Does a professional licensing board have the ability to discipline licensees without antitrust trouble? Can a state medical board require patients to see a doctor in person before being treated remotely? And can a municipal taxicab commission require private transportation companies to conduct background checks?
In the aftermath of the Supreme Court’s ruling in N.C. State Bd. of Dental Exam’rs v. FTC, 135 S. Ct. 1101 (2015), these are just some of the questions that state regulatory boards may have to answer in court – at least if they do not heed the Federal Trade Commission staff’s (“FTC Staff”) recently published guidance on how state boards can protect themselves from antitrust problems.
In Dental Examiners, the Supreme Court held that state regulatory boards are not necessarily exempt from liability under federal antitrust laws merely due to their status as state entities – at least if the board is “controlled by market participants.” These state regulatory boards are, instead, only exempt from federal antitrust laws if the board’s anticompetitive conduct is clearly articulated in state policy and “actively supervised” by the state. The new guidance addresses only this second, “actively supervised,” prong of the “state action” doctrine, which was the focus of the Dental Examiners decision.
The FTC Staff guidelines illustrate that determinations about whether particular state boards are exempt from federal antitrust scrutiny through what’s known as the “state action” defense are fact-specific. The guidelines provide background discussion and then give a series of examples to illustrate the applicable principles.
A regulatory board may be found to be “controlled by market participants” – and potentially not eligible for the state action defense – even where the market participants do not make up the majority of the board.
For example, two dentists on a five person state dental board may be found to “control” the board if any regulation requires the approval of at least one of the dentists before it becomes effective or if the non-dentists on the board generally defer to the dentists on board decisions, the FTC Staff suggests.
The FTC Staff also takes a fact-specific view when determining whether a state regulatory board’s anti-competitive actions are clearly articulated and “actively supervised” by the state – and thus exempt from federal antitrust scrutiny even if controlled by market participants.
The FTC Staff explains it will consider several factors to determine whether a board’s decisions have been “actively supervised.” These include:
- Whether the supervisor has obtained the information necessary for proper evaluation of the action recommended by the regulatory board;
- Whether the supervisor has evaluated the substantive merits of the recommended action and whether those actions comport with the standards established by the state legislature; and
- Whether the supervisor has issued a written decision to approve, modify, or disapprove of the recommended action, explaining the reasons for such decision.
In short, a state will be found to “actively supervise” a regulatory board if it conducts a serious review of the board’s actions before approving, rejecting, or modifying the board’s proposed action.
Of course, even if a state regulatory board is not exempt from federal antitrust laws, the FTC Staff explains that traditional defenses available to antitrust defendants are still available.
For instance, reasonable restraints on competition do not violate the antitrust laws. Some regulatory strictures may in fact promote competition by preventing consumer deception or exploitation. In addition, the FTC Staff explains that a particular disciplinary action taken by a regulatory board will typically have only a de minimis effect on competition and likely would not violate antitrust laws. It then qualifies that a pattern or program of disciplinary actions affecting multiple licensees may have a substantial effect and so may warrant closer review.