Academic journal article Harvard Law Review

Sherman Act - State-Action Immunity

Academic journal article Harvard Law Review

Sherman Act - State-Action Immunity

Article excerpt

The state-action antitrust immunity doctrine is premised on the idea that Congress, in passing the Sherman Act, could not have intended to prohibit all state economic regulation that displaces competition. First laid out by the Supreme Court in Parker v. Brown, (1) the doctrine immunizes the decisions of states as sovereigns from antitrust scrutiny. (2) In California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., (3) the Court held that private entities can be protected by state-action immunity, but only if their conduct is (1) taken pursuant to a "clearly articulated and affirmatively expressed ... state policy" and (2) "'actively supervised' by the State itself." (4) After Midcal, however, it remained open whether the actions of state agencies like professional licensing boards--which are typically composed of active practitioners in the market they regulate (5)--were subject to the doctrine's requirement of active state supervision for private entities claiming state-action immunity.

Last Term, in North Carolina State Board of Dental Examiners v. FTC, (6) the Supreme Court held that in order to obtain antitrust immunity, a state agency must be actively supervised by the state if "a controlling number of [its] decisionmakers are active market participants in the occupation the board regulates." (7) The majority's test leaves open important questions regarding the scope of the active supervision requirement, including the very definition of active market participation. (8) Future courts may be tempted to interpret the majority's test narrowly and apply the active supervision requirement only to boards with a majority of active participants in the precise market being regulated. But that interpretation would be at odds with the balance between competition and federalism struck by the majority opinion and with the Court's functionalist approach taken in other antitrust contexts.

The North Carolina State Board of Dental Examiners is a state-created agency tasked chiefly with licensing dentists and dental hygienists. (9) Six of its eight members must be practicing dentists and are elected by other dentists. (10) In addition to its licensing authority, the Board can bring actions in state court against people suspected of practicing dentistry without a license. (11) In 2003, the Board became aware of a growing trend in the market for teeth-whitening services: nondentists were performing whitening procedures, mostly at salons and shopping mall kiosks, at a significantly lower price than dentists. (12) After an initial investigation, the Board sent cease-and-desist letters to twenty-nine nondentist providers. (13) The campaign was effective. Nondentists left the teeth-whitening market, and sellers of the nondentist providers' whitening products shut down their operations in North Carolina. (14)

In 2010, the Federal Trade Commission (FTC) brought an administrative action against the Board alleging that it engaged in "[u]nfair methods of competition" in violation of the Federal Trade Commission Act (15) (FTC Act). (16) The Board moved to dismiss, claiming that, as a state agency, it was protected by state-action antitrust immunity. (17) The FTC denied the motion. (18) The case then proceeded to an adjudication on the merits in front of an administrative law judge, who found that the Board had violated the FTC Act. (19) The FTC affirmed and, in its Final Order, enjoined the Board from continuing to send cease-and-desist letters to nondentists or otherwise "discouraging the provision" of teeth-whitening goods or services. (20)

The Fourth Circuit denied the Board's petition for review of the FTC order. (21) Writing for the court, Judge Shedd (22) endorsed the FTC's view that state agencies will be considered "private" actors--and thus are subject to Midcal's active-supervision requirement--when they are "operated by market participants who are elected by other market participants." (23) Because the Board could not show that it was actively supervised by North Carolina, (24) the court turned to the merits of the underlying antitrust claim and held that the Board had violated the FTC Act. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.