Citing Antitrust Law, SCOTUS Backs FTC in NC Dental Board Suit

The ruling has far-ranging implications for state regulatory boards overseeing professional activities, including those of physicians, hospitals, and health systems.

The U.S. Supreme Court this week upheld an appeals court ruling that states must actively supervise private market participants sitting on state regulatory boards.

The 6-3 ruling in North Carolina State Board of Dental Examiners vs. Federal Trade Commission could have broad implications for state regulatory boards overseeing professional activities, including those of physicians and hospitals.

The justices were asked to decide if a state regulatory board is exempt from federal antitrust laws under the state action doctrine if its members are "market participants" elected by other market participants.

Dental Board Case Before SCOTUS Has Far-Reaching Implications

The eight-member North Carolina dental board, which includes six dentists elected by other dentists, had been the subject of a complaint by the FTC in 2010 for violations of the FTC Act after the board banned non-dentists operating in mall kiosks from performing discount teeth-whitening procedures.

A federal district court rejected the board's initial complaint. Last spring, the U.S. Court of Appeals for the Fourth Circuit sided with the FTC and noted that the dental examiners board was composed of dentists who stood to gain financially by restricting the practice.

Writing for the majority, Justice Anthony Kennedy said the Sherman Antitrust Act protects competition and respect federalism. "It does not authorize the states to abandon markets to the unsupervised control of active market participants, whether trade association or hybrid agencies. 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 high court's three most-conservative judges sided with the dental board. Writing in dissent, Justice Samuel Alito noted that the majority's ruling "will create practice problems and is likely to have far-reaching effects on the states' regulation of professions."

SCOTUS Review of NC Board Case 'A Very Big Deal' to Providers

"As a result of today's decision, states may find it necessary to change the composition of medical, dental, and other boards, but it is not clear what sort of changes are needed to satisfy the test that the Court now adopts," Alito wrote.

Alito was joined in dissent by Justices Antonin Scalia and Clarence Thomas.

Reaction

Reaction to the ruling was mixed.

Bobby D. White, COO for the North Carolina Board of Dental Examiners, said in an email exchange with HealthLeaders Media that the court ruling "fundamentally misconstrues the purpose of state-action doctrine."

"The point of the doctrine is to respect federalism, in that there's no indication in the Sherman Act that Congress intended to displace state regulatory activity. That's especially true in this context: professional regulatory boards have always been structured this way, and yet no one until this case ever argued that the Sherman Act subjected them to liability for this reason. That's the elephant in the room that Alito's dissent emphasized and that Kennedy's majority ignored."

As a result of the ruling, White says virtually every professional regulatory board in the nation will have to change its structure and supervision or the activities it performs.

"And since all of those changes will take time (and often legislative activity), the opinion threatens to massively disrupt professional regulation," White said.

The American Medical Association had filed an amicus brief supporting the dental board's antitrust immunity. Citing Alito's dissent, AMA President Robert M. Wah, MD, in a statement this week said the ruling "'will spawn confusion' by creating far reaching-effects on the jurisdiction of states to regulate medicine and protect patient safety. The AMA will work with other physician groups to secure policy changes to reinforce long held antitrust protections for activities conducted under state authority to protect patients."

Federal Trade Commission Chairwoman Edith Ramirez applauded the ruling.

"We are pleased with the Supreme Court's recognition that the antitrust laws limit the ability of market incumbents to suppress competition through state professional boards," Ramirez said in prepared remarks. "We will remain vigilant through our enforcement initiatives and advocacy to safeguard competition and ensure that American consumers benefit from entrepreneurial initiative."

The Practical Effects

Three antitrust experts reached for comment about the practical effects of the ruling all said that states should take note of the ruling, but none said the ruling would create regulatory chaos, nor was it was particularly burdensome.

Deborah Gersh, the Chicago-based co-chair of Ropes & Gray's health care practice, says the ruling has prompted an unfounded and "alarmist mindset with respect to the implications to boards and how no doctors, dentist or lawyers will almost ever serve on a board again."

"On this board, you had independent dentists in a majority making the decision. It's a little bit like the foxes guarding the henhouse from a competitive standpoint. That is the basis for the ruling," Gersh says.

"As a practical matter, the opinion is really focusing on individuals who are sitting on a board where there is no active state supervision. The state really isn't telling them what the parameters are, or their roles and responsibilities. So there is the risk with competitors monitoring other competitors, individuals monitoring their competitors, and what they are saying is we are not going to give you immunity if this is how the state chooses to have this board set up."

"There are certainly alternatives that the state can do. They can impose more guidelines and supervisory requirements so that there are limitations on where the state provides them with specific thing they are to regulate."

Jay L. Levine, a Washington, D.C.-based partner at Porter Wright Morris & Arthur LLP, says states may likely have to examine how they establish and supervise boards, but they're supposed to do that anyway.

"All it says is that a state board that is comprised of private actors who are competitors, even when they act under the cover of state law, need active state supervision," Levine says.

"The legislature, when they create the paradigm for enforcing their policy, need to include some mechanisms to actively supervise people acting under their legislative guidance. Obviously that requires a little bit more of an infrastructure than if that wasn't required, but at the same time, it's not as if states don't know how to do that and can't do that if they are so inclined."

Levine says the ruling likely will not prompt widespread litigation in other states.

"If it is not a board composed of private actors who are competitors, I don't know that you are going to have the same kind of arguments they did in North Carolina," he says. "There are probably boards across the country that are similar in composition, but I don't think that they are so ubiquitous that we need to fear that the floodgates are open and the courts are going to be inundated with antitrust lawsuits against state boards."

Michael L. Sibarium, a Washington, DC-based litigator and partner with Pillsbury, says the ruling should prompt introspection.

"If you're sitting on one of these boards the first question you should ask is 'how is our board structured under legislative authority and who is on it?' The next question is 'if you are structured in a way as to require active supervision to get to state action immunity do you have it?' Those are the questions you should be asking," Sibarium says.

The question left unanswered in the dental board ruling, Sibarium says, is whether or not individual members of these regulatory boards can be held liable for their decisions.

"They point out a number of options where states can grant immunity," he says, "but they leave that question for another day, whether people would have individual liability."