On February 19, 2013, the US Supreme Court overturned the Court of Appeals for the Eleventh Circuit's decision in Federal Trade Commission v. Phoebe Putney Health System, Inc. The Supreme Court held that although the State of Georgia created and granted state hospital authorities the right to purchase or otherwise acquire hospitals to operate and maintain them, it did not likely foresee the anticompetitive effects of one authority controlling the only two hospitals serving the majority of a six-county area. Therefore, the local hospital authority's acquisition of the second area hospital was not protected from antitrust liability by the state-action immunity doctrine.

In 1941, Georgia enacted the Hospital Authorities Law, authorizing counties and municipalities to create bodies (hospital authorities) to govern the operation and maintenance of state health care facilities. Under the law, the hospital authorities' can purchase, lease or otherwise acquire hospitals or other health care facilities. Pursuant to the Law, the City of Albany and Dougherty County created the Hospital Authority of Albany-Dougherty County (HAADC) and used it to acquire Phoebe Putney Memorial Hospital (Memorial). In 1990, the HAADC created two private non-profit corporations to manage Memorial: Phoebe Putney Health System, Inc. (PPHS) and its subsidiary, Phoebe Putney Memorial Hospital, Inc. (PPMH). Under a lease, the HAADC gave exclusive control over Memorial to PPMH, including the ability to set service prices.

The only other hospital in Dougherty County is Palmyra Medical Center (Palmyra). Until the acquisition, which is the subject of this case, Palmyra was operated by a national for-profit hospital network, HCA, Inc. The two county hospitals constitute 86% of the acute-care hospital services market in the six surrounding counties.

In 2010, the HAADC approved a plan to purchase Palmyra from HCA and lease Palmyra to PPHS under the same terms as the Memorial lease agreement. Shortly after the transaction was approved, the FTC brought an administrative complaint against the HAADC, HCA, Palmyra, PPHS, PPMH and the PPHS subsidiary that managed Palmyra (together, the respondents) to enjoin the transaction. The FTC alleged that the Palmyra transaction violates Section 5 of the FTC Act by:

The US District Court for the Middle District of Georgia granted the respondents' motion to dismiss, reasoning that the state-action doctrine granted the respondents immunity from antitrust liability. The Eleventh Circuit affirmed, noting that although the transaction would substantially lessen competition or create a monopoly, the HAADC was protected by the state-action doctrine if the anticompetitive effect was a reasonably foreseeable result of the Hospital Authorities Law. In finding that the anticompetitive effects were reasonably foreseeable, the Eleventh Circuit explained that the legislature may have reasonably anticipated that the HAADC's broad hospital acquisition power may lead to consolidated, anticompetitive hospital ownership. The Supreme Court granted certiorari.

The Supreme Court ruled that the respondents were not protected by state-action immunity. The Supreme Court noted that state-law authority to act does not automatically grant state-action immunity from liability, which is disfavored in the courts. To benefit from state-action immunity, the sub-state governmental entity, the HAADC, must prove that it was given the power to act anticompetitively.

The Supreme Court used a two-part test to determine if the respondents were protected from antitrust liability by the state-action doctrine. The test required that:

The Supreme Court explained that to pass the clear articulation test, the anticompetitive effects must have been a foreseeable result of the Hospital Authorities Law. The Court reasoned that because there was no evidence that the legislature contemplated that the HAADC would consolidate hospital ownership in a way that substantially lessened competition, state-action immunity did not apply.

In reaching its conclusion, the Supreme Court charged the Eleventh Circuit with too loosely applying the foreseeability aspect of the clear articulation test. It stated that to determine whether a particular anticompetitive act was clearly articulated and contemplated by the legislature, state government must have:

Foreseeability, the Supreme Court explained, is evident if the anticompetitive effects were the inherent, logical or ordinary result of the exercise of state-granted authority. It also explained that because state government granted the respondents general corporate power, which does not typically raise antitrust concerns, it likely did not contemplate that the power would be used to reduce competition. It concluded that the legislature could not have foreseen the HAADC's anticompetitive conduct when it granted it the simple permission to acquire hospitals in the acute-care market.

Because the Supreme Court found that the first prong of the clear articulation test was not satisfied, it did not address the second prong.

This case is significant because through the October 2011 term, the Supreme Court under Chief Justice Roberts decided nine antitrust cases, all but one in favor of the defendant. The Phoebe Putney decision is significant because it is both in favor of the plaintiff and unanimous.