Supreme Court Requires State Supervision Of Professional Boards To Secure Antitrust Immunity

In an important decision, the U.S. Supreme Court has held that, where a state professional regulatory board is controlled by active market participants in the profession the board regulates, the board cannot claim "state action" antitrust immunity unless it is actively supervised by other state officials who are not active market participants. The opinion has broad implications for state professional boards hoping to avoid antitrust liability and the entities they regulate seeking either to challenge or to invoke their authority. Having represented the North Carolina State Board in the Supreme Court, Jones Day is especially familiar with the issues and implications raised by the case. The case is North Carolina State Board of Dental Examiners vs. FTC, No. 13–534 (U.S. Feb. 25, 2015). This case, along with FTC v. Phoebe Putney Health System, Inc., (2013), is the second time in three years that the Court has rejected a claim of state-action antitrust immunity.

Background

The North Carolina Legislature created the North Carolina State Board of Dental Examiners "as the agency of the State for the regulation of the practice of dentistry in the State." The Board is empowered to create, administer, and enforce a licensing system for dentists, including to bring actions in the name of the State of North Carolina to enjoin persons from unlawfully practicing dentistry. Of the Board's eight members, six must be licensed, practicing dentists, who are elected by other North Carolina licensed dentists.

Starting in 2006, the Board sent official cease-and-desist letters to non-dentist teeth whitening service providers and product manufacturers in the state. The letters stated or implied that teeth whitening constitutes "the practice of dentistry" and warned that the unlicensed practice of dentistry is a crime. Non-dentists thereafter left the market.

In 2010, the Federal Trade Commission filed an administrative complaint challenging the letters as an anticompetitive practice and unfair method of competition under § 5 of the Federal Trade Commission Act. The FTC argued that the Board's actions amounted to concerted action to exclude non-dentists from the North Carolina teeth-whitening services market.

The Board moved to dismiss on the grounds that it was a state actor and therefore immune from antitrust scrutiny under Supreme Court precedents, beginning with Parker v. Brown, 317 U. S. 341 (1943), that have interpreted the federal antitrust laws, in light of...