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North Carolina Board of Dental Examiners v. Federal Trade Commission

The North Carolina State Board of Dental Examiners, which is responsible for licensing dentists in North Carolina, is dominated by elected representatives of the dental industry. When dentists began complaining that non-dentists were providing teeth-whitening services to North Carolina consumers and undercutting the prices charged by dentists, the Board began sending “cease-and-desist” letters to the teeth-whiteners, claiming that they were engaged in practicing dentistry without a license. Although the Board is called a state agency under North Carolina law, no statute authorizes it to issue cease-and-desist letters, and no disinterested state officials provided any oversight over the Board’s effort to protect dentists from competition. The Federal Trade Commission initiated proceedings against the Board, claiming that its attempts to stifle competition violated federal antitrust laws. The Board in response argued that because it was an “arm of the state,” it was entitled to immunity against antitrust liability under a string of Supreme Court decisions providing for “state action” antitrust immunity. The FTC found that the Board was not immune because it had not shown one of the essential prerequisites for such immunity: active supervision of its activities by the state. The Board sought review of the FTC’s action by the U.S. Court of Appeals for the Fourth Circuit, arguing that because it is called a “state agency” under North Carolina law, the state supervision requirement does not apply. The Fourth Circuit rejected the Board’s argument, holding that entities dominated by private industry groups, even if designated state agencies by state law, can receive immunity only if they show active supervision by disinterested state agencies or officers. The Supreme Court granted review of the Fourth Circuit’s decision. Public Citizen filed an amicus curiae brief in support of the FTC, arguing that the Board is not entitled to state action immunity. The brief argued that the considerations that led the Supreme Court to eliminate the state supervision requirement in cases involving municipal governments do not apply to a board dominated by private participants in the market, as such a board, unlike a municipality, is likely to take action motivated by private interests in suppressing competition. The brief cited many examples of industry-dominated regulatory boards created by state law that engage in anticompetitive activities that advance their private interests at the expense of those of consumers and the public. The Supreme Court, largely following the approach of our brief, held that state action immunity is not available to industry-dominated boards that are not actively supervised by the state.