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State Licensing Agencies May Violate Antitrust Laws

By: Robert W. Hesselbacher, Jr.

In North Carolina State Board of Dental Examiners v. Federal Trade Commission, decided February 25, 2015, the United States Supreme Court held that a state licensing board, whose members include individuals who are employed in the profession regulated by the board, may violate federal antitrust law. 

The North Carolina State Board of Dental Examiners was created by state law as a state agency.  The Board created, administers, and enforces a licensing system for dentists and has broad authority over licensees.  Six of the Board’s eight members are licensed, practicing dentists.  Following complaints by a number of dentists, the Board took various actions against non-dentist teeth whitening service providers, including sending cease-and-desist letters, which asserted that teeth whitening services constituted the unlawful practice of unlicensed dentistry. 

The Federal Trade Commission brought an administrative action against the Board on the ground that the concerted action of its dentist members to exclude non-dentists from the market for teeth whitening services in North Carolina was anticompetitive conduct in violation of federal antitrust law.  The FTC prevailed in the administrative action, and the decision was affirmed by the Fourth Circuit Court of Appeals.  The Supreme Court accepted the case. 

The federal antitrust laws prohibit various types of anticompetitive conduct that are deemed to be unlawful restraints of trade.  Under long-established principles, however, states are immune from antitrust liability when they act in their sovereign capacities.  North Carolina argued to the Supreme Court that the Board of Dental Examiners was immune because it was created as a state agency.  The Court rejected this argument, holding that the designation as a state agency in and of itself did not create immunity when the Board included non-state employees who were participants in the marketplace – i.e., dentists who were in competition with non-dentists for teeth whitening services.  In such an instance, a state board must satisfy two conditions to enjoy immunity: (1) the board’s action was “clearly articulated and affirmatively expressed as state policy” and (2) the policy was “actively supervised by” the state.  The Board of Dental Examiners was not subject to active supervision by North Carolina officials since no one in state government had the ability to review and approve or reject the Board’s actions.  Therefore, the Supreme Court upheld the decision of the Fourth Circuit and found the Board’s conduct to be in violation of antitrust law. 

State licensing boards in Maryland and elsewhere regulate a host of professions and trades.  Those boards, like the North Carolina Board of Dental Examiners, typically include a number of active members of the profession or trade that the board regulates.  Including such members permits these boards to have the great benefit of their experience and expertise.  However, as the Supreme Court observed, there is the risk that their actions may be anticompetitive.  As the Supreme Court held, any board action that serves to restrain competition must be examined to be certain that it is consistent with a clear state policy and that it is approved by a state supervisor who is not an active participant in the profession or trade that is regulated by the board.

Wright, Constable & Skeen represents many professional and trade licensees, including dentists, doctors, other medical providers, veterinarians, and members of the construction trades.  For more information, contact Robert W. Hesselbacher, Jr., (410) 659-1317, rhesselbacher@wcslaw.com.