By Lisa Soronen
The Supreme Court’s decision in North Carolina State Board of Dental Examiners v. FTC will affect how many of states’ hundreds of agencies, boards, and commissions operate and are governed.
The Court held 6-3 that if the majority of state board members are active market participants, antitrust immunity applies only if the state actively supervises the board. The State and Local Legal Center (SLLC) filed an amicus brief in this case arguing that active supervision was unnecessary.
The North Carolina State Board of Dental Examiners is a state agency principally charged with licensing dentists. Six of its eight members must be actively practicing, licensed dentists. After the Board issued cease-and-desist letters to non-dentist teeth whitening service providers, the Federal Trade Commission (FTC) charged it with violating federal antitrust law.
In Parker v. Brown the Court held that states receive state-action immunity from federal antitrust law when acting in their sovereign capacity. In this case the Court held that non-sovereign entities controlled by active market participants receive state-action immunity only if the challenged restraint is clearly articulated in state policy and the policy is actively supervised by the state.
Here the parties assumed the clear articulation requirement was met and agreed the Board wasn’t actively supervised by the state. So the Court denied the Board state-action immunity.
Justice Kennedy, writing for the majority, reasoned that without active supervision, boards and commissions made up of a majority of market participants may act in their own interest rather than the public interest: “Limits on state-action immunity are most essential when the State seeks to delegate its regulatory power to active market participants, for established ethical standards may blend with private anticompetitive motives in a way difficult even for market participants to discern.”
In a dissenting opinion Justice Alito, joined by Justices Scalia and Thomas, concluded that under Parker state-action immunity applies to state agencies regardless of how they are structured.
This case will reduce the authority of governors and state legislatures to compose state agencies, boards, and commissions as they prefer and/or be difficult to comply with. As the SLLC’s amicus brief points out, states typically have hundreds of boards and commissions largely staffed by market participants.
States now have to either staff them differently or actively supervise them. Governors and state legislatures may be reluctant to not include a majority of market participants on boards and commissions because market participants have needed expertise. Active supervision will likely be onerous and expensive.
The Court was not specific about what kind of active supervision should have been occurring in this case. According to the Court, active supervision is “flexible and content-dependent” and should provide “realistic assurance” that an agency’s anticompetitive conduct “promotes state policy, rather than merely the party’s individual interests.”
Seth P. Waxman, Thomas G. Sprankling, and Alan Schoenfeld of WilmerHale wrote the SLLC’s brief which the National Governors Association, the National Conference of State Legislatures, and the Council of State Governments joined.
Lisa Soronen is executive director of the State and Local Legal Center. She writes frequently on U.S. Supreme Court cases for the NCSL Blog.