By Gregory Day. Full Text.
States are not only prolific monopolists but also virtually unaccountable. Consider the prison-industrial complex, where states force inmates to pay monopoly prices while suppressing competition for commissary items, phone services, medicine, and more. While the Sherman Act would often ban these types of practices, states are immune from antitrust scrutiny as a matter of federalism—a concept referring to the constitutional division of power between federal and states actors. Because regulating commerce is considered an essential feature of self-rule, the Supreme Court held in Parker v. Brown that antitrust review would impermissibly strip states of their autonomy. In fact, this immunity is absolute because states must answer to voters, who should ostensibly compel states to restrain trade when it would advance the public’s welfare.
It is notable, though, that states act much differently than when Parker was decided in 1943. Today, states are relentlessly competing in markets through banks, telecommunication providers, farms, shopping centers, utility companies, and more. These entities are identical to private firms, and can restrain trade just like ordinary monopolists. Given Parker’s purpose of allowing states to pursue public policies, should antitrust’s analysis change when a state has excluded competition in hopes of raising revenue as a conventional monopolist, instead of achieving public objectives as a sovereign?
Set against the prison-industrial complex, this Article challenges the modern theory of antitrust federalism, asserting that states should relinquish immunity when acting as market participants. The research refutes the Court’s position of accountability and federalism by demonstrating that a state’s anticompetitive practices: (1) create greater dangers than run-of-the-mill monopolies; (2) dodge important forms of oversight associated with democratic governance; and (3) pose none of Parker’s federalism concerns. In light of the prison-industrial complex and similar industries, this Article finds that states encounter powerful incentives to monopolize markets comprised of marginalized people—such as inmates, immigrants—due to their dearth of economic and political power. Further, due to a state’s legislative authority, the resulting monopolies are more formidable than private ones. If a state’s sovereign acts were shielded, but courts could subject commercial behaviors to antitrust review, it would add an important check on unaccountable state power.