July | August 2017






State Board Members and Antitrust Immunity

By Lisa Soronen, Executive Director, State and Local Legal Center
A new Supreme Court case says state boards don’t automatically get immunity from antitrust laws. This ruling could reduce the authority of governors and state legislatures to compose state agencies, boards and commissions or create massive headaches for state leaders trying to decide what active supervision means. 
In North Carolina State Board of Dental Examiners v. FTC, the Supreme Court held 6-3 that if the majority of a state board’s members are active market participants, antitrust immunity applies only if the state actively supervises the board. The State and Local Legal Center filed an amicus brief in this case, which CSG joined, arguing that active supervision was unnecessary.
The North Carolina State Board of Dental Examiners is a state agency principally charged with licensing dentists. Six of its eight members must be actively practicing, licensed dentists. After the board issued cease-and-desist letters to teeth-whitening service providers who were not dentists, the Federal Trade Commission charged it with violating federal antitrust law.
The court held in Parker v. Brown that states receive state-action immunity from federal antitrust law when acting in their sovereign capacity. In this case, the court held that non-state entities controlled by active market participants receive state-action immunity only if the challenged restraint is clearly articulated in state policy and the policy is actively supervised by the state.
In this case, the parties assumed the clear articulation requirement was met and agreed the board wasn’t actively supervised by the state, so the court denied the board state-action immunity.
Justice Anthony Kennedy, writing for the majority, reasoned that without active supervision, boards and commissions made up of a majority of market participants may act in their own interest rather than the public interest. “Limits on state-action immunity are most essential when the State seeks to delegate its regulatory power to active market participants,” he said, “for established ethical standards may blend with private anticompetitive motives in a way difficult even for market participants to discern.”
In a dissenting opinion, Justice Samuel Alito—joined by Justices Antonin Scalia and Clarence Thomas—concluded that under Parker, state-action immunity applies to state agencies regardless of how they are structured.
The State and Local Legal Center’s amicus brief points out that states typically have hundreds of boards and commissions largely staffed by market participants. States now have to either staff them differently or actively supervise them. Governors and state legislatures may be reluctant to not include a majority of market participants on boards and commissions because market participants have needed expertise. Active supervision likely will be onerous and expensive.
The court was not specific about what kind of active supervision should have been occurring in the North Carolina case. According to the court, active supervision is “flexible and content-dependent” and should provide “realistic assurance” that an agency’s anticompetitive conduct “promotes state policy, rather than merely the party’s individual interests.”
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