The Fourth Circuit ruled on 31 May that the North Carolina State Board of Dental Examiners was not shielded from federal antitrust scrutiny under the state action doctrine when it issued cease-and-desist letters to non-dentists offering teeth-whitening services. The court, in a decision by Judge Dennis Shedd, held that the Dental Board is a private entity that was not supervised by the state. Following on the heels of the Federal Trade Commission’s (FTC’s) victory in FTC v. Phoebe Putney Health System, this ruling marks another win for the FTC in its quest to narrow the scope of the state action doctrine, and even more importantly, sheds light on whether certain medical boards or licensing entities, such as a state dental board, must show they are actively supervised by the state in order to claim immunity from the antitrust laws.

The FTC had sued the Dental Board alleging that it violated the FTC Act because the cease-and-desist letters effectively halted all non-dentists from offering teeth-whitening services, thus harming competition. The Dental Board argued that its actions were immune from the federal antitrust laws under the state action doctrine – which protects state entities from federal antitrust scrutiny as long as there is a clearly articulated state policy to displace competition with regulation and active state supervision of any private conduct seeking to benefit from the immunity.

While the Dental Board claimed it was a state actor, the FTC found, and the Fourth Circuit upheld, that the board was a private actor that was only entitled to antitrust immunity if actively supervised by the state. The Fourth Circuit reasoned that the Dental Board was a private actor because it was composed primarily of dentists elected by other practicing dentists, all pursuing independent economic interests. And because the Dental Board acted as a private actor and was not supervised by the state when it issued its cease-and-desist letters, antitrust immunity did not shield its actions from oversight by the federal antitrust laws. The court then went on to affirm the rest of the FTC’s decision, including holding that the Dental Board members could conspire to restrain trade under federal antitrust law even though they were acting as part of a single entity (i.e. the dental board). Ultimately, the court held  that ‘‘ [ a ] t the end of the day, this case is about a state Board run by private actors in the marketplace taking action outside of the procedures mandated by state law to expel a competitor from the market.”

The case however, does not hold that all state medical boards or similar entities are always private actors. As emphasized in the concurring opinion by Judge Barbara Milano Keenan, if the Dental Board members had been appointed or elected by state government officials pursuant to a statute, a much stronger case for state action immunity would have existed. Other noteworthy aspects of the decision are the following:

  • In determining whether an entity, and in particular a medical board or licensing entity, is a state entity or a private actor under the state action doctrine, the critical inquiry is who controls the entity and whether they are independent market participants with independent economic interests. Entities should not rely solely on statutory language that says the board is an “agency of the state.”
  • The court upheld the approach by FTC in which it found based on a “quick look” that the Dental Board’s actions were anticompetitive. In doing so, among other things the court noted that the Dental Board lacked “any clinical or empirical evidence validating” the risks of teeth-whitening. This highlights the importance that courts may place when evaluating a restraint on whether there is strong evidence that the challenged conduct is designed to, and likely will result, in beneficial effects.
  • The decision follows the Supreme Court's guidance in Phoebe Putney’s guidance that immunity from the antitrust laws is disfavored. Entities should engage in a detailed inquiry before assuming that the state action doctrine will immunize their actions.