Healthcare Litigation

State Licensing Boards Aren’t Immune From Antitrust Claims Unless They Are Actively Supervised by the State, Rules U.S. Supreme Court

Why It Matters

Practicing professionals who serve on state licensing boards can be liable for antitrust violations unless the board’s conduct is subject to active supervision by the state, per the U.S. Supreme Court in North Carolina State Board of Dental Examiners v. FTC, 547 U.S. ___, 135 S. Ct. 1101 (2015). Because licensing boards are gatekeepers that determine who can practice in a profession and under what terms, boards are more exposed to antitrust claims than previously was the case. This decision is of nationwide importance for the many professional licensing boards that are composed primarily of individuals practicing in that profession.

The North Carolina State Board of Dental Examiners (Board), which regulates the practice of dentistry in North Carolina, had responded to complaints from licensed dentists that nondentists were charging lower prices for teeth-whitening services. The Board, made up primarily of practicing dentists, issued at least 47 cease-and-desist letters to nondentist teeth-whitening service providers, often warning them that the unlicensed practice of dentistry is a crime.

The Federal Trade Commission subsequently filed an administrative complaint against the Board alleging that the Board’s concerted action to exclude nondentists from the marketplace for teeth-whitening services constituted an anticompetitive and unfair method of competition, in violation of federal law. In response, the Board argued that its actions were protected under the doctrine of state-action antitrust immunity set forth in Parker v. Brown, 317 U.S. 341 (1943), and its progeny. In Parker, the Supreme Court had interpreted antitrust laws to confer immunity on anticompetitive conduct of states when acting in their sovereign capacity. The administrative law judge in the North Carolina lawsuit rejected application of that doctrine and ruled against the Board. The United States Court of Appeals for the Fourth Circuit affirmed.

The Supreme Court took the case and held that when a controlling number of decision makers on a state licensing board are active participants in the occupation the board regulates, the board can invoke state-action immunity, but only if it is subject to active supervision by the state. “If a State wants to rely on active market participants as regulators, it must provide active supervision if state-action immunity under Parker is to be invoked.” In its 6-to-3 decision, the Court held at page 8 that “active market participants cannot be allowed to regulate their own markets free from antitrust accountability.” Immunity extends to such actions only if the challenged restraint was “clearly articulated and affirmatively expressed state policy” and the implementation of that policy “was actively supervised by the state.”

In this case, the state of North Carolina had not formally defined teeth-whitening as the practice of dentistry, nor did it have any express policy to exclude nondentists from the teeth-whitening market. Further, the state did not actively supervise the Board’s actions or exclude nondentists from the teeth-whitening market. In addition, the Board itself was made up primarily of licensed practicing dentists within the state of North Carolina.

Takeaway

State licensing boards often are composed of professionals who practice within the profession that the board is charged with regulating. In that situation, careful consideration should be given to whether the actions of such boards enjoy state-action antitrust immunity. The relevant questions are whether (1) the challenged action was clearly articulated and affirmatively expressed in state policy, and (2) the actions of the board are actively supervised by the state.

Where It Matters

Click here to view a partial listing of states and professional boards that are, or may currently be, composed of a controlling number of actively practicing members.

manatt-black

ATTORNEY ADVERTISING

pursuant to New York DR 2-101(f)

© 2024 Manatt, Phelps & Phillips, LLP.

All rights reserved