25 February 2015

Law in Plain English: North Carolina Board of Dental Examiners v. FTC

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblogNorth Carolina Board of Dental Examiners v. FTC

Argument: Oct 14 2014 (Aud.)

Background: The North Carolina Board of Dental Examiners is a state agency comprised primarily of licensed dentists, elected by dentists within the state, and funded by fees paid by dentists. The Board opened an investigation into teeth­ whitening services performed by non-dentists, and ultimately issued at least 47 cease-and-desist letters to 29 non-dentist teeth-whitening providers. In response, the Federal Trade Commission (FTC) filed a complaint against the Board, alleging a violation of the FTC Act, 15 U.S.C. § 45, by engaging in unfair competition. The Fourth Circuit ruled in favor of the FTC, concluding that when a state agency appears to have the attributes of a private actor and is taking actions to benefit its own membership, it should be treated as a private entity. The Board was a private entity because it was operated by market participants who were elected by other market participants and was not actively supervised by the state. Allowing the antitrust laws to apply to the unsupervised decisions of self-interested regulators acts as a check to prevent conduct that is not in the public interest; absent antitrust to police their actions, unsupervised self-interested boards would be subject to neither political nor market discipline to serve consumers' best interests.

Issue: The question before the Court was whether, for purposes of the state-action exemption from federal antitrust law, an official state regulatory board created by state law may properly be treated as a “private” actor simply because, pursuant to state law, a majority of the board’s members are also market participants who are elected to their official positions by other market participants.

Holding: In a 6-3 decision, the Supreme Court ruled that because a controlling number of the Board’s decisionmakers are active market participants in the occupation the Board regulates, the Board can invoke state-action antitrust immunity only if it was subject to active supervision by the State, and here that requirement is not met. 
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