U.S. Supreme Court opinion finds that there is no automatic antitrust immunity for state professional licensing boards

Hello everyone and welcome to this Ethics Alert blog which will discuss the recent interesting U.S. Supreme Court opinion which found that there is no automatic antitrust immunity for professional licensing boards.  The case is North Carolina State Board of Dental Examiners v. Federal Trade Commission, No. 13–534. (USSC February 25, 2015) and the opinion is here: https://www.supremecourt.gov/opinions/14pdf/13-534_19m2.pdf.

According to the opinion, similar to many states, the North Carolina legislature delegated the regulation of dentists to a state dental board.  By state law, practicing dentists must fill a majority of the seats on the dental board and the board’s actions are not supervised by any state officials. The board moved to exclude non-dentists from the market for teeth-whitening services after dentists complained about the low prices that non-dentists charged for teeth whitening.  The board sent letters to non-dentists who offered teeth-whitening services demanding that they stop and encouraged malls to remove kiosks used for non-dentist teeth whitening services.

The Federal Trade Commission (FTC) filed an administrative complaint alleging that the board’s move to exclude non-dentists from the market for teeth whitening services in North Carolina was an unfair method of competition under the Federal Trade Commission Act.  An Administrative Law Judge (ALJ) denied the Board’s motion to dismiss on the ground of state-action immunity.

 

The FTC affirmed the ruling, finding that even if the board had acted pursuant to a clearly articulated state policy to displace competition, it must be actively supervised by the state to claim immunity, which it was not.  After a hearing on the merits, the ALJ determined that the board had unreasonably restrained trade in violation of antitrust law.  The FTC again affirmed the ALJ, and the Fourth Circuit affirmed the FTC.

In a 6-3 opinion written by Justice Kennedy, the U.S. Supreme Court upheld the Fourth Circuit’s decision, holding that the board is not immune from the antitrust laws.  The USSC opinion states that, even though the board is an agency of the state, its actions must be supervised by the state in order to have antitrust immunity. The “formal designation given by the States” does not itself create immunity. The board in this case is controlled by market participants in the same occupation as those whom the board regulates.  “When a State empowers a group of active market participants to decide who can participate in its market, and on what terms, the need for supervision is manifest.”

 

According to the opinion, the requirement of state supervision applies to agencies “controlled by active market participants” and actions taken by boards with no involvement from market participants may not have to satisfy the supervision requirement.  The opinion also identifies factors regarding adequate state supervision, including the requirement that the state supervisor must actually review the substance of the agency’s actions and have the power to overrule or modify those actions.

Bottom line:  There has been prior litigation against state Bar entities past attacking the their state action immunity.  This opinion refers to three specific cases and appears to suggest that these cases should be interpreted to mean that only the actions of a Bar entity which are actively supervised by the state (i.e. the supreme court) should have antitrust immunity; however, the rest of a Bar entity’s actions may not have such immunity.

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Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

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