Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Supreme Court asked to consider application of active-supervision requirement under state action immunity doctrine, (Oct 31, 2013)

By Jeffrey May, J.D.

A North Carolina state board charged with regulating the practice of dentistry in the state has asked the U.S. Supreme Court to review a decision of the U.S. Court of Appeals in Richmond, Virginia (717 F.3d 359, 2013-1 Trade Cases ¶78,406), upholding an FTC finding that the board excluded non-dentist providers from the market for teeth whitening services in violation of Sec. 5 of the FTC Act. The North Carolina State Board of Dental Examiners filed its petition for certiorari on October 25 (North Carolina State Board of Dental Examiners v. FTC, Dkt. 13-534).

The Supreme Court is being asked to take up the state action doctrine in the context of an FTC enforcement action just eight months after the Court issued its decision in FTC v. Phoebe Putney Health System, Inc. In that case, the Supreme Court reversed an Eleventh Circuit decision (663 F.3d 1369, 2011-2 Trade Cases ¶77,722) holding that the effective merger of the only two competing hospitals in the Albany area was immune under the state action doctrine from an FTC challenge. The appellate court was found to have “applied the concept of ‘foreseeability’ from our clear-articulation test too loosely.”

The petitioner cites the recent Phoebe Putney decision for the proposition that the antitrust laws “should not be read to bar States from imposing market restraints ‘as an act of government.’”

Now the Supreme Court is being asked to consider whether the petitioning state agency needs to be actively supervised in order to be shielded under the state-action exemption from federal antitrust law. The state action doctrine was first recognized in 1943 by the U.S. Supreme Court in Parker v. Brown (317 U.S. 341).

Specifically, the petitioner asks whether an official state regulatory board created by state law may properly be treated as a “private” actor simply because, pursuant to state law, a majority of the board’s members are also market participants who are elected to their official positions by other market participants.

“The Fourth Circuit in this case, following the FTC’s lead, spurned Hallie’s guidance and broke from 70 years of precedent explicating Parker’s state-action antitrust exemption,” according to the petitioner. In Town of Hallie v City of Eau Claire (471 U.S. 34), the Supreme Court suggested that a state agency would not be required to demonstrate active state supervision for state action immunity.

The petitioner contends that the Fourth Circuit erred by imposing the active-supervision requirement on the board. The holding is said to conflict with decisions of the Fifth Circuit (Earles v. State Bd. of Certified Public Accountants of Louisiana, 139 F.3d 1033, 1998-1 Trade Cases ¶72,135), and the Ninth Circuit (Hass v. Oregon State Bar, 883 F.2d 1453, 1989-2 Trade Cases ¶68,732). Those cases held that the active-supervision requirement does not apply to an official state agency’s acts, even though the agency’s officers were required under state law also to be private market participants whose selection for office was caused by other private market participants, according to the petitioner.

Attorneys: Glen D. Nager (Jones Day) for North Carolina Board of Dental Examiners. Donald B. Verrilli Jr., Solicitor General, for FTC.

Companies: North Carolina Board of Dental Examiners

News: Antitrust FederalTradeCommissionNews