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Affluent Christian Investor | August 21, 2017

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High Court Strikes Down Anticompetitive Regulation In North Carolina Dental Case

Last August, I wrote about an important case that had reached the Supreme Court. It concerned the legality under antitrust law, of a state board using its power to stifle competition that would have taken some business away from members of its profession.

Happily, the Court upheld competition and the interests of consumers, although the 6-3 split was rather unusual.

On Feb. 25, the Supreme Court released its decision in that case, North Carolina State Board of Dental Examiners v. Federal Trade Commission.

To briefly reiterate the facts, the FTC filed suit against the NC Board over its practice of telling non-dentists that offering teeth whitening services would land them in trouble because they were not licensed to do such work. In the FTC’s view, that was a clear violation of the Sherman Antitrust Act.

In response, the Board said that its actions were permissible, claiming that they came under a “state action” exemption to antitrust the Court established in a 1943 case.

Justice Kennedy wrote the majority opinion, joined by Chief Justice Roberts and Justices Ginsburg, Breyer, Kagan, and Sotomayor. Rejecting the argument that the Board’s conduct was shielded against antitrust attack, Kennedy wrote, “Where a State delegates control over a market to a nonsovereign actor, the Sherman Act confers immunity only if the State accepts political accountability for the anticompetitive conduct it permits and controls. Limits on state-action immunity are most essential when a State seeks to delegate its regulatory power to active market participants….”
If the North Carolina General Assembly had ever directed the Board to reserve the business of teeth whitening for licensed dentists only, the case would have been different. But it had never done anything to approve the Board’s aggressive campaign to scare away others from competing against dentists, so there really was no state action involved, and therefore no immunity.

Justice Kennedy also brushed off the desperate, laughable claim made by the state that if the FTC prevailed, that would “discourage dedicated citizens from serving on state agencies that regulate their own occupation.” Kennedy’s retort: “This holding is not inconsistent with the idea that those who pursue a calling must embrace ethical standards that derive from a duty separate from the dictates of the State.” Indeed so. Dentists will still be willing to serve on the Board even if they are not allowed to use their power for the unethical purpose of preventing competition.

Justice Alito wrote a dissenting opinion, joined by Justices Scalia and Thomas. He argued that the precedent North Carolina relied on, Parker v. Brown, applied in this case; even though the Dental Board was acting in a way that prevented competition, because it was a governmental agency, it was shielded against antitrust action.

Sometimes the “conservative” wing of the Court is just too conservative. Standing on the Parker precedent would allow state agencies composed of practitioners in a field to continue to use their power for anticompetitive ends that are neither in the public interest nor approved by elected officials in the state. There is simply no good in that.

Not long after the Court issued its rebuke to the Dental Board, a report by the State Auditor found that it had not been doing its true job of protecting public health very well because it had issued sedation permits to dentists before inspecting their facilities and had not conducted compliance checks to ensure that practitioners can safely deliver anesthesia.

What a double-whammy for the administrative state: stop stifling competition and instead, do your job.

The interesting question is what further implications the Court’s decision could have. The North Carolina Dental Board is by no means the only professional regulatory body that uses its power not just to oversee the competence and ethics of its practitioners, but also to decide who may compete with them. Often, the answer is “nobody.”

State bar associations are notorious for acting like junkyard dogs, protecting licensed attorneys against any and all “trespassers” who might take away some billable hours. The way they do so is through “unauthorized practice of law” suits against people who do anything that could be called “practicing law” – even if no money changes hands and the work is done perfectly.

Rarely does the law carefully define what “the practice of law” is, so the lawyers have a free hand to try stopping websites, books, legal secretaries and anything else that could divert business away from members of the legal guild — a problem I wrote about in this column.

The meaning of North Carolina Board of Dental Examiners is that professional regulatory bodies cannot violate the antitrust laws unless they have been explicitly authorized to do so by political processes. It was a good win for the FTC. Let us hope that the FTC follows up with suits against bar associations and other state agencies that have taken it upon themselves to stifle competition.

Article originally published on Forbes.com.

 

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