A summary factual background of N.C. State Bd. of Dental Examiners v. Fed. Trade Comm’n is here. A summary of the Court’s analysis and holding follows.
Justice Kennedy began the majority opinon by noting the Court’s earlier interpretations of the antitrust laws to “confer immunity on anticompetitive conduct by the States when acting in their sovereign capacity” (see Parker v. Brown, 317 U. S. 341, 350-351 (1943)):
The States, however, when acting in their respective realm, need not adhere in all contexts to a model of unfettered competition. While “the States regulate their economies in many ways not inconsistent with the antitrust laws,” in some spheres they impose restrictions on occupations, confer exclusive or shared rights to dominate a market, or otherwise limit competition to achieve public objectives. If every duly enacted state law or policy were required to conform to the mandates of the Sherman Act, thus promoting competition at the expense of other values a State may deem fundamental, federal antitrust law would impose an impermissible burden on the States’ power to regulate.
(citations omitted). An entity such as the North Carolina Board of Dentistry, which is controlled by active participants in a market and to which the state delegates control over that market, enjoys this immunity only if (a) the challenged restraint that it enforces is clearly articulated and affirmatively expressed as state policy and (b) the policy is actively supervised by the state. “Parker immunity requires that the anticompetitive conduct of nonsovereign actors, especially those authorized by the State to regulate their own profession, result from procedures that suffice to make it the State’s own.”
Confusingly, the Court agreed with the parties that the “clear articulation” requirement had been satisfied by the state’s prohibition of the unauthorized practice of dentistry, but went on to observe that the state’s dental act did not expressly include teeth whitening within the scope of the practice of dentistry. The Board’s case ultimately failed at the second prong: the state did not actively supervise the Board’s determination that the dental act’s prohibition included teeth whitening or its issuance of the cease-and-desist letters. The Court therefore upheld the decision of the Fourth Circuit that the Board had unreasonably restrained trade in violation of antitrust law.
The Board argued that the potential for money damages will discourage members of regulated occupations from participating in state government. This case, however, did not include a claim for money damages and so the Court did not address the possibility of immunity from damages liability. Justice Kennedy observed, however, that states may provide for the defense and indemnification of agency members. States may also ensure immunity for agencies by adopting clear policies to displace competition and actively supervising agencies controlled by active market participants.
In his dissent Justice Alito argued syllogistically that the federal antitrust laws do not apply to state agencies; the North Carolina Board is a state agency; and that is the end of the matter. He concluded that the majority decision violated Parker, federalism and state sovereignty; and will be difficult to apply. To illustrate this last objection, he raised what he considered to be open questions in the majority opinion. For example, what constitutes a controlling number of decisionmakers? Who are active market participants? What is active supervision?
These questions help focus the impact, if any, of the decision on the Georgia Bar’s actions against the unlicensed practice of law (“UPL”). One of the threshold questions is who controls the Bar’s UPL enforcement activities? The case suggests that this determination is activity specific: the Board’s arguments failed because the state did not actively supervise its determination that the dental act’s prohibition included teeth whitening or its issuance of the cease-and-desist letters. The Georgia Supreme Court has ultimate oversight over the Bar, but is this general oversight sufficient to bring the Bar’s UPL activities under the state’s antitrust exception? Is the court’s oversight of UPL activities sufficient to render them activities of the state?
If not, might the Bar’s UPL Standing Committee be the appropriate focus? According to the Bar’s website, this committee “shall investigate and diligently inquire into the unauthorized practice of law by law agencies and other unauthorized persons specifically including any person not an active member in good standing of the State Bar, and the participation of lawyers therein, and proper methods for the prevention thereof.” Twelve of the committee’s twenty-three members are attorneys. Is the committee therefore controlled by active participants in the legal market?
Does the analysis then lead to Parker? The Georgia General Assembly and Supreme Court have “clearly articulated and affirmatively expressed” the state’s policies on UPL, satisfying the first Parker prong. “State legislation and ‘decision
The Supreme Court must also actively supervise the UPL activities. What does that mean? According to the majority opinion this determination
is flexible and context-dependent. Active supervision need not entail day-to-day involvement in an agency’s operations or micromanagement of its every decision. Rather, the question is whether the State’s review mechanisms provide “realistic assurance” that a nonsovereign actor’s anticompetitive conduct “promotes state policy, rather than merely the party’s individual interests.” The Court has identified only a few constant requirements of active supervision: [t]he supervisor must review the substance of the anticompetitive decision, not merely the procedures followed to produce it; the supervisor must have the power to veto or modify particular decisions to ensure they accord with state policy; and the “mere potential for state supervision is not an adequate substitute for a decision by the State. Further, the state supervisor may not itself be an active market participant. In general, however, the adequacy of supervision otherwise will depend on all the circumstances of a case.
(citations omitted). Does the Supreme Court’s oversight of UPL activities satisfy this requirement?
Justice Alito was right. This case raises practical problems and may require the Bar to re-evaluate its UPL enforcement structure and policies.