For some time, the Federal Trade Commission (FTC) has been attempting to limit the scope of anti-trust immunity under the “state action doctrine.” The state action doctrine provides that states may take regulatory actions that would have otherwise violated federal anti-trust laws. The FTC recently recorded a big win in this ongoing fight in the matter of North Carolina State Board of Dental Examiners v. Federal Trade Commission, Case No. 12-1172 (4th Cir. May 31, 2013). The Fourth Circuit held that the the Board of Dental Examiners improperly expelled non-dentists from the teeth whitening market in North Carolina.
This case focused on actions of the Board, which is a state agency made up of practicing dentists, dental hygienists, and a consumer representative. While the primary purpose of the Board is to license and discipline dentists, the board had issued dozens of cease and desist letters to non-dentists engaged in teeth-whitening services. The FTC caught wind of this and issued an administrative complaint alleging improper exclusion of non-dentists from the market. Of course, the Board responded by claiming that it was covered under the state action doctrine because it was a state entity that was created to regulate the practice of dentistry, which included teeth-whitening.
The Fourth Circuit held that the Board was a private actor because its majority is made up of members who are participants in the regulated market and who were elected by fellow market participants. In reaching this decision the Court relied on California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980), which held that private parties can only claim immunity if they act according to express state policy and are actively supervised by the state. The Board was unable to meet this test because there wasn’t sufficient state oversight. As such, the Board is subject to anti-trust laws.
For those of you keeping track at home, the NCAA is not subject to anti-trust laws but the actions of the a State Board of Dental Examiners are covered. Makes sense in the grand scheme of things, right?