State Governing Boards Face Antitrust Risk after Supreme Court Ruling in North Carolina Dentists Case


The U.S. Supreme Court recently agreed with the Federal Trade Commission (FTC) when it ruled North Carolina’s custom of practicing dentists serving on the state regulatory board was anticompetitive.  The decision in North Carolina State Board of Dental Examiners v. Federal Trade Commission could subject thousands of similarly structured boards to antitrust liability, and brings into question the individual liability of licensed, market-participating board members.

North Carolina State Board of Dental Examiners v. Federal Trade Commission

The case concerned the regulation of teeth whitening services provided by non-dentists.  North Carolina dentists began whitening teeth in the 1990s, despite the fact that North Carolina’s Dental Practice Act does not specify teeth whitening as an “act of dentistry.”  Non-dentists began whitening teeth as well, charging substantially less than licensed dentists.  In response, licensed dentists complained to the state Board of Dental Examiners, an eight-person regulatory board featuring six active dentists.  The Board issued 47 cease-and-desist orders to non-dentists, warning that the unlicensed practice of dentistry was a crime.

Thus, Parker immunity will no longer apply to state regulatory boards operating independent of state supervision and consisting of active market participants.”

The FTC filed an antitrust complaint against the Board, alleging that their concerted action to exclude non-dentists from the market for teeth whitening services constituted an anticompetitive and unfair method of competition under the Federal Trade Commission Act and Sherman Act.  The FTC suggested the Board was seeking to exclude non-dentists from the teeth-whitening market in order to freeze out potential competitors.  The Board argued that it had immunity from antitrust requirements because it was a state-authorized entity, a power given to the states in Parker v. Brown (1943).  An administrative law judge and a U.S Court of Appeals disagreed with the Board, ruling that it had improperly restrained trade.

The U.S. Supreme Court held that the Board could not invoke state-action-antitrust immunity, or Parker immunity, because a controlling number of its members were active in the occupation the Board regulated and because their activity was not supervised by the state.  Thus, Parker immunity will no longer apply to state regulatory boards operating independent of state supervision and consisting of active market participants.

The Supreme Court Decision’s Implications

California, and every other state for that matter, regulates health care professionals through state licensing agencies consisting of practicing members.  A key factor to consider when examining whether your state board will come under scrutiny, after the Supreme Court’s holding, is the level of state supervision over the board.  The court held that states “can also ensure Parker immunity is available by adopting clear policies to displace competition and providing active supervision.”  State supervision includes overseeing the board’s rulemaking authority, as the North Carolina Board of Dental Examiners clearly overstepped their boundaries when they issued the cease-and-desist orders.

Another important implication to consider is the individual liability of licensed, market-participating board members who conduct anticompetitive behavior without knowing they do not have Parker immunity.  In their holding, the court did not offer an opinion on the issue, stating the case “[did] not offer occasion to address the question whether agency officials, including board members, may, under some circumstances enjoy immunity from damages liability.”  The court further noted that “states may provide for the defense and indemnification of agency members in the event of litigation.”  Boards that do not offer such protections might wish to do so, even if that requires legislative action, in order to ease the concerns of current and prospective board members. The individual board member liability issue will surely be addressed in future cases.

If you have any questions about your state governing board, or any other legal inquiries, please contact the attorneys at Carlson & Jayakumar LLP at (949) 222-2008.

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