[Blogger’s Note: I am very pleased to share this post by my colleague at Seton Hall Law, Tara Adams Ragone, in which she discusses North Carolina Board of Dental Examiners v. FTC, drawing on both her scholarly work on the intersection of health care and antitrust law and on her deep experience prosecuting medical licensing actions for the state of New Jersey.]
By Tara Adams Ragone
Cross-Posted at Health Reform Watch
Should state professional boards, which regulate a growing and diverse array of professions and often are composed of professionals from the regulated community, be immune from federal antitrust liability if they engage in anticompetitive conduct? The Federal Trade Commission thinks not in all cases, the Fourth Circuit agreed, and the North Carolina Board of Dental Examiners has asked the United States Supreme Court to review this decision.
Sasha Volokh recently devoted a 5-part series of blog posts to the major legal issues in play in this case. He provides an overview of the antitrust state action immunity doctrine here, summarizes the facts underlying the case, North Carolina Board of Dental Examiners v. FTC, here, outlines the differing tests used in the circuits when applying the state action immunity doctrine to professional boards here, offers his opinion on how the Supreme Court ought to resolve these conflicts here (he leans towards the Fourth Circuit’s analysis), and suggests a possible way for the Board to work around the FTC’s injunction (by simply rephrasing its letters to threaten litigation) here. Sasha’s posts provide an accessible and helpful primer on the case and relevant antitrust case law and are worth a read.
While we wait to learn if the Supreme Court will review this case, Professors Aaron Edlin and Rebecca Haw tackle the question of whether the actions of state professional licensing boards should be subject to antitrust scrutiny in their article, “Cartels by Another Name: Should Licensed Occupations Face Antitrust Scrutiny?” (available on SSRN and forthcoming in the University of Pennsylvania Law Review). Although they use a question mark in their title, their characterization of licensing boards as cartels is a powerful tipoff to their ultimate conclusion – that licensing boards composed primarily of competitors regulating their own profession should not escape antitrust review:
We contend that the state action doctrine should not prevent antitrust suits against state licensing boards that are composed of private competitors deputized to regulate their own competition and to outright exclude those who compete with them, often with the threat of criminal sanction. At most, state action should immunize licensing boards from the per se rule and require plaintiffs to prove their case under the rule of reason.
The article notes that professional licensing boards now regulate almost one-third of American workers in over 800 occupations. While acknowledging that some regulations imposed by licensing boards likely improve quality and public safety, they contend that many create barriers to entry, inhibit competition, and ultimately increase costs on consumers. They cite, for example, the requirement in some states that physicians supervise nurse practitioners even though there is no empirical evidence that such requirements improve patient outcomes. They also fault state dental boards that restrict the number of dental hygienists a dentist may employ, which then creates more demand for dentists.
Edlin and Haw recognize that there are some benefits to having trained professionals establishing standards for and evaluating conduct by licensed professionals. To balance these potential benefits against the threat to competition from empowering professionals to guard their own henhouse, the authors propose somewhat of a middle ground. Professional boards composed of competitors would need to satisfy the California Retail Liquor Dealers Association v. Midcal test to enjoy state action immunity – the board would need to be acting pursuant to a clearly articulated purpose to displace competition, and the state would need to actively supervise the board’s conduct. Unlike the Fourth Circuit’s decision in the North Carolina dental board case, which requires active supervision when market participants both dominate the board and were selected to their posts by fellow market participants, Edlin and Haw’s proposal goes a step further by subjecting professional boards to active supervision by the state whenever they are composed of competitors, regardless of how they are appointed.
If a board fails to satisfy either prong of the Midcal test, the authors propose to evaluate its conduct according to a modified rule of reason analysis that would permit courts to consider evidence that a restraint on competition improves safety or quality as a pro-competitive benefit that then must be balanced against the regulation’s anticompetitive effects.
Edlin and Haw’s article makes intuitive sense. Its appeal to reasoned balancing seems logical and modest.
My concern is with how their normative arguments will translate in practice. The modern administrative state is far from a model of efficiency. When I prosecuted medical licensing actions for the state of New Jersey, the life cycle of complex cases easily could span multiple years, given investigative demands, due process requirements, and backlogs at the Office of Administrative Law. As I have written about in a different context, the active supervision requirement is a demanding standard that requires that the state engage in a pointed reexamination of and exercise ultimate control over the government policy. Adding an additional layer of state bureaucracy to actively supervise all board conduct likely would further extend the time it takes for the board to take action to protect the public, especially when that layer lacks the expertise that licensed professionals bring to the work. Requiring active supervision of board conduct also could add to the state’s costs, which would be difficult for states to absorb, given current state fiscal realities.
Permitting antitrust challenges by federal antitrust agencies and private individuals, including competitors, similarly threatens to make the system far less efficient and responsive to consumer needs. Rule of reason analysis is inherently fact-based, which adds to the level of uncertainty.
As the authors suggest, states could avoid the demands of antitrust scrutiny by reorganizing professional boards so that they are run predominantly by state actors and not by self-interested licensees. Professionals could serve as consultants to state-run boards without dominating them, for example. It is difficult to imagine states voluntarily reorganizing their vast network of professional boards in this manner, however, absent clear instruction from the Supreme Court that such restructuring is necessary to avoid exacting antitrust scrutiny. Query also how we can predict whether quality would suffer as a result, which would harm consumers.
The North Carolina Board of Dental Examiners case was distributed for Conference by the Justices on February 21, 2014, and the case has been relisted for Conference this Friday, February 28, 2014. It’s difficult to know why the case has been relisted. As Amy Howe at SCOTUSblog explains, it could mean a number of things, including that one or more Justices wants to take a closer look at the case or is trying to amass four votes to grant review. But it also could mean that the Justices are writing a summary reversal, or that one or more Justices are writing a dissent from a decision to deny review. We’ll just have to tune in after Friday’s conference for an update.
Regardless what the Court decides, states should consider Professors Edlin and Haw’s article as they evaluate how to structure state professional boards to ensure they protect the public in a timely manner without unduly burdening healthy competition.