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Supreme Court Requires State Supervision of Professional Boards

Posted in Antitrust, Legislation and Public Policy, Litigation, State Matters

The U.S. Supreme Court recently ruled that state professional boards composed of and controlled by market participants in the profession are subject to federal antitrust regulations, and may not invoke state-action immunity, if the boards are not supervised by their respective state governments. “If a state wants to rely on active market participants as regulators, it must provide active supervision if state-action [antitrust regulation] immunity under [Parker v. Brown] is to be invoked,” the Court said.

The issue before the Court in the case, North Carolina State Board of Dental Examiners v. Federal Trade Commission, was whether the actions of the North Carolina State Board of Dental Examiners (the “Board”), a majority of the members of which are actively engaged in the practice of dentistry in the state, are protected from antitrust regulation under the state-action antitrust immunity doctrine (the “Parker Doctrine”). The North Carolina Dental Practice Act established the Board and granted it authority to regulate dental practice in the state. The Board consists of eight members, six of whom must be licensed dentists actively engaged in the practice of dentistry who are elected by other North Carolina dentists. The Board is granted the authority to promulgate regulations governing the practice of dentistry in the state, provided that any regulations inconsistent with the Dental Practice Act must receive approval from the North Carolina Rules Review Commission, appointed by the state legislature.
The Board actions at issue in the case relate to the Board’s response to complaints from dentists about teeth whitening services offered in North Carolina by non-dentists. The Board conducted an investigation and issued cease-and-desist letters to the non-dentist service providers stating that the provision of teeth whitening services by non-dentists constitutes the illegal practice of dentistry. The Dental Practice Act is silent on whether the practice of dentistry includes teeth whitening services.

As a result of the Board’s actions, the Federal Trade Commission alleged that the “Board’s concerted action to exclude nondentists from the market for teeth whitening services in North Carolina constitutes an anticompetitive and unfair method of competition.” The Board argued that its members were granted authority by the state and as a result were protected from antitrust regulation under the Parker Doctrine, which confers immunity from antitrust regulations to state actions performed in the state’s sovereign capacity. According to the Court, Parker Doctrine immunity cannot be invoked unless the actions are an exercise of sovereign power by the state, and “state agencies are not simply by their governmental character sovereign actors for purposes of state-action immunity.”

The Court held that the Board could invoke the Parker Doctrine only if it was subject to active supervision by the State of North Carolina. In this case, the Court found that such state supervision did not exist; therefore, the Board could not invoke Parker Doctrine immunity and its actions were subject to antitrust regulation. “While North Carolina prohibits the unauthorized practice of dentistry, however, its Act is silent on whether that broad prohibition covers teeth whitening. Here, the Board did not receive active supervision by the state when it interpreted the Act as addressing teeth whitening and when it enforced that policy by issuing cease-and-desist letters to nondentist teeth whiteners.” The Court recognized that the adequacy of state supervision for Parker Doctrine purposes will depend on the circumstances of each case; however, “the state supervisor may not itself be an active market participant.”
The case was argued before the Court on October 14, 2014 and the 6-3 opinion, which was written by Justice Kennedy, was issued on February 25, 2015.

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