The Supreme Court has largely immunized state action from Federal antitrust enforcement. However, this carte blanche immunity, while founded on federalism grounds, runs counter to a number of constitutional principles, and too easily allows states to impose costs on other states while reaping all the benefits of anti-competitive policies. While the Supreme Court has only scantily discussed revisiting this immunity, academics and the Federal Trade Commission have largely criticized the doctrine. The Sherman Act, described as taking on a constitutional standing, should seek to form a more perfect economic union, and our understanding of State Action Immunity should strive towards that goal.
This note proposes a new framework to analyze State Action immunity cases. It will begin by surveying the origins of State Action Immunity, from the evolution of the Commerce Clause and its interactions with the Sherman Act to the seminal case of Parker v. Brown that created State Action Immunity. It will then describe the extensive criticism of the doctrine, as well as how it is inconsistent with American Federalism and economic thought while noting a number of existing proposals to remedy the doctrine’s failings. This note will then propose a novel framework for assessing State Action cases. In addition to the standard test, regulations must also not unreasonably impose costs on out-of-state citizens. Lastly, the paper will describe how the new test aligns best with modern economic thought and healthy federalism.