PERSPECTIVE: APPLYING ANTITRUST IMMUNITY, A LEGAL SAFEGUARD

The Sherman Antitrust Act is a commerce regulation that prohibits monopolies by market participants and promotes free and fair trade competition in the marketplace. Antitrust immunity confers legal protection and exempts antitrust actions based upon regulatory actions. An issue of antitrust competition was brought forth to the Supreme Court in the case of  North Carolina Board of Dental Examiners v. FTC.

In this case, a North Carolina Board of licensing dentists whose “principle duty is to create, administer, and enforce a licensing system for dentists” prohibited the service of teeth-whitening by non dentists even though this is not a recognized dental service per North Carolina’s Dental Practice Act [1]. The service of teeth-whitening became popular in the 1990s and many non dentists began offering this service and charging lower fees than licensed dentists.

In 2007, the Board began sending cease and desist letters to non dentists who offered this service; this ultimately resulted in the termination of the service of teeth-whitening offered by non dentists in the state of North Carolina.

The Federal Trade Commission (FTC) determined that the Board violated antitrust laws by prohibiting this service from being offered by non dentists because several of the board members are market participants of the teeth-whitening industry.

The North Carolina Board of Dental Examiners invoked antitrust immunity under Parker v. Brown. Per this case, the Court recognized immunity is conferred on the anticompetitive conduct of States acting in their sovereign capacity [2].  The Court in this case noted FTC v. Phoebe Putney when determining that immunity is found “only if ‘the challenged constraint’ is clearly articulated and affirmatively expressed as state policy, and ‘the policy is actively supervised by the state [3].”

This Court agreed that when a State delegates control over a market to a non sovereign actor the Sherman Act confers immunity only if the State accepts political accountability for the anticompetitive conduct it permits and controls [4].”

This Court ultimately held “ [t]he Board’s actions [were] not cloaked with Parker immunity. The Court concluded per Midcal’s two-part test that the anticompetitive policy was not a policy of the state because (1) there was no expressed state policy the Board was acting pursuant to nor was the Board (2) actively supervised by the State [5].

The Court reasoned “a state board on which a controlling number of decision makers are active participants in the occupation the board regulates,” the Board must “resolve the ultimate question whether an anticompetitive policy is the policy of a State [6].”

The Court referenced FTC v. Phoebe Putney when reasoning a clearly identified state policy is determined when “the displacement of competition is the inherent, logical, or ordinary result of the exercise of authority delegated by state legislature and the active participation requirement is satisfied when “state officials have and exercise power to review particular anticompetitive acts of private parties and disapprove those that fail to accord with state policy [7].”

This Court clarified the significance of Midcal’s active supervision test as being an essential prerequisite of antitrust immunity for any sovereign entity controlled by active market participants. [8]”

[1] North Carolina Board of Dental Examiners v. FTC, 574 U.S. 494 (2015). 

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

[3] FTC v. Phoebe Putney Health System, Inc., 568 U.S. 216 (2013).

[4] North Carolina Board of Dental Examiners v. FTC, 574 U.S. 494 (2015). 

[5] Id.

[6] Id.

[7] Id.

[8] Id.