News: CJ Exclusives

N.C. Dental Board Loses Antitrust Challenge

SCOTUS: Board cannot bar nondentists from offering teeth whitening

RALEIGH — In a decision released Wednesday, a 6-3 majority of the U.S. Supreme Court ruled that the North Carolina State Board of Dental Examiners violated federal antitrust laws by engaging in self-dealing in ordering service providers that do not have dental licenses to cease and desist from whitening teeth.

The ruling is hailed by some as a victory for free market enterprise, turning back regulatory overreach. But the dissenting justices warned that the Supreme Court has strayed from precedent in a manner that erodes states’ rights and will cast sweeping confusion nationwide on an array of state regulatory bodies.

“We came out on the losing end. We’re disappointed in the ruling itself,” said Bobby White, chief operations officer of the state dental board.

“We are under their jurisdiction, we will comply with the holding of the Supreme Court,” White said. “We have a board meeting this weekend. I know that we won’t develop an action plan, but we’ll certainly review the decision, and see where that leaves us.”

There will need to be a legislative decision to determine the future of professional boards whose members work in that field because they are familiar with the highly technical nature of the industry, White said.

“This is an important ruling for economic liberty. Our hope is that this decision will lead lower courts to be more skeptical when confronted with obviously protectionist laws, not just in antitrust cases, but in constitutional cases as well, said Paul Sherman, a lawyer with the Institute for Justice, which filed a friend-of-the-court brief in the case.

“What’s absolutely clear from both the majority opinion and the dissent in the North Carolina case is that every member of the court knew exactly what was going on in North Carolina, which is exactly what is happening in countless occupations in states across the country,” Sherman said.

The lawsuit was brought by the Federal Trade Commission, which argued that the dental board’s ability to prevent nondentists from offering teeth-whitening services violated federal antitrust law.

In the majority opinion, Justice Anthony Kennedy wrote:

“In the 1990s, dentists in North Carolina started whitening teeth. Many of those who did so, including eight of the Board’s 10 members during the period at issue in this case, earned substantial fees for that service. By 2003, nondentists arrived on the scene. They charged lower prices for their services than the dentists did. Dentists soon began to complain to the board about their new competitors. Few complaints warned of possible harm to consumers. Most expressed a principal concern with the low prices charged by nondentists. …

“Starting in 2006, the board issued at least 47 cease-and-desist letters on its official letterhead to nondentist teeth whitening service providers and product manufacturers. … These actions had the intended result. Nondentists ceased offering teeth whitening services in North Carolina.”

Sherman said even the dissenting opinion, written by Justice Samuel Alito, “recognizes that this is standard operating procedure for occupational licensing boards.”

He cited this portion of Alito’s dissent to make his case:

“[There is not] ‘anything new about the suspicion that the North Carolina board — in attempting to prevent persons other than dentists from performing teeth-whitening procedures — was serving the interests of dentists and not the public. Professional and occupational licensing requirements have often been used in a such a way.”

While that may be a common practice, Sherman said, “it’s not a legitimate use of government power, and the Institute for Justice is currently litigating cases challenging similar restrictions on nondentist teeth whitening in Alabama, Georgia, and Connecticut on constitutional grounds.”

Sherman said he hopes that today’s decision “will lead lower courts to see these laws for what they are: The unconstitutional use of public power for private gain.”

But in the dissent, Alito — joined by Justices Antonin Scalia and Clarence Thomas — countered that the 1943 decision in Parker v. Brown, around which the North Carolina dispute was argued, gives state agencies immunity from federal antitrust laws.

Indeed, Alito wrote, Parker immunity evolved from a California case that was “unquestionably designed to benefit the regulated entities, California raisin growers.”

The minority justices determined the dental board is a state agency and, under the Parker precedent, is immune from antitrust laws.

The dissenters reasoned that under federalism — which gives states some independence from federal control — states are sovereign except where constitutionally restrained. Alito set forth a number of state statutes to show the Dental Board “is unmistakably a state agency,” not a private entity.

The majority disagreed, finding the Dental Board was not a state agency.

Alito wrote that the court “strayed” from precedent and “distorted” the meaning of the Parker case, pushing the court “into a morass. Determining whether a state agency is structured in a way that militates against regulatory capture is no easy task, and there is reason to fear that today’s decision will spawn confusion.”

As a result of the decision, 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,” Alito wrote.

The majority opinion said the dental board’s “active market participants” constitute “a controlling number of [the] decisionmakers,” but creating that test raises unanswered questions.

The majority did not define “controlling number,” so it remains unclear whether that implies a majority, a number less than a majority, a voting bloc, an obstructionist minority, or an agency chair empowered to set the agenda or veto regulations.

Nor did the court define what constitutes an active market participant, or “the scope of the market in which a member may not participate while serving on the board,” Alito wrote. He asked whether the court would have ruled differently if the North Carolina Dental Board members were periodontists or orthodontists that did not offer teeth-whitening services.

“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,” Alito wrote.

“The dissent, I think, captures the board’s point of view rather effectively,” White said. He anticipates future complainants increasingly citing this decision, raising the volume of litigation the Dental Board faces.

“The majority opinion kind of skirted that issue about damages and immunities from personal liability and those kinds of things,” White said, and that could dampen interest in serving on professional boards in the future.

Nor did the decision delve into public health issues, which now heightens the caveat emptor — buyer beware — admonition, he said.

“Basically, you’re putting acid in people’s mouths, and if it’s put on an unhealthy tooth, or it gets below the gumline on the gum it can cause damage, sometimes irreparable damage,” White said. Lay practitioners are not trained to know if a tooth is cracked or a filling is leaking, have no training in infection control, and sometimes operate in an unhygienic manner, he added.

Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.