On Wednesday, February 25, 2015, the Supreme Court released a 6-3 decision in North Carolina Board of Dental Examiners v. Federal Trade Commission, a case with potentially broad implications for regulation by dental and medical boards across the country. The case asked whether the North Carolina Board of Dental Examiners (“NC Dental Board”) could be treated as a “private” actor for federal antitrust law purposes because the board’s members are also market participants (elected by other market participants) who took action to restrain trade against non-dentists. Here are our initial thoughts on the decision:
Key Facts
Key Takeaways
Analysis of the Majority Opinion
In a 6-3 opinion authored by Justice Kennedy, the court held that a state board with a controlling number of decision-makers actively participating in the occupation the board regulates must have active supervision from the state in order to invoke state-action antitrust immunity. The court reached this conclusion by looking back at a series of cases that began with Parker v. Brown, 317 U.S. 341 (1943). In Parker, the court held that states have immunity from the antitrust laws when acting in their sovereign capacities and can legislate policies that restrain trade. North Carolina Board of Dental Examiners asked whether a state board on which a majority of the decision-makers are active market participants was entitled to such immunity.
In reaching its conclusion, the court found that non-sovereign actors, such as the NC Dental Board, receive Parker immunity only if (a) there is a clear articulation of state policy to allow anticompetitive conduct and (b) the policy is actively supervised by the state. The board provided no evidence that it was supervised by North Carolina. Indeed, it argued all along that it was the state and therefore did not need such supervision.
The court reasoned that state agencies need more than a “mere facade” of state involvement to qualify as the sovereign state itself. Without providing a bright line test for when an agency is a state actor, the court expressed discomfort with regulatory power held by active market participants. Indeed, while the NC Dental Board was created under North Carolina law, the court focused on the fact that since the agency was controlled by active market participants, the State had to provide active supervision.
Since all parties agreed the state did not provide oversight, the court ruled against the NC Dental Board. The majority then provided a few suggestions of what supervision might include to guide future actions. Further case law development is necessary to articulate this supervision prong, in particular since the holding could apply broadly to many state agencies that have participation from market participants.
Analysis of the Dissent
The dissent led by Justice Alito concluded that the court misinterpreted the doctrine of state-action antitrust immunity recognized in Parker. Justice Alito wrote that the state-action immunity analysis should have ended with the fact that the North Carolina board was a state agency. Justice Alito disapproved of the majority denying antitrust immunity to the North Carolina board because it was not structured in a way that merits a “good-government seal of approval.” Justice Alito argued that the concept of a licensing board being dominated by licensed practicing professionals is not new and has been around since before the Sherman Act was enacted (in 1890). Finally, the dissent pointed out that the majority’s efforts to combat regulatory capture of licensing boards through the creation of a vague test will inevitably cause more confusion.
The dissent notes that this decision may create practical problems for states’ regulation of professions. States may seek to change the composition of their medical, dental and other boards, but the majority did not articulate what specific percentage constituted “control by active market participants.” Furthermore, there are no explanations of what makes a board member “an active participant,” or part of the scope of the market that causes conflicts of interest for the board member. Finally, if states have boards that are staffed and composed in a manner similar to the North Carolina board, it is possible that all future decisions of such boards could become subject to federal antitrust challenge.