On February 25, 2015, the Supreme Court decided North Carolina State Board of Dental Examiners v. Federal Trade Commission, No. 13-534. The Court held that the North Carolina State Board of Dental Examiners was not immune from Sherman Act regulation under the doctrine of state-action antitrust immunity as set forth in Parker v. Brown, 317 U.S. 341 (1943) and its progeny. “If a State wants to rely on active market participants as regulators, it must provide active supervision if state-action immunity under Parker is to be invoked.”
The North Carolina State Board of Dental Examiners, made up of six dentists, one dental hygienist, and one consumer, was tasked with the duty to create, administer, and enforce a licensing system for dentists. The Board issued numerous cease-and-desist letters to nondentist teeth whitening service providers and product manufacturers. The FTC filed an administrative complaint alleging that that the Board’s action to exclude nondentists from the market for teeth whitening services in North Carolina constituted an anticompetitive and unfair method of competition in violation of the Sherman Act. The Board moved to dismiss on the basis of state-action immunity. The administrative law judge (ALJ) denied the motion and ultimately found in favor of the FTC. The Fourth Circuit affirmed.
The Supreme Court affirmed. “[A]ctive market participants,” held the Court, “cannot be allowed to regulate their own markets free from antitrust accountability.” In Parker v. Brown, the Court had interpreted antitrust laws to confer immunity on anticompetitive conduct by states when acting in their sovereign capacity. But immunity for state agencies requires more than a mere façade of state involvement. A nonsovereign actor controlled by market participants, like the Board here, is immune only if (1) the challenged restraint on competition is clearly articulated and affirmatively expressed as state policy and (2) the policy is actively supervised by the state. While the unauthorized practice of dentistry is prohibited, nothing in the governing statute addresses whether that prohibition covers teeth whitening, and the Board did not receive active supervision when it interpreted the statute to address teeth whitening and when it enforced that policy by issuing cease-and-desist letters.
Justice Kennedy delivered the opinion of the Court, joined by Chief Justice Roberts and Justices Ginsburg, Breyer, Sotomayor, and Kagan. Justice Alito filed a dissenting opinion, joined by Justices Scalia and Thomas.