By Betty McNeil

Unlike more contentious areas of the law, antitrust scrutiny and enforcement remains a bipartisan issue. However, if we delve into the grittier and muddier areas of antitrust we see that, although bipartisan in many respects, certain areas of antitrust are able to keep up with highly debated areas of the law. For instance, § 2 of the Sherman act “affords the fundamental protection against monopolistic abuse through single firm conduct” and there is often debate regarding enforcement of § 2 which some suggest “can chill pro-competitive conduct and prevent successful firms from competing aggressively.”[1] Under this theory, firms may be subjected to over enforcement as a result of false negatives and false positives.[2] Therefore, when SolarCity Corporation filed a suit against Salt River Project Agricultural Improvement and Power District (“Salt River Project” or “Defendants”) regarding Salt River Project’s change in retail electricity rate structures, many suspected the claim would be dismissed with prejudice because of the uphill barriers of a § 2 claim.[3]

However the claim has thus far proceeded, and during a hearing on Monday, March 21, 2017, Salt River Project presented a novel defense which, if allowed, could establish a new and preferential precedent for corporations seeking to avoid antitrust scrutiny all whilst avoiding the uphill barriers of obtaining an antitrust exemption.[4] More specifically, since 1943 states and municipalities have escaped the scrutiny of the antitrust laws when a state policy has foreseeable anticompetitive effects.[5] The rule has been extended to provide non-state actors with immunity when: (1) there is a clearly articulated policy to displace competition and (2) there must be active supervision by the state of the policy or activity.[6] Salt River Project, however has alleged that recent precedent set by the Third Circuit during Edinboro College Park Apartments v. Edinboro University, in March 2017, entitled Salt River Project as a non-state actor to immunity because the “state action immunity defense’s clear articulation test can be met when the displacement of competition is the logical, or ordinary result of the authority delegated” and even more novel, under the Third Circuit’s holding, “municipalities and comparable non-state actors do not need to show their conduct was actively supervised to qualify for state action immunity unless they are controlled by active participants in the relevant market.”[7]

SolarCity will likely struggle to overcome the argument regarding the clear articulation test because the Arizona state legislature has delegated to the district the power to set rates which unfortunately appears to displace free market competition as it might otherwise exist if the policy was not in place.[8] Conversely, the argument that non-state actors do not need to show that their conduct was actively supervised to qualify for the state action is not only novel but provides defendants who are able to meet the clear articulation test with the ability to escape antitrust scrutiny without oversight.[9] Further, as practitioners, legal scholars, and others interested in upholding free market competition, it is vital to hold corporations which operate under the state immunity doctrine to the oversight standards that have been outlined and applied time and time again by the Supreme Court. Specifically, the very premise for state antitrust immunity is that state policies do not seek to restrain trade within the meaning of the Sherman Act but are introduced as acts of government.[10] However, allowing a non-state actor who is a private corporation to avoid oversight unless members are controlled by active participants in the relevant market, fails to consider the inherent nature and agenda of private corporations when operating under a clearly articulated policy but which only provides loosely defined windows, which some might call windows of opportunity, and could result in non-state actors contracting, or conspiring to restrain trade as long as they are within the bounds and windows set by the policy under which the clear articulation test is met.


[1] William F. Adkinson, Karen L. Grimm & Christopher N. Bryan, Enforcement of Section 2 of the Sherman Act: Theory and Practice, (Nov. 3, 2008)

[2] Id.

[3] See SolarCity Corporation v. Salt River Project Agricultural Improvement and Power District, 2016 WL 5109887 (Sep. 20, 2016).

[4] Eric Kroh, Utility Tells 9th Circ. New Ruling Boosts Antitrust Defense, Law 360, (Mar. 21, 2017, 4:19PM)

[5] Parker v. Brown, 317 U.S. 341, 352 (1943).

[6] Id.

[7] See supra note 3.

[8] Id.

[9] Id.

[10] Parker, 317 U.S. at 352.

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