State professional regulatory boards may seek more state supervision or change their membership makeup because of a U.S. Supreme Court decision last week involving a North Carolina dental board accused of illegally suppressing competition.
In North Carolina State Board of Dental Examiners v. Federal Trade Commission, the court sided with the Federal Trade Commission. It ruled 6-3 that the North Carolina dental regulatory board, composed mostly of dentists, illegally suppressed competition when it told nondentists to stop offering teeth-whitening services.
It's common for states to establish regulatory boards comprising members of the profession being regulated. The American Medical Association and the American Dental Association had filed a friend-of-the-court brief supporting the state dental board's position.
Lawyers for the board had argued it should be immune from antitrust laws because it's a state agency. The FTC, however, said the dental board should not be immune because North Carolina didn't actively supervise the board's actions.
In an opinion written by Justice Anthony Kennedy, the majority said North Carolina did not actively supervise the dental board, which meant it was not immune from antitrust action. Kennedy wrote that immunity from antitrust action requires “more than a mere facade of state involvement.”
“Limits on state-action immunity are most essential when the State seeks to delegate its regulatory power to active market participants, for established ethical standards may blend with private anticompetitive motives in a way difficult even for market participants to discern,” Kennedy wrote. “Dual allegiances are not always apparent to an actor.”
The decision could spur more states to set up supervisory structures over professional regulatory boards, said Jeffrey Brennan, a partner at McDermott Will & Emery in Washington who formerly headed the FTC's healthcare division. Now, states generally don't actively supervise such boards. “If states do not have an active supervision structure in place, then those decisions will be very vulnerable to challenges in light of this case,” Brennan said.
Matthew Cantor, a partner at Constantine Cannon in New York City, said the majority was clear that the supervision procedures don't have to be overly burdensome. “There has to be some reporting mechanism that permits the state to evaluate the actions of the board,” he said.