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Austin Smith, Logan Breed, Robert Leibenluft, Apr 27, 2015
The Supreme Court’s recent decision in North Carolina Board of Dental Examiners v. Federal Trade Commission will have a real and lasting effect on how state boards regulate and license scores of professions. The case concerned the state action immunity doctrine articulated in the 1943 Parker decision, which held that federal antitrust law does not reach anticompetitive actions by states. Midcal later clarified that states cannot throw a “gauzy cloak” of immunity over private anticompetitive conduct unless the private parties (1) act pursuant to a clearly articulated state policy to displace competition; and (2) are actively supervised by the state.
North Carolina Dental posed the question whether a state dental board composed primarily of active dentists has to meet Midcal’s “active supervision” requirement despite its designation as an arm of the state. The Court sided strongly with federal competition and antitrust law at the expense of formalistic federalism, holding that such boards should be treated like private organizations for Parker immunity purposes and are thus subject to both Midcal requirements.
States will now be forced to rethink how they delegate their police powers over many occupations that are currently largely self-regulated. There are three general ways that states could react to the North Carolina Dental decision: (i) changing the makeup of regulatory boards so that active market participants no longer control them; (ii) providing more active supervision over boards’ conduct; and (iii) taking no further action, thereby subjecting some of their boards’ conduct to federal antitrust law (which will in turn present its own issues).
While much commentary on the case has focused on the “active supervision” aspect of the case, the other options are also important. Each state is likely to employ a mix of these options, tailoring approaches to their unique needs, and even varying their responses on a board-by-board basis within the same state. However states choose to react, the upshot is that active market participants will no longer be able to so easily shield their actions on professional boards from federal antitrust law.
