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Learning to Love the State Action Doctrine

The state action doctrine receives relatively little attention in the Federal Trade Commission/Department of Justice 2004 report on competition in the health care sector. Not surprisingly, the report focuses primarily on urging states to reconsider specific laws that tend to restrict competition in health care markets but that are clearly shielded by the state action doctrine. Relatively little attention is given to the interpretation of the doctrine itself. This article employs the twin themes of institutional choice and market failure to evaluate a number of interpretive proposals affecting the state action doctrine that were available to, but not taken up by, the agencies. It also proposes using the state action doctrine to ease the burden on courts in market-failure cases in which there is an obvious threat to competition and the alternative of publicly accountable regulatory action is available.

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