The Latest Fight Over the State-Action Antitrust Immunity Doctrine

August 05, 2014

Last week, the Federal Trade Commission (“FTC”) submitted its brief urging the Supreme Court to deny antitrust immunity to the North Carolina State Board of Dental Examiners (“Board”).  Years ago, the Board had barred non-dentists from providing teeth-whitening services, prompting the FTC’s lawsuit. A series of appeals have followed, and the case is now in the U.S. Supreme Court.

The issue before the Supreme Court involves a doctrine of antitrust immunity called the “state-action doctrine.”[1]  In general terms, the state-action antitrust doctrine exempts anti-competitive actions that are part of a state-supervised regulatory scheme.  Typically, antitrust immunity is only granted to non-state actors if: (1) the non-state actor is operating pursuant to a clearly articulated state policy to restrict competition, and (2) the state actively supervises the non-state actor’s activity.268763415_70cbfcf5fb_z

The doctrine has its roots in a 1943 Supreme Court case, Parker v. Brown, in which the Supreme Court held that federal antitrust law does not prohibit the application of state and federal agricultural laws that regulated (and restricted) competition among, inter alia, raisin sellers.[2]  Since Parker, the doctrine has been shaped by numerous other Supreme Court cases, but one of the most relevant decisions bearing on the case now in front of the Supreme Court is California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980).  As the FTC remarks in its respondent’s brief: “Midcal’s active-supervision requirement ensures that the antitrust laws will give way only if those crucial policy choices are supervised by disinterested public officials, thereby ensuring ‘that particular anti-competitive conduct has been approved by the State.’”  Brief at 17-18 (quoting FTC v. Ticor Title Ins. Co., 504 U.S. 621, 637 (1992)).

The question facing the Supreme Court now is whether the the North Carolina State Board of Dental Examiners is entitled to antitrust immunity.  The case swings on two key facts: (1) a majority of the Board is comprised by private practicing dentists who compete directly in the area of competition that is being restricted (i.e., teeth-whitening services), and (2) the Board’s decisions are not supervised by disinterested public officials.  Under such circumstances, the FTC maintains, the active supervision element of the state-action antitrust immunity doctrine is lacking.  Brief at 22-23.

The Supreme Court will hear Oral Argument in the case on October 14, 2014, and the Supreme Court will most likely decide the case within the next year. Consumers and businesses alike should hope that the Supreme Court agrees with the FTC.  Government regulation is, in some fashion, a prominent aspect of virtually all major commercial industries. No one would benefit from an overly-broad application of the state-action antitrust doctrine, especially one that allowed a group of private actors to implement self-interested market restrictions within their own commercial sphere.

 

Sources:

[1] North Carolina State Board of Dental Examiners v. Federal Trade Commission, No. 13-534 (2014).

[2] Parker v. Brown, 317 U.S. 341, 368 (1943).

Photo Credit: Tooth-Brush

 

 


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