N.C. State Bd. of Dental Exam'rs v. Fed. Trade Comm'n

• Decision Date: 25 February 2015
• Docket Number: No. 13–534.,13–534.
• Citation: 191 L.Ed.2d 35,135 S.Ct. 1101,574 U.S. 494
• Parties: NORTH CAROLINA STATE BOARD OF DENTAL EXAMINERS, Petitioner v. FEDERAL TRADE COMMISSION.
• Court: U.S. Supreme Court

574 U.S. 494

135 S.Ct. 1101

191 L.Ed.2d 35

NORTH CAROLINA STATE BOARD OF DENTAL EXAMINERS, Petitioner

v.FEDERAL TRADE COMMISSION.

No. 13–534.

Supreme Court of the United States

Argued Oct. 14, 2014.

Decided Feb. 25, 2015.

Hashim M. Mooppan, Washington, DC, for Petitioner.

Malcolm L. Stewart, for Respondent.

Glen D. Nager, Counsel of Record, Hashim M. Mooppan, Amanda R. Parker, Jones Day, Washington, DC, for Petitioner.

Jonathan E. Nuechterlein, General Counsel, David C. Shonka, Principal Deputy General Counsel, Imad D. Abyad, Mark S. Hegedus, Attorneys, Federal Trade Commission, Washington, DC, Donald B. Verrilli, Jr., Solicitor General, Counsel of Record, William J. Baer, Assistant Attorney General, Malcolm L. Stewart, Deputy Solicitor General, Brian H. Fletcher, Assistant to the Solicitor General, Department of Justice, Washington, DC, for Respondent.

Justice KENNEDY delivered the opinion of the Court.

This case arises from an antitrust challenge to the actions of a state regulatory board. A majority of the board's members are engaged in the active practice of the profession it regulates. The question is whether the board's actions are protected from Sherman Act regulation under the doctrine of state-action antitrust immunity, as defined and applied in this Court's decisions beginning with Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943).

I

A

In its Dental Practice Act (Act), North Carolina has declared the practice of dentistry to be a matter of public concern requiring regulation. N.C. Gen.Stat. Ann. § 90–22(a) (2013). Under the Act, the North Carolina State Board of Dental Examiners (Board) is "the agency of the State for the regulation of the practice of dentistry." § 90–22(b).

The Board's principal duty is to create, administer, and enforce a licensing system for dentists. See §§ 90–29 to 90–41. To perform that function it has broad authority over licensees. See § 90–41. The Board's authority with respect to unlicensed persons, however, is more restricted: Like "any resident citizen," the Board may file suit to "perpetually enjoin any person from ... unlawfully practicing dentistry." § 90–40.1.

The Act provides that six of the Board's eight members must be licensed dentists engaged in the active practice of dentistry. § 90–22. They are elected by other licensed dentists in North Carolina, who cast their ballots in elections conducted by the Board. Ibid. The seventh member must be a licensed and practicing dental hygienist, and he or she is elected by other licensed hygienists. Ibid. The final member is referred to by the Act as a "consumer" and is appointed by the Governor. Ibid. All members serve 3–year terms, and no person may serve more than two consecutive terms. Ibid. The Act does not create any mechanism for the removal of an elected member of the Board by a public official. See ibid.

Board members swear an oath of office, § 138A–22(a), and the Board must comply with the State's Administrative Procedure Act, § 150B–1 et seq., Public Records Act, § 132–1 et seq., and open-meetings law, § 143–318.9 et seq. The Board may promulgate rules and regulations governing the practice of dentistry within the State, provided those mandates are not inconsistent with the Act and are approved by the North Carolina Rules Review Commission, whose members are appointed by the state legislature. See §§ 90–48, 143B–30.1, 150B–21.9(a).

B

In the 1990's, dentists in North Carolina started whitening teeth. Many of those who did so, including 8 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.

Responding to these filings, the Board opened an investigation into nondentist teeth whitening. A dentist member was placed in charge of the inquiry. Neither the Board's hygienist member nor its consumer member participated in this undertaking. The Board's chief operations officer remarked that the Board was "going forth to do battle" with nondentists. App. to Pet. for Cert. 103a. The Board's concern did not result in a formal rule or regulation reviewable by the independent Rules Review Commission, even though the Act does not, by its terms, specify that teeth whitening is "the practice of dentistry."

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. Many of those letters directed the recipient to cease "all activity constituting the practice of dentistry"; warned that the unlicensed practice of dentistry is a crime; and strongly implied (or expressly stated) that teeth whitening constitutes "the practice of dentistry." App. 13, 15. In early 2007, the Board persuaded the North Carolina Board of Cosmetic Art Examiners to warn cosmetologists against providing teeth whitening services. Later that year, the Board sent letters to mall operators, stating that kiosk teeth whiteners were violating the Act and advising that the malls consider expelling violators from their premises.

These actions had the intended result. Nondentists ceased offering teeth whitening services in North Carolina.

C

In 2010, the Federal Trade Commission (FTC) filed an administrative complaint charging the Board with violating § 5 of the Federal Trade Commission Act, 38 Stat. 719, as amended, 15 U.S.C. § 45. The FTC alleged that the Board's concerted action to exclude nondentists from the market for teeth whitening services in North Carolina constituted an anticompetitive and unfair method of competition. The Board moved to dismiss, alleging state-action immunity. An Administrative Law Judge (ALJ) denied the motion. On appeal, the FTC sustained the ALJ's ruling. It reasoned that, even assuming the Board had acted pursuant to a clearly articulated state policy to displace competition, the Board is a "public/private hybrid" that must be actively supervised by the State to claim immunity. App. to Pet. for Cert. 49a.

The FTC further concluded the Board could not make that showing.

Following other proceedings not relevant here, the ALJ conducted a hearing on the merits and determined the Board had unreasonably restrained trade in violation of antitrust law. On appeal, the FTC again sustained the ALJ. The FTC rejected the Board's public safety justification, noting, inter alia, "a wealth of evidence ... suggesting that non-dentist provided teeth whitening is a safe cosmetic procedure." Id., at 123a.

The FTC ordered the Board to stop sending the cease-and-desist letters or other communications that stated nondentists may not offer teeth whitening services and products. It further ordered the Board to issue notices to all earlier recipients of the Board's cease-and-desist orders advising them of the Board's proper sphere of authority and saying, among other options, that the notice recipients had a right to seek declaratory rulings in state court.

On petition for review, the Court of Appeals for the Fourth Circuit affirmed the FTC in all respects. 717 F.3d 359, 370 (2013). This Court granted certiorari. 571 U.S. 1236, 134 S.Ct. 1491, 188 L.Ed.2d 375 (2014).

II

Federal antitrust law is a central safeguard for the Nation's free market structures. In this regard it is "as important to the preservation of economic freedom and our free-enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms." United States v. Topco Associates, Inc., 405 U.S. 596, 610, 92 S.Ct. 1126, 31 L.Ed.2d 515 (1972). The antitrust laws declare a considered and decisive prohibition by the Federal Government of cartels, price fixing, and other combinations or practices that undermine the free market.

The Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. § 1 et seq., serves to promote robust competition, which in turn empowers the States and provides their citizens with opportunities to pursue their own and the public's welfare. See FTC v. Ticor Title Ins. Co.,

504 U.S. 621, 632, 112 S.Ct. 2169, 119 L.Ed.2d 410 (1992). 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," id., at 635–636, 112 S.Ct. 2169, 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. See Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 133, 98 S.Ct. 2207, 57 L.Ed.2d 91 (1978) ; see also Easterbrook, Antitrust and the Economics of Federalism, 26 J. Law & Econ. 23, 24 (1983).

For these reasons, the Court in Parker v. Brown interpreted the antitrust laws to confer immunity on anticompetitive conduct by the States when acting in their sovereign capacity. See 317 U.S., at 350–351, 63 S.Ct. 307. That ruling recognized Congress' purpose to respect the federal balance and to "embody in the Sherman Act the federalism principle that the States possess a significant measure of sovereignty under our Constitution." Community Communications Co. v. Boulder, 455 U.S. 40, 53, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982). Since 1943, the Court has reaffirmed the importance of Parker 's central holding. See, e.g., Ticor, supra, at 632–637, 112 S.Ct. 2169 ; Hoover v. Ronwin, 466 U.S. 558, 568, 104 S.Ct. 1989, 80 L.Ed.2d 590 (1984) ; Lafayette v. Louisiana Power &...