October 16, 2015
FTC Issues Guidance on Active Supervision of State Regulatory Boards
Earlier this year, the U.S. Supreme Court issued its long awaited ruling in the North Carolina State Board of Dental Examiners v the Federal Trade Commission (FTC). In the case, the FTC accused the dental board of anticompetitive behavior when it sent cease and desist letters to non-dentists offering teeth whitening services. The dental board argued it was acting on behalf of the state and therefore was immune from antitrust prosecution under the state action doctrine. In its 6-3 decision, the Court found the dental board was not entitled to immunity because it was not “actively supervised” by the state.
On October 14, in response to requests for guidance after the Court’s ruling, the FTC announced a staff guidance document to assist state officials charged with ensuring antitrust compliance for their boards that regulate occupations (i.e. boards of medicine, boards of nursing, and so forth).
The document is designed to help state officials seeking to ensure their occupation boards are positioned to claim a state action defense if challenged by the FTC. However, the document only addresses one of the elements necessary for this defense, the active supervision component. Specifically, it addresses two questions:
1. When does a state regulatory board require active supervision in order to invoke the state action defense?
2. What factors are relevant to determining whether the active supervision requirement is satisfied?
The document does not address the other component required for this defense by states with regulatory boards that have a controlling number of market participants, namely the clear articulation component.
ASA staff is reviewing the document and will follow up with more comprehensive guidance in the near future. In the meantime, the document may provide more direction for the states in the aftermath of North Carolina State Board of Dental Examiners v FTC -- which may help avoid similar future court decisions.