Article:

John Cirace, An Economic Analysis of the “State-Municipal Action” Antitrust Cases, 61 TEXAS L. REV. 481 (1982).
 

Abstract:
In 1943, the U.S. Supreme Court held that the Sherman Act does not apply to state governments acting in their sovereign capacities to regulate commerce, even though the regulation may have anticompetitive effects. This doctrine lay dormant for three decades. Beginning in 1975, however, the Supreme Court began clarifying the scope of the state antitrust exemption in a series of cases that engendered much confusion among bench and bar. Much of the confusion results from the fact that most judges have tried to formulate a neutral test to determine whether the state action exemption applies, when the proper approach is a substantive due process test. Therefore, excepting a state-owned monopoly, federal antitrust preemption should prohibit states from displacing competition in particular markets unless there are substantial market inadequacies inherent in that market. Prof. Cirace provides three specific rules that use economic theory to identify and limit the circumstances of valid state-municipal displacement of competition.