AAI Praises Supreme Court’s State-Action Decision
The American Antitrust Institute (AAI) applauds the Supreme Court’s ruling today in North Carolina State Board of Dental Examiners v. Federal Trade Commission. The AAI had filed a brief supporting the position adopted by the Court.
The Court held that “a state board on which a controlling number of decisionmakers are active market participants in the occupation the board regulates must satisfy Midcal’s active supervision requirement in order to invoke state-action antitrust immunity.”
“This is a tremendous victory for the FTC,” said the AAI Vice President and General Counsel Richard Brunell.
In a 6-3 decision written by Justice Kennedy, the Court not only affirmed the FTC’s decision to hold the North Carolina dental board liable for excluding competing non-dentist teeth whitening providers, but it confirmed the FTC’s long-held bipartisan consensus that unsupervised state regulatory boards controlled by market participants should be subject to antitrust scrutiny.
The Court also offered a ringing endorsement of the antitrust laws, declaring: “Federal antitrust law is a central safeguard for the Nation’s free market structures.”
“Today’s decision is the culmination of a project to narrow and rationalize the state-action doctrine that began with Chairman Tim Muris and was brought to fruition by successive Republican and Democratic commissions,” Brunell explained. In a state-action decision two years ago, cited by the Court today, the Court made it more difficult for defendants to establish the other requirement for state-action immunity, namely that the state “clearly articulate” a policy to displace competition.
The Court accepted the argument made by the AAI and others that the “clear articulation” requirement and the “active supervision” requirement work hand in hand to ensure that an anticompetitive policy “is indeed the policy of a State.”
The clear-articulation requirement alone is insufficient, according to the Court, because “a policy may satisfy this test yet still be defined at so high a level of generality as to leave open critical questions about how and to what extent the market should be regulated,” questions that may be answered by self-interested boards to further their own interests rather than the State’s. In this case, while North Carolina law barred the unlicensed practice of dentistry, it was silent as to whether teeth whitening constituted the practice of dentistry.
The Court rejected the argument that immunity is needed because otherwise full-time professionals would be reluctant to volunteer on state boards, noting that the States may provide for the defense and indemnification of agency members, and that immunity would still be available if States adopt clear policies to displace competition and supervise market participants when they enforce or interpret those policies. The Court also suggested, but pointedly did not decide, that sovereign immunity might shield board members from damages in some circumstances.
Notably, the Court did not limit the supervision requirement to state boards whose members are elected by their peers, which the lower court had thought was significant. Nor did the Court specify what constitutes active supervision, leaving it up to the FTC and the lower courts to flesh out the particulars based on general principles articulated in other cases, including the principle that the “supervisor must have the power to veto or modify particular decisions to ensure they accord with state policy.”
The Court did not say whether judicial review might satisfy the active-supervision requirement. However the Court did note that the North Carolina board had failed to rely on “any of the powers at its disposal that would invoke oversight by a politically accountable official,” which included going to court to seek an injunction.
In dissent, Justices Alito, Scalia and Thomas claimed that the decision “will spawn confusion.” The dissenters noted that many issues were also left open by the Court including whether supervision may be required when something less than a majority of the board is comprised of active market participants, whether professionals who temporarily withdraw from practice are “active market participants,” and whether active market participants who do not engage in the particular conduct at issue (say, dentists who do not practice teeth whitening) would require active supervision.
Media Contact:
Richard Brunell
rbrunell@antitrustinstitute.org
202-600-9640