One of the most important cases the U.S. Supreme Court will decide this year—at least with respect to antitrust law—involves the question of whether dentists in North Carolina can maintain a monopoly over teeth whitening services. While it hasn’t generated nearly the level of public attention as cases involving marriage equality or voting rights, North Carolina Board of Dental Examiners v. Federal Trade Commission, argued before the Court last week, could have a significant impact on the ability of state agencies to regulate specific industries and professions, particularly healthcare.
Created by state statute, the purpose of the North Carolina Dental Board (the Board) is to regulate the practice of dentistry in North Carolina in order to protect public health, safety and welfare. The Board consists of eight members—six dentists, one dental hygienist and one consumer—elected by its membership of dentists. Around 2003, non-dentists began offering teeth whitening services to consumers in malls, spas and salons, typically at a significant discount to the rates charged by dentists. After receiving a number of complaints from its membership, which focused primarily on the low prices charged for teeth whitening services by non-dentists, the Board took the position that these services, when provided by non-dentists, constituted the unlicensed practice of dentistry. The Board sent at least 47 cease and desist letters to non-dentist teeth whitening service providers, manufacturers of teeth whitening products, distributors of these products, and even the North Carolina Board of Cosmetic Art Examiners, which regulates salons and spas. On Dec. 7, 2011, the Federal Trade Commission (FTC) unanimously found that the Board’s actions violated Section 5 of the Federal Trade Commission Act by ordering non-dentist teeth whitening service providers to stop operating in North Carolina.
At the core of this case is the scope of the “state action doctrine.” In its 1943 decision in Parker v. Brown, the Supreme Court found that the Sherman Act does not expressly prohibit a state from regulating its own economy, thus exempting any such action by a state from the antitrust laws. The Court has since refined the state action doctrine and extended immunity to certain state agencies, as well as non-state actors such as municipalities, so long as the actor is acting pursuant to a clearly expressed state policy to displace competition. In later decisions, the Supreme Court provided that private actors may be also immune from antitrust risk when they act pursuant to such a state policy, but only if they can additionally prove that the questioned conduct is actively supervised by the state itself. At issue in North Carolina Board of Dental Examiners is whether the Board was a state agency (and need only prove that its actions were conducted pursuant to a state policy) or simply a private party masquerading as a state agency (and thus must additionally prove active state supervision).
Arguments of the Parties
The Supreme Court accepted the case to review the following question: “Whether, for purposes of the state-action exemption from federal antitrust law, an official state regulatory board created by state law may be properly treated as a ‘private’ actor simply because, pursuant to state law, a majority of the board’s members are also market participants who are elected to their official positions by other market participants.”
The Board claims that it was acting as a state agency, not as a private actor, because it was created by state law, its members took an oath, and it had to comply with state ethics rules, the Administrative Procedures Act and public records laws.
The FTC, by contrast, argues that the Board’s actions were not exempt because the State did not actively supervise the Board and because the Board had a financial interest in excluding non-dentists from the market place. Consequently, by sending cease and desist letters to non-dentist teeth whiteners, the Board was not acting in the public interest, but as an anticompetitive cartel.
The case attracted at total of 17 amicus briefs. Not surprisingly, industry trade groups and state governments filed briefs in support of the Board. Several associations and companies restricted by professional licensing standards—such as Legalzoom.com—filed briefs in support of the FTC, as did law professors and both conservative and political policy groups.
Options of the Supreme Court
At oral argument, the Court appeared concerned about articulating an appropriate test to exempt purported state agency actions from antitrust laws. The justices posed a number of scenarios to the attorneys for both parties in furtherance of this purpose. Justice Kagan, for example, hypothesized to counsel for the Board: “So suppose a State just looked around and found a trade association and said we think that that trade association is going to be a very good enforcer of State law, and made the trade association a State entity. That’s the board that’s going to regulate this industry. Is that sufficient?” Both Justice Breyer and Justice Scalia, however, emphasized to counsel for the FTC that they wanted medical personnel, not bureaucrats, deciding who could practice medicine in a given state.
The decision in North Carolina Board of Dental Examiners could have a potentially widespread impact on how states regulate a number of industries. As the Justices’ questions demonstrate, the opinion will likely have a particular impact on the ability of states to regulate healthcare practitioners using healthcare practitioners. Of course, professional licensing in many states now covers not only law and healthcare, but also fortune telling, eyebrow threading and interior decorating, among other industries. Dentists will not, therefore, be the only ones anxiously awaiting the Court’s decision.