U.S. Supreme Court Holds That To Invoke Antitrust Immunity, State Agencies Controlled By Market Participants Must Prove Active State Supervision

On Feb. 25, 2015, the U.S. Supreme Court held in a 6-3 decision that a state board with a controlling number of decision-makers who are active market participants in the occupation the board regulates does not enjoy state action immunity from federal antitrust laws unless it is subject to active state supervision in accordance with a clearly articulated state policy. North Carolina State Bd. of Dental Examiners v. F.T.C., No. 13-534, 2015 WL 773331 (U.S. Feb. 25, 2015). (Click here for a copy of the opinion.)

Background

In Parker v. Brown, 317 U.S. 341, 350-51 (1943), the Supreme Court held that state agencies acting in their sovereign capacity are immunized from liability under federal antitrust laws. Since Parker, state action immunity (also known as Parker immunity) has been extended and granted to private actors when they 1) act pursuant to a clearly articulated state policy and 2) are subject to active state supervision when advancing that policy. See, e.g., Cal. Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 104 (1980).

In Dental Examiners, the North Carolina State Board of Dental Examiners ("the Board")—the majority of whose members are licensed dentists—issued cease-and-desist letters to non-dentists and teeth-whitening product manufacturers (in some cases suggesting they committed misdemeanors) in order to eliminate the provision of all teeth-whitening services by non-dentists in North Carolina. These efforts were successful.

The Federal Trade Commission (FTC) brought an administrative action against the Board, alleging that sending the cease-and-desist letters without state authorization or supervision constituted an unlawful restraint of trade in violation of Section 5 of the FTC Act. The Board moved to dismiss on the grounds of state action immunity, arguing that, as a state board, it needed to only show a clearly articulated state policy (the first of the two Parker prongs). The Administrative Law Judge found in favor of the FTC and the 4th U.S. Circuit Court of Appeals affirmed, holding that agencies, like the Board, in which a "decisive coalition (usually a majority)" is made up of participants in the regulated market, and who are chosen by and accountable to their fellow market constituents, are like any private party required to show both a clearly articulated state policy and active state supervision. North Carolina State Bd. of Dental Examiners v. F.T.C., 717 F.3d 359, 368-70 (4th Cir. 2013). The...