Antitrust Immunity Up In Smoke: Preemption, State Action, And The Master Settlement Agreement

By: Matthew McDonald


In antitrust law, the state action doctrine allows states to take regulatory actions that would otherwise result in violations of the federal antitrust laws. Unfortunately, the Supreme Court has not always provided clear guidance in its state action jurisprudence, and lower courts have expressed frustration with this doctrinally confusing area of antitrust law. There is confusion among the lower courts over the relationship between state action immunity and the related doctrine of federal antitrust preemption. Further, lower courts are confused as to how they should apply the Midcal two-pronged test regulating the availability of state action immunity to private actors. The judicial response to antitrust suits over the tobacco Master Settlement Agreement (MSA), a settlement signed between tobacco manufacturers and forty-six states, provides a stark example of this confusion. The Second and Third Circuits have held that the antitrust preemption and state action doctrines do not immunize the MSA from charges of facilitating a price-fixing conspiracy among cigarette makers, while five other circuits have held the contrary. This Note explores the MSA circuit split and contends that the Second and Third Circuits were correct in holding that antitrust preemption and state action immunity do not shield the MSA. This result is consistent with Supreme Court precedent and antitrust policy.


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