Antitrust Law - State Action Immunity - Fourth Circuit Holds That State's Dental Board of Examiners Must Show "Active Supervision" by State to Be Entitled to Antitrust Immunity

Harvard Law Review, May 2014 | Go to article overview

Antitrust Law - State Action Immunity - Fourth Circuit Holds That State's Dental Board of Examiners Must Show "Active Supervision" by State to Be Entitled to Antitrust Immunity


ANTITRUST LAW--STATE ACTION IMMUNITY--FOURTH CIRCUIT HOLDS THAT STATE'S DENTAL BOARD OF EXAMINERS MUST SHOW "ACTIVE SUPERVISION" BY STATE TO BE ENTITLED TO ANTITRUST IMMUNITY.-- North Carolina State Board of Dental Examiners v. FTC, 717 F.3d 359 (4th Cir. 2013), cert. granted, No. 13-534, 2014 WL 801099 (U.S. Mar. 3, 2014).

in Parker v. Brown, (1) the Supreme Court ruled that antitrust laws do not apply to state regulation. (2) Since then, the Court has extended state action antitrust immunity under three sets of circumstances. First, conduct by the state itself--the state legislature or the state supreme court--enjoys immunity. (3) Second, under the two-prong test in California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., (4) private parties may claim state action immunity if their actions are (1) pursuant to a "clearly articulated and affirmatively expressed" (5) state policy and (2) "'actively supervised' by the State." (6) Third, in Town of Hallie v. City of Eau Claire, (7) the Supreme Court held that municipalities need not show active state supervision but instead earn Parker immunity when, under the first Midcal prong, they act pursuant to a "clearly articulated" state policy to displace competition. (8) whether state agencies should be subject to an active supervision requirement is considered an "open question." (9) Recently, in North Carolina State Board of Dental Examiners v. FTC," the Fourth Circuit upheld a Federal Trade Commission (FTC) order directed against the North Carolina State Board of Dental Examiners for engaging in anticompetitive behavior. (11) The court ruled that the state-created Board, comprised primarily of practicing dentists elected by dentists, was subject to--and failed to pass--the Midcal test for private actors. (12) Though it appealed extensively to Midcal and Hallie, the Fourth Circuit failed to clarify how its focus on the Board's election fit with the Supreme Court's stated goal of preventing self-interested actors from using the cover of state agency to engage in anticompetitive conduct.

The North Carolina State Board of Dental Examiners is the state's dentistry licensing board. (13) it has eight members: six licensed dentists elected by dentists, one licensed dental hygienist elected by dental hygienists, and one consumer member appointed by the Governor. (14) The Board is empowered to sue to enjoin the unlicensed practice of dentistry. (15) in about 2003, dentists complained to the Board about nondentists providing low-cost teeth-whitening services. In response, the Board issued cease-and-desist letters to twenty-nine-nondentist teeth-whitening providers, effectively ousting nondentists from the teeth-whitening market. (16) in 2010, the FTC issued an administrative complaint, alleging that the Board's enforcement measures violated section 5 of the FTC Act, (17) which prohibits "[u]nfair methods of competition." (18)

The Board moved to dismiss the FTC's complaint, arguing that it was not under the FTC's jurisdiction and that it was entitled to state action immunity. (19) An Administrative Law Judge (ALJ) denied the motion, and the FTC affirmed. (20) On the merits, the ALJ ruled that the Board had violated the FTC Act, and the FTC affirmed, enjoining the Board from continuing its actions against teeth-whitening providers. (21) The Board then petitioned for review of the final order. (22)

The Fourth Circuit denied the petition. (23) Writing for the majority, Judge Shedd (24) agreed with the FTC that the Board was a private party that must demonstrate active supervision by the state in order to qualify for Parker immunity. (25) The court reasoned that the Supreme Court dispensed with the active supervision requirement for municipalities in Hallie because a municipality presents "little or no danger that it is involved in a private price-fixing arrangement." (26) The Hallie Court limited its holding to municipalities, though it speculated in a footnote that state agencies would "likely" also be exempt from that requirement. …

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Antitrust Law - State Action Immunity - Fourth Circuit Holds That State's Dental Board of Examiners Must Show "Active Supervision" by State to Be Entitled to Antitrust Immunity
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