U.S. Supreme Court’s ruling could impact dental and other professional licensing boards

On Feb. 25, 2015, the United State Supreme Court issued a ruling in the North Carolina State Board of Dental Examiners v. Federal Trade Commission case that could have significant ramifications for professional licensing boards across the country, including here in Ohio. As regular readers of this column know, I have written multiple columns in the “ODA Today” over the last several months about this case as it wound its way through the courts (those columns can be found by clicking here). While the Supreme Court’s ruling brings an end to the litigation between the North Carolina State Board of Dental Examiners (North Carolina Dental Board) and the Federal Trade Commission (FTC), it raises many more questions than it answers in terms of how states are now supposed to implement the court’s new mandates on state licensing boards.


In 2010, the FTC initiated action against the North Carolina Dental Board, charging the board with violating federal antitrust laws by excluding non-dentist teeth whiteners from the market. Following a series of administrative proceedings, the FTC issued its final order in the case in December of 2011, ruling against the North Carolina Dental Board and directing the board to stop unilaterally issuing cease and desist orders to non-dentist teeth whitening providers in North Carolina. The board appealed the FTC’s Order to the U.S. Court of Appeals for the Fourth Circuit, which issued its ruling in favor of the FTC on May 31, 2013.

The North Carolina Dental Board then appealed to the U.S. Supreme Court. The board’s main argument to the high court was that it is exempt from federal antitrust laws under the “state action” doctrine because it was acting as a state agency when it sought to regulate teeth whitening in North Carolina.

The Supreme Court first outlined what became known as the “state action” exemption from federal antitrust laws in the 1943 case Parker v. Brown. Specifically, the Parker court held that a state’s anticompetitive acts directed by the legislature are exempt from federal antitrust laws. The court noted that under America’s “dual system of government,” the states are “sovereign” and “there is nothing in the language of the Sherman (Antitrust) Act or its history that suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature.”

States have a tradition of delegating the responsibility for licensing certain professionals to state licensing boards. Federal courts have long recognized that such licensing regimes are the states’ responsibility in order to protect the public, and the federal government has traditionally not interfered with those professional licensing decisions. The North Carolina Dental Board argued that it was acting pursuant to authority delegated to it by the state legislature to license dental professionals and regulate the practice of dentistry when it issued the cease and desist orders to non-licensed teeth whiteners.

The FTC, however, argued that the North Carolina Dental Board is not a state actor for purposes of the antitrust exemption because a majority of the board is made up of dentists, thereby reducing the FTC’s level of confidence that the board’s decision-making process is sufficiently independent from the interests of those being regulated.

According to the FTC, because the North Carolina Dental Board is not a state government actor, the board had to show that its actions were “actively supervised” by the state to qualify for the state action exemption to the antitrust laws. The FTC argued that the North Carolina Dental Board could not show any active state supervision of the board’s actions in issuing the cease and desist letters to the non-licensed teeth whiteners.

The Supreme Court rules in favor of the FTC

Justice Anthony Kennedy wrote the main opinion for the court’s six-justice majority made up of Kennedy and Chief Justice John Roberts and Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan. The court concluded that the North Carolina Dental Board is not a state agency entitled to immunity from the antitrust laws because a “controlling number” of its members are practicing dentists or so-called “market participants.” By statute, the North Carolina Dental Board is made up of six licensed dentists, one licensed dental hygienist, and a public member. Justice Kennedy wrote that “while the Sherman Act confers immunity on the States’ own anticompetitive policies out of respect for federalism, it does not always confer immunity where, as here, a State delegates control over a market to a non-sovereign actor.” The court found that “state agencies composed of active market participants” pose a risk of “self-dealing” and therefore active state supervision is required as a check on that self-dealing.

The court’s finding that the North Carolina Dental Board is not a state agency for antitrust purposes is very significant since most state licensing boards in America have market participants serving on them.

The dissenting opinion written by Justice Samuel Alito and joined by Justices Antonin Scalia and Clarence Thomas, offered a devastating critique of the majority’s decision. Alito wrote that the case is very simple: “the North Carolina Board of Dental Examiners is a state agency; and that is the end of the matter.” According to Alito, a state licensing board should be exempt from the application of federal antitrust law. Alito wrote that by straying from this “simple path” the majority is “headed into a morass” that will “spawn confusion.” Alito pointed out that the court’s decision will “create practical problems and is likely to have far-reaching effects on the states’ regulations of professions.”

The confusion created by this decision is undeniable. As Justice Alito pointed out, “state medical and dental boards have been staffed by practitioners since they were first created” decades ago, noting that “it is reasonable for States to decide that the individuals best able to regulate technical professions are practitioners with expertise in those very professions.” However, as a result of this decision, Alito points out that “states may find it necessary to change the composition of medical, dental, and other boards, but it is not clear what sort of changes are needed to satisfy the test that the Court now adopts.” How many dentists are too many on a dental board? Is a “controlling number” a majority of the board or more than a majority or less than a majority?

Justice Alito also notes that the court doesn’t tell us what defines an “active market participant.” What if the dentist board member is retired or a dental faculty member or a part time practitioner? Alito asks “[i]f board members withdraw from practice during a short term of service but typically return to practice when their terms ends, does that mean that they are not active market participants during their period of service?” Alito concludes “the answers to these questions are not obvious, but the states must predict the answers in order to make informed choices about how to constitute their agencies.”

The court’s majority opinion further adds to the confusion by providing very little guidance on what would constitute enough “active state supervision” to give state licensing boards immunity from antitrust limitations. According to the court’s opinion, the supervisor must:

  • Review the substance of the anticompetitive decision
  • Have the power to veto or modify particular decisions
  • Not be an active market participant

Justice Kennedy concluded that “the adequacy of supervision otherwise will depend on all the circumstances of a case.” So, in reality, the court gave the states very little guidance at all on what constitutes “active state supervision.”

What does the Supreme Court’s opinion mean for state licensing boards?

As a result of the Supreme Court’s decision, states will have to examine their professional licensing boards to determine if a “controlling number” of board members are market participants. Arguably, that would be the case for most of Ohio’s licensing boards, including the Ohio State Dental Board, which consists of nine dentists, three dental hygienists, and one public member.

If a board has a controlling number of market participants, there must be some sort of active state supervision of the board’s anticompetitive activities. It is unclear what constitutes an anticompetitive activity in the eyes of the court. Does it include all licensing decisions? What about policy decisions that impact on professional practice? Are all licensure disciplinary matters now subject to oversight?

Moreover, it is unclear what “active state supervision” must look like. The court did make clear that the supervisor may not be a market participant (so the supervisor of the Ohio State Dental Board’s actions may not be an active licensed dentist) and must have the authority to veto or modify the decisions or actions taken by the board. Basically, the Supreme Court has mandated that the final authority over most regulatory and licensing decisions for such boards must be made by someone who is totally independent from the regulated profession.

Ultimately, these issues will be worked out over time as states, including Ohio, try to comply with the Supreme Court’s mandates by reconstituting their professional licensing boards or by defining a new supervisory authority over such boards.

Justice Alito’s dissenting opinion summed up the concerns of many when he wrote that by manufacturing these new federal mandates on state licensing boards, the Supreme Court’s majority opinion “diminishes our respect for federalism and state sovereignty” and has created a new standard that “will be difficult (for the states) to apply.”