Opinion ID: 223637
Heading Depth: 3
Heading Rank: 1

Heading: Antitrust Preemption Requires a Per Se Violation

Text: Memorial argues that the PCI regulations are preempted by Sherman Act § 1, which declares [e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade... to be illegal. 15 U.S.C. § 1. There are two primary modes of analysis under Sherman Act § 1: The Supreme Court has repeatedly recognized that by the language of the Sherman Act, `Congress intended to outlaw only unreasonable restraints.' Texaco Inc. v. Dagher, 547 U.S. 1, 5, 126 S.Ct. 1276, 164 L.Ed.2d 1 (2006) (quoting State Oil Co. v. Khan, 522 U.S. 3, 10, 118 S.Ct. 275, 139 L.Ed.2d 199 (1997)). [M]ost antitrust claims are analyzed under a `rule of reason,' according to which the finder of fact must decide whether the questioned practice imposes an unreasonable restraint on competition, taking into account a variety of factors.... State Oil, 522 U.S. at 10, 118 S.Ct. 275.... Some types of restraints, however, have such predictable and pernicious anticompetitive effect, and such limited potential for procompetitive benefit, that they are deemed unlawful per se.  State Oil, 522 U.S. at 10, 118 S.Ct. 275. Such restraints `are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use.' Nw. Wholesale Stationers [, Inc. v. Pac. Stationery and Printing Co. ], 472 U.S. [284,] 289, 105 S.Ct. 2613, 86 L.Ed.2d 202 [(1985) ](quoting N. Pac. Ry. Co. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958)). California ex rel. Harris v. Safeway, Inc., 651 F.3d 1118, 1132-34 (9th Cir.2011) (en banc). The blanket condemnation of per se analysis applies only where the challenged practice [has] `manifestly anticompetitive' effects and lack[s] `any redeeming virtue.' Id. (quoting Con'l T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 58-59, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977)). Otherwise, the rule of reason is the default mode of analysis. See id. The distinction between the rule of reason and per se analysis is important for federal preemption, which requires an irreconcilable conflict between the federal and state regulatory schemes. Rice v. Norman Williams Co., 458 U.S. 654, 659, 102 S.Ct. 3294, 73 L.Ed.2d 1042 (1982). Sherman Act § 1 preempts state law only when the conduct contemplated by the statute is in all cases a per se violation  without per se illegal conduct, there can be no certainty that the regulation conflicts with the Sherman Act. Id. at 661, 102 S.Ct. 3294(quoted by Sanders v. Brown, 504 F.3d 903, 910-11 (9th Cir.2007)). Conduct contemplated by the regulation is that which it mandates, authorizes, or places irresistible pressure on a private party to commit. Id.; Sanders, 504 F.3d at 910 (quoting Rice ); see also Costco Wholesale Corp. v. Maleng, 522 F.3d 874, 885-86 (9th Cir.2008) ([T]o be struck down, the regulation or restraint must effect a per se violation of the Sherman Act.). Importantly, a state regulation is not preempted simply because it has anticompetitive effects. See Fisher v. City of Berkeley, 475 U.S. 260, 264, 106 S.Ct. 1045, 89 L.Ed.2d 206 (1986). To determine whether a regulation facially conflicts with Sherman Act § 1, we first consider whether the challenged regulation involves (1) unilateral action by the state and is thus not subject to preemption (because there is no concerted action), see id. at 266-67, 106 S.Ct. 1045 (citing Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984)) [7] ; or (2) a hybrid of state and private action and is thus potentially subject to preemption, see id. at 267-69, 106 S.Ct. 1045. [8] See also Costco, 522 F.3d at 887-89(distinguishing between unilateral and hybrid regulations). A regulation is a unilateral restraint when [n]o further action is necessary by the private parties because the anticompetitive nature of [the] restraint is complete upon enactment. Costco, 522 F.3d at 890. [P]ublic officials determine[] the nature and extent of the resulting consumer injury, with no degree of discretion delegated to private actors. Id. Consequently, any anticompetitive effects are the logical and intended result of the state's action, rather than the result of private parties being empowered to `dictate market conditions to others.' Id. at 887(quoting Sanders, 504 F.3d at 918). Because the state acts alone in creating the restraint, there is no concerted action to be evaluated for consistency with Sherman Act § 1. See Fisher, 475 U.S. at 267, 106 S.Ct. 1045. In contrast, a hybrid restraint may be attacked under [Sherman Act] § 1 as per se unreasonable. 324 Liquor Corp. v. Duffy, 479 U.S. 335, 345 n. 8, 107 S.Ct. 720, 93 L.Ed.2d 667 (1987) (quoting Fisher, 475 U.S. at 268, 106 S.Ct. 1045) (quotation marks omitted). The hallmark of a hybrid restraint is the  delegation of discretion to private actors. Costco, 522 F.3d at 898 n. 20. The key distinction is that the regulation leaves a gap in the restraint of trade for private parties to fill at their discretion. A regulation is not hybrid  solely because it produces an effect that could not be produced by agreement of private parties without violating the antitrust laws. Id. at 889 (emphasis added). Rather, hybrid regulations merely enforce private marketing decisions, granting a degree of private regulatory power to the regulated parties. Fisher, 475 U.S. at 268, 106 S.Ct. 1045(citing Rice, 458 U.S. at 665, 102 S.Ct. 3294 (Stevens, J., concurring in judgment)). [9] In light of the foregoing principles, we must decide whether the PCI regulations go beyond the anticompetitive tendencies of a licensing requirement and actually delegate a degree of regulatory power to incumbent licensees. [10] Memorial argues that the PCI regulations grant regulatory power to incumbent licensees by calculating the need for a new certificate based in part on the number of PCI procedures they perform, thereby allowing the incumbent licensees to manipulate the number of PCIs they perform so as to exclude competing hospitals from the elective PCI market. We disagree, for reasons explained below. We begin with an analysis of the regulations.