia Sotomayor: If it were -- if we were not to find state immunity, would the merger be subject to the rule of reason?

Seth P. Waxman: --I am embarrassed to say I don't know enough about Sherman Act laws--

Justice Sonia Sotomayor: I was embarrassed to ask the question, but I was taught to ask the question.

If it is -- I'm going to assume that we'll both be -- we'll both be corrected by our respective colleagues soon enough.

But if it--

Seth P. Waxman: --Probably me sooner than you.

Justice Sonia Sotomayor: --That's right.

But -- but my question is really more fundamental, which is yes, I understand that you have a great defense, potentially, to a rule of reason challenge that -- that there was necessity in its truest sense, in its economic sense in this situation, so why should we undo our decades of writings that say that we should construe immunity narrowly and not broadly when it comes to displacing our antitrust laws?

Seth P. Waxman: Because the point of state action immunity, which is respect for the sovereign choices of sovereign states, is -- exists not only to provide a defense -- an ultimate defense in litigation on the merits, it's to protect states and sub-state entities from the cost of litigating.

I mean, the question ultimately in this case, and in all these cases, is, who gets to decide?

Who gets to decide if this is reasonable or not?

Is it the Federal Trade Commission that comes in and files a lawsuit for this poor hospital authority?

Justice Elena Kagan: Mr. Waxman, I mean, that's right, it is about choices, but -- but the question is whether the state has made a choice.

And that's what all these cases are about--

Seth P. Waxman: Right.

Justice Elena Kagan: --is our trying to find whether the state has made a choice as to this kind of conduct.

Seth P. Waxman: Right.

Justice Elena Kagan: So now we have your corporate powers aren't enough, your general mission isn't enough.

You said a certificate of need, but a certificate of need isn't even given out by this authority.

It's something that has nothing to do with the powers of this authority.

Then you said there's some kind of a price regulation that happens as to the hospitals that the authority owns, but not with respect to other hospitals.

So I guess I'm still looking for the things that show that the state has made a choice that it wants these -- these hospital authorities to be able to make anticompetitive purchases.

Where do I find that?

Seth P. Waxman: I may not be able to convince you, but let me take another run.

I think it's the combination.

Because, as this Court has expressed repeatedly, it's -- one has to look at the specific power granted, which here is the power to acquire hospitals within a very circumscribed jurisdiction, in the context of the law as a whole.

The context of the law as a whole here -- and I hope this works for the Court, but if it doesn't, you know, perhaps I am wrong; it certainly makes this a stronger case than Hallie -- here we have a law that says counties have the obligation now, unlike the state, to provide adequate hospitalization services.

They will exercise -- what they do is deemed to exercise public and essential government function within strictly limited areas.

And they have the power to acquire hospitals in those areas subject to very strict rate of return regulations and very, very strict conditions on how they operate those hospitals, including the power to lease to an operator for -- in order to serve the public mission.

And they do that against the backdrop of a series of -- they have eminent domain power.

They can take another hospital if it is essential to fulfill their mission.

Justice Ruth Bader Ginsburg: Mr. Waxman--

Seth P. Waxman: And they do this in a backdrop of a state that has -- notwithstanding the advocacy of the Federal Trade Commission, has repeatedly strengthened, rather than abrogated, a -- a certificate of need law that leads--

Justice Ruth Bader Ginsburg: --Mr. Waxman, you are essentially interpreting the Georgia statute that sets up the hospital authority.

And you're saying this is how we read it.

We start with the antitrust exemption is for the state, not subdivisions, so the state has to give it to the subdivision for the subdivision to have it.

Could the Federal court have said, we'd like to know what the Georgia legislature -- what the Georgia authorities think this statute means?

So, could a question have been certified -- I don't know if Georgia has a certification procedure, but to the Georgia Supreme Court -- and said, tell us, does this statute, is it intended to transfer the state's immunity to the locality, to the local unit?

Seth P. Waxman: --I mean, I -- I -- I assume that the Georgia state courts could do that; but, Justice Ginsburg, I think it's important to recognize that the FTC doesn't dispute that the -- that hospital authority -- county hospital authorities are, in fact, agents or arms of the state--

Justice Ruth Bader Ginsburg: But the question is, does this -- does this legislature mean that the state is transferring its immunity to this local unit?

Seth P. Waxman: --And I believe the FTC -- Mr. Horwich can correct me if I'm wrong -- but I believe the FTC's position is generally, yes, but not with respect to the merge -- what is alleged to be a merger to monopoly.

And the question in this case is whether or not the acts under this law and applying the foreseeable result standard, whether the acts of the hospital authority in this case in approving and acquiring the second hospital are fairly attributable to the state.

And if I could just--

Justice Antonin Scalia: Mr. Waxman, if you don't want to be interrupted, you have to pause between sentences.

Seth P. Waxman: --I was taking a cue from Your Honor's last argument.

Justice Antonin Scalia: I understand.

That's right.

You've given a -- you know, an appealing example of a small county that has one -- one hospital, and this operation purchases that one hospital.

Seems nothing wrong with that; although, as Justice Sotomayor suggests, I doubt whether the FTC would be pursuing a situation in which there is a natural monopoly.

It's a question of whether the monopoly would be owned by the state or not.

But your argument, if we follow it, embraces a quite different situation, a very large county which has five hospitals that are competing vigorously in price, in specialties, they advertise on the radio, as some hospitals do.

And what you're saying is that this operation can take over all of those hospitals and eliminate all of that competition.

Isn't that so?

Seth P. Waxman: Well, I -- for purposes of Federal antitrust law, yes.

Justice Antonin Scalia: Yes.

Seth P. Waxman: --but for purposes of State law, almost certainly no.

And the point here is -- and that is the point here.

The point is that Georgia, either through both private suits and actions authorized by its attorney general, can take steps in order to restrain hospital authorities from doing what they can.

And in fact--

Justice Antonin Scalia: We have no -- we have no idea whether they are willing to do that.

Seth P. Waxman: --Oh, yes, we do.

Justice Antonin Scalia: And we have a Federal antitrust law.

Seth P. Waxman: We -- we absolutely do, Justice Scalia.

There is a solid line of cases in which the Georgia Supreme Court has -- has quite rigorously enforced the limitations of the Hospital Authority Law in order to prevent hospital authorities from doing things that it says the legislature didn't intend.

The Tift County case is the best example, but there are others cited in our brief.

The last point--

Justice Antonin Scalia: Why didn't it intend this?

I don't understand.

You -- you've told us that they did intend this, that they did intend to displace competition.

Seth P. Waxman: --Yes.

Justice Antonin Scalia: And now you say: But Georgia will say: Oh, no, they didn't intend to displace competition.

Seth P. Waxman: No, no, no.

Justice Antonin Scalia: Which is it?

Seth P. Waxman: My point is that, with respect to your hypothetical, whether the hospital authority of Fulton County -- and I believe there is more than one hospital authority in Fulton County and they are authorized to merge in any event -- but could they acquire, by purchase or eminent domain, all of the hospitals in metropolitan Atlanta to do so?

And my point is that for purposes of Federal antitrust law the answer is: You are out.

That's -- you are not the authority to inquire.

The question is -- just as this Court -- you explained for the Court in Omni, there may be very many things that a local authority can do that would violate State law, and there are State law remedies.

And my point only was that the Georgia Supreme Court has been very quick to enforce the limitations, but as a matter of Federal antitrust law the only question is: Were they -- were they authorized to do things like this?

And if I--

Justice Stephen G. Breyer: And they -- they say on that, that it's a sham.

Well, just say 30 seconds on their argument that the FTC looked into it, these people had never regulated anything, they'd never looked at any price anywhere, they've never done a single thing, it's a sham; and therefore that's the end of it.

What about that?

Seth P. Waxman: --Okay.

If I can just finish my answer to Justice -- I have one other point to make for -- to Justice Kagan, who has asked it twice.

My last point I want to make, and then I will answer this, is that this county, this hospital authority, like many, facing a capacity constraint and a -- and a nondiscretionary mandate to serve the public needs for hospitalization, had two choices: It could have tried to convince the State to spend three times as much money to get half the number of beds, notwithstanding the existence of excess capacity; or it could buy the other hospital and get that capacity in a consensual transaction by the authority.

And here's my point, Justice Scalia: This case is on all fours with this Court's decision in Omni.

The notion that this may have long been desired by this, this special-purpose entity, is totally irrelevant.

This -- this acquisition was proposed to, considered by, and -- and approved by the hospital authority.

And not only that, when the FTC came and complained about it, they reconvened another public meeting and discussed it again and came to the conclusion again that they wanted to acquire this hospital.

And before they signed the lease, they issued a notice and comment period.

There was three months for people to tell the authority whether this lease was or was not consistent with community interests.

They had a public meeting and they approved it.

And that is the act of the State.

Chief Justice John G. Roberts: Can the State -- does the State have a procedure where it can give real-time approval?

In other words, this is going on and the hospital authority says, boy, the FTC is sending us these letters.

State, could you do something to show that you approve this transaction, whether it's a special law or there is some organization I guess in some other case setup, that could give its approval?

Seth P. Waxman: Yes.

I mean, this is -- the Hospital Authorities Law says: Counties, this is your responsibility.

Here are your powers.

If anybody in the State or any competitor or the Attorney General thinks that you are abusing those statutory powers, the courts are open and quite receptive to those concerns.

But there's no--

Chief Justice John G. Roberts: No, I know.

But I guess my point is, can the burden of going forward be switched the other way, and can this hospital authority say, you know, to the State, we would like some blessing on this so that we can go ahead with it?

So the choices aren't really build your own hospital or acquire the other one in the abstract, but ask the State, you know, what do you want us to do?

Do you want us to build a new hospital, or is it okay if we acquire this one?

Seth P. Waxman: --I don't believe there is any such mechanism, and I believe that the -- the State, the legislature, didn't contemplate anything like that, because the mandate and the responsibility and the authorization was devolved to the counties.

Now, Mr. Chief Justice, what the -- what the hospital authority could do and did do, although it's not in the record of this case, is evaluate the likelihood of getting a certificate of need to build the additional required facilities.

Chief Justice John G. Roberts: Thank you, counsel.

Mr. Horwich, you have 4 minutes remaining.

REBUTTAL ARGUMENT OF BENJAMIN J. HORWICH ON BEHALF OF THE PETITIONER

Benjamin J. Horwich: Thank you.

I guess I -- I heard several members of the Court asking Mr. Waxman specifically: Where do you find this?

Where can you locate this intent to displace competition in the statute?

And I would like to just run through, if I could, each of his answers and why I think they are insufficient.

So the first one, of course, we've talked a lot about the existence of general corporate powers, but the most natural inference there is that the State expects those to be exercised in conformity with the background principles that anybody else who has general powers has.

Now, the idea that the authority has a mandate, a purpose it's supposed to serve, of course that's always true.

States always have some purpose in mind when they set up some sub-State entity.

The question isn't whether there is particular ends the State is trying to pursue.

The question here is whether the State intended to pursue those ends through the particular means of displacing competition, here, displacing competition in the market for paid health care services.

And Mr. Waxman also pointed to the rate of return provision in the statute.

Now as a sort of a threshold matter, there's -- if past is prologue, there is not any reason to think that that will be not be rigorously enforced with respect to the privately controlled operations here.

But -- and that's sort of the second question presented, and we can set that aside for the moment, I guess.

But it seems to me there are two far more natural explanations for the presence of the rate of return provision in the statute than the one Mr. Waxman would like you to -- to give to it.

The first explanation is: This is a statute about providing public care for indigents.

Nobody should be making a profit off of that and the State wants to say that.

And that seems to be a very natural explanation that doesn't depend at all on the State intending to displace competition completely.

The -- the rate -- the price regulation provision also can be naturally understood as a response to the recognition that there will be some de facto monopolies in the situation where there is only one hospital in the county.

But it does not mean that the state wants there to be more monopolies so that it can bring in the unfortunate medicine of rate regulation to respond to those.

Presumably, the state intends, as is the accepted background principle of free market competition in this country, that there won't be monopolies unless they -- unless they arise of necessity.

Justice Sonia Sotomayor: Counsel, can I interrupt--

Seth P. Waxman: Yes.

Justice Sonia Sotomayor: --you just a moment to address a question raised by Justice Breyer, which is your alternative argument.

Benjamin J. Horwich: Yes.

Justice Sonia Sotomayor: You have lots of evidence that the authority does very little oversight of these hospitals when they move forward.

But is that the issue before us?

Is the question of immunity as to what happens in the operation of the hospital, or in their merger and acquisition, their actual formation?

And -- so that to the extent that we were to conclude that the state has delegated immunity on the basis of merger?

Why do we need to look any further at whether there has or has not been an appropriate degree of supervision of that decision?

Benjamin J. Horwich: Right.

Well, the -- the -- I -- I don't think the two are entirely -- are entirely separable as a matter of competition law, because the reason the competition law is concerned with mergers is not because of the transaction as such, but it's because of what it does going forward to the structure of the market and the competitive behavior of those in the market.

And so the State Action Doctrine says that the state -- if the state's going to go create monopoly, it needs to take ownership of that monopoly.

And I'm using ownership not in the literally sense, but at least ownership in the sense of actively supervising the monopoly to be sure that it is pursuing the -- the objective that the state has in mind for creating it.

So that's -- that's why we are still concerned there.

Mr. Waxman referred to the Certificate of Need Law.

I think there is a very close analogy to be drawn to Goldfarb here.

That is the -- the question of minimum fee schedules agreed to by lawyers.

The state of -- the state of Virginia regulated entry into the market for the practice of law just as the certificate of need regulates entry into the hospital market.

But horizontal agreements among people already in the market, such as here and such as the minimum fee schedule in Goldfarb, are not exempt just because of it.

Thank you.

Chief Justice John G. Roberts: Thank you, Counsel.

The case is submitted.