The U.S. Supreme Court recently ruled that the North Carolina Board of Dental Examiners – comprised primarily of practicing dentists elected by other practicing dentists – violated federal anti-trust laws by attempting to exclude non-dentist teeth whitening companies from offering their services. The Supreme Court determined that the dental licensing board was not acting as a sovereign entity entitled to immunity from Federal Trade Commission regulations. (The North Carolina State Board of Dental Examiners v. The Federal Trade Commission, 574 U.S. _ (slip op.) (2015).) Mark Fleury below analyzes the court’s decision, and assesses its potential impact on state licensing boards in Rhode Island and Massachusetts.
Q. What is the background to the case?
A. The North Carolina legislature created an eight-member dental board to regulate the practice of dentistry. Around 2003, non-dental companies and individuals began to provide teeth whitening services to the public. The North Carolina Dental Practices Act states that “a person ‘shall be deemed to be practicing dentistry’ if that person, ‘[r]emoves stains, secretions or deposits from the human teeth.”’ The dental board issued cease and desist letters barring various non-licensed entities from providing teeth whitening services. The letters indicated that “the sale or use of teeth-whitening products by a non-dentist is a misdemeanor” under North Carolina law. As a result of these letters, the FTC claimed the board was attempting to restrict trade in violation of federal anti-trust laws. The 4th U.S. Circuit Court of Appeals agreed with the FTC. (The North Carolina State Board of Dental Examiners v. The Federal Trade Commission, 717 F. 3d 359 (2013)).
Q. What issue was the Supreme Court deciding?
A. The issue was whether the dental board, as constituted under North Carolina law, is a public body or private actor for purposes of applying the “state action” doctrine, which exempts states from antitrust laws for certain activities.
Q. What is the court’s ruling in a nutshell?
A. A majority of the Supreme Court held that the board was not a public body for purposes of applying antitrust exemptions. Relying on its previous ruling in Parker v. Brown, 317 U.S. 341 (1943), the court reiterated that antitrust laws only “confer [sovereign] immunity on anticompetitive conduct by the States when acting in their sovereign capacity.” (North Carolina State Bd. of Dental Examiners v. FTC, 574 U.S. _ (slip op., at 5.) (2015).) Two factors determine whether a board controlled by active market participants is acting in a sovereign capacity. First, ‘“the challenged restraint … [must] be one clearly articulated and affirmatively expressed as state policy’ and, second, that ‘the policy … be actively supervised by the State.’” Id. (quotations omitted). The determining issue in the case came down to whether the dental board had been “actively supervised.” The court found that active supervision requires a ‘“realistic assurance that a private party’s anticompetitive conduct promotes state policy, rather than merely the party’s individual interests”’ Id. (slip op., at 10) (quoting Patrick v. Burget, 486 U.S. 94, 101 (1988).) The court held that the board, comprised of a majority of dentists who are active market participants, required active supervision and was not afforded sovereign immunity.
Q. What does the ruling mean going forward?
A. As a result of the court’s ruling, many states may have to reexamine their selection processes when establishing licensing boards. A board comprised of a majority of self-regulating professionals will be likely subject to federal antitrust laws. As such, states will have to be cognizant of the court’s mandate that any such board, constituted of a majority of market participants, must be actively supervised by the state. Whether a board is appropriately supervised may have to be resolved on a case-by-case basis. This was the concern of the three dissenting Justices in this case.
Q. How will the Supreme Court case potentially impact medical licensing boards in Massachusetts and Rhode Island?
A. In Massachusetts and Rhode Island, the licensing boards regulating medical fields are selected by the governor of each state. Each state’s licensing boards include members of the practice and of the general public – a potentially important distinguishing factor when analyzing the impact of the Supreme Court’s decision on local licensing boards. In addition, the boards in Rhode Island and Massachusetts may have sovereign immunity from an anti-trust challenge as members of both serve at the pleasure of the governor. However, when making decisions that could impact free market activities, Massachusetts and Rhode Island boards need to be cognizant of the strictures required to establish sovereign immunity should such a challenge arise. In the event of such a challenge, immunity will only apply where: (1) the action or restraint by the board must be one clearly articulated and firmly expressed as a policy of the states, and (2) the policy must be actively supervised by the state.
Mark has focused his practice for more than a decade on defending medical professionals in professional liability and licensure matters in Massachusetts and Rhode Island.