In North Carolina State Board of Dental Examiners v. F.T.C., No. 13-534 (2015), the United States Supreme Court ruled last week that the North Carolina Dental Board, which is comprised mainly of practicing dentists, was not immune from federal antitrust liability under the “state-action” doctrine because no evidence existed “that the State exercised active, or indeed any, supervision over [the Board’s] conduct regarding” the nondentists that the board sought to regulate. 
 
The case arose out of the Board’s efforts to prevent nondentists from providing teeth whitening services in North Carolina.  In 2010, the FTC successfully brought an antitrust action alleging that the Board’s concerted action to exclude nondentists from the market for teeth whitening services in North Carolina constituted an anticompetitive and unfair method of competition.  The Fourth Circuit affirmed.

Arguing that “its members were invested by North Carolina with the power of the State and that, as a result, the Board’s actions are cloaked with . . . immunity” under an earlier Supreme Court decision that “confers [antitrust] immunity on the States’ own anticompetitive policies out of respect for federalism,” the Board sought review in the Supreme Court.    The Supreme Court rejected the Board’s argument.  As the Court explained, “[a] nonsovereign actor controlled by active market participants—such as the Board—enjoys [state-action] immunity only if it satisfies two requirements: first that the challenged restraint be one clearly articulated and affirmatively expressed as state policy, and second that the policy be actively supervised by the State.” The Supreme Court ruled that the Board could not satisfy the second part of this test because there was no evidence that the state of North Carolina “supervised” the Board, which was comprised primarily of practicing dentists, “when it interpreted the [statutory definition of dentistry] as addressing teeth whitening and when it enforced that policy by issuing cease-and-desist letters to nondentist teeth whiteners.” 

Although the Supreme Court emphasized that federal antitrust law “protects competition while also respecting federalism,” the Court also explained that states are not authorized to “abandon markets to the unsupervised control of active market participants, whether trade associations or hybrid agencies.”  Accordingly, “[i]f a State wants to rely on active market participants as regulators, it must provide active supervision” to shield the regulator’s actions from antitrust liability.

The Supreme Court’s decision is available by clicking here.

Reporter, Ramsey Prather, Atlanta, + 1 404 572 4624, rprather@kslaw.com.