Recently, in a rarely considered question, the US District Court of Massachusetts held that the American Red Cross (ARC), a federally chartered corporation, is not subject to liability under the Sherman Antitrust Act (Sherman Act) because it is not an antitrust “person.” The court narrowly construed the Sherman Act to exclude a quasi-public entity like ARC, resulting in a broad interpretation of immunity for quasi-public entities under the antitrust laws.
ARC is the largest supplier of blood platelets in the United States and, until recently, sold “untreated” platelets to hospitals which then employed various services to mitigate the risk of platelets becoming infected. Verax Biomedical Inc. (Verax) manufactures one such mitigation service. After ARC announced its plan to begin using Cerus Corporation’s INTERCEPT Blood System on its platelet supply prior to sale – a system that is incompatible with Verax’s service – Verax sued ARC for allegedly leveraging its power in the market for platelets to monopolize the market for mitigation services.
The court found that, although Congress had clearly waived ARC’s sovereign immunity, it did not constitute a “person” under the Sherman Act in form or function because its public attributes outweighed its private ones.
- ARC is a federally chartered nonprofit corporation responsible for “provid[ing] volunteer aid in time of war to the sick and wounded of the Armed Forces.” 36 U.S.C. § 300102(1). It is also the largest supplier of blood platelets in the United States.
- Verax produces and sells US Food and Drug Administration (FDA)-cleared tests for detecting bacterial growth in platelets.
- In the past, ARC sold both “untreated” and “treated” platelets to hospitals. Untreated platelets require further treatment to ensure bacterial growth is controlled. Hospitals could choose which mitigation services to use, including Verax’s.
- In 2020, ARC announced its intention to stop selling untreated platelets and to begin treating all platelets with Cerus Corporation’s INTERCEPT Blood System prior to sale. Verax’s service cannot be used on platelets that have been treated with the INTERCEPT system, as the FDA has not endorsed the pairing of the two technologies.
- Verax filed suit against ARC, bringing three counts under the Sherman Act: tying, exclusive dealing and attempted monopolization.
- ARC moved to dismiss the lawsuit, arguing, in part, that ARC cannot be sued under the Sherman Act. Shortly after, the federal government filed a statement of interest arguing that ARC can be sued under the Sherman Act.
- The court concluded that, although it was a close question, ARC was not a “person” under the Sherman Act in either form or function and therefore dismissed the antitrust claims.
HOW THE DECISION WAS REACHED
- To determine whether the Sherman Act extends to ARC, the court applied the two-step analysis laid down by the US Supreme Court in FDIC v. Meyer and asked (1) whether there was a waiver of sovereign immunity for actions against ARC and (2) whether the substantive prohibitions of the Sherman Act apply to ARC.
- The answer to the first question, the court found, was a clear yes. Since 1950, ARC’s statutory charter has stated that it may “sue and be sued in courts of law and equity, state or Federal, within the jurisdiction of the United States.” 36 U.S.C. § 3001015(a); see 36 U.S.C. § 2 (1905).
- As to the second question, the court noted that the Sherman Act imposes liability on any person, which includes corporations and associations existing under or authorized by the laws of the United States. However, because the United States is not an antitrust “person,” the question was whether ARC is a person separate from the United States for the purposes of the antitrust laws. ARC argued it is a federal instrumentality, while both Verax and the United States argued it was not.
- The court looked to ARC’s form and function to settle the question. It considered a prior determination by the US Supreme Court that the US Postal Service is not an antitrust “person” because its statutory designation and goals and obligations suggested Congress did not intend it to be treated as a separate entity from the United States.
- When considering ARC’s form, the court found that ARC’s enabling statute demonstrates a congressional intent to treat it as an instrumentality of the federal government and that one of the “rights” of an instrumentality of the United States is immunity from antitrust suit. It rejected the government’s assertion that ARC is a separate antitrust person because the “United States does not own, control or supervise the ARC,” finding this was not dispositive.
- When considering ARC’s function, the court found it significant that ARC’s charter requires it to fulfill a variety of public functions, including effectuating treaty obligations and coordinating domestic and international aid both during peacetime and during war or emergency. It acknowledged that ARC’s enabling statute does not provide it with powers more characteristic of government, such as eminent domain, but found that on balance ARC’s public attributes outweighed its private ones. Moreover, ARC is different from private enterprises because it does not seek profits. It rejected the government’s argument that ARC is a separate antitrust person because federal courts have repeatedly concluded it is a corporate “person” separate from the United States, noting that these decisions predate a 2007 amendment to ARC’s statutory charger and discuss ARC’s government status under distinct legal regimes and mandates.
WHAT THIS DECISION MEANS
- The court narrowly construed the definition of “person” under the Sherman Act, which includes “corporations” and “associations.” As a result, quasi-public entities like ARC, which have more public attributes than private attributes, are immune from liability under federal antitrust laws.
- Had the court adopted the government’s argument that ARC is a “person” subject to antitrust liability, it could have exposed a variety of other entities that perform governmental functions to liability. Instead, the court rejected the government’s attempt to expand antitrust liability under the Sherman Act.