Supreme Court Finds That Regulatory Boards Composed Of 'Active Market Participants' Are Subject To Antitrust Laws If Not Actively Supervised By The State

Yesterday, the Supreme Court issued its ruling in North Carolina State Board of Dental Examiners v. FTC, finding that North Carolina's state board of dental examiners was subject to antitrust scrutiny under the Sherman Act and Federal Trade Commission Act. In reaching that decision, the court found that a state agency composed of "active market participants"—here, a board responsible for supervising the practice of dentistry composed primarily of practicing dentists—was not immune to federal antitrust laws as a sovereign actor unless the state "actively supervised" that agency. The Court left open, however, just what sort of active supervision might be required.

The North Carolina board of dental examiners is composed of eight members: six dentists (elected by other licensed dentists), one dental hygienist (elected by other licensed hygienists), and one "consumer," appointed by the governor. The dispute in North Carolina State Board related to teeth whitening, a practice that had once been the exclusive province of dentists. The Court found that over time, however, non-dental practitioners had increasingly offered that service to consumers, typically at rates lower than those charged by dentists. Several years later, certain members of the board, all of whom were dentists, began an inquiry into the practice of teeth whitening by non-dentists. The board did not issue a rule or regulation as a result of the inquiry, which would have been reviewable by the North Carolina Rules Review Commission, whose members are appointed by the legislature. Instead, the board sent cease-and-desist letters to non-dentist providers and manufacturers and engaged in other actions designed to discourage non-dentists from providing those services. In 2010, the FTC successfully sued the board to prevent these practices, in a ruling that was ultimately sustained by the Fourth Circuit. The board sought review before the Supreme Court.

The Court, in an opinion authored by Justice Kennedy, rejected the board's argument that as a state actor it was immune from liability under Parker v. Brown, 317 U.S. 341 (1943) and its progeny. The Court noted that under its previous decisions, including California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980), a "nonsovereign actor controlled by active market participants" was entitled to immunity only if (i) the restriction at issue was "clearly articulated and affirmatively expressed as state policy," and...