June 3, 2015 – A recent U.S. Supreme Court decision affecting dental practice regulators has ruffled the feathers of self-regulated professions, including the legal profession, that fear regulatory actions could subject them to antitrust prosecution.
In North Carolina State Board of Dental Examiners v. Federal Trade Commission,1 the Court ruled (6-3) that dentists on a board that regulates the practice of dentistry in North Carolina – the North Carolina State Board of Dental Examiners – were not immune from an antitrust lawsuit by the Federal Trade Commission (FTC).
The FTC had argued that dental board members engaged in anticompetitive and unfair methods of competition when they sent nondentists cease-and-desist letters that told them to stop providing teeth whitening services, viewed as the practice of dentistry.
The decision has the potential to impact numerous self-regulated professions – including law, medicine, dentistry, and accounting – where those professions have boards or commissions with authority to restrain competition within the field.
No Antitrust Immunity
Antitrust laws, particularly the federal Sherman Act and the Federal Trade Commission Act, promote free market competition and prohibit anticompetitive actions.
But states can restrict competition where necessary to protect the public. States do so by requiring professionals to meet licensing requirements, and prohibit unlicensed persons from performing services deemed “the practice” of that profession.
However, many states, if not all of them, entrust the regulation of the profession to those who work in that profession. Indeed, North Carolina required six of the eight members on the North Carolina State Board of Dental Examiners to be licensed dentists engaged in the practice of dentistry. These states recognize that professionals in technical professions have the expertise to know what regulations will protect the public.
But self-regulated professions are subject to heightened scrutiny for obvious reasons: there can be suspicion that self-regulated professions have opportunity for self-dealing.
Joe Forward, Saint Louis Univ. School of Law 2010, is a legal writer for the State Bar of Wisconsin, Madison. He can be reached by email or by phone at (608) 250-6161.
Thus, actions to restrain competition by “active market participants” must be “clearly articulated and affirmatively expressed as state policy” and the policy must be “actively supervised by the state.”2 If these requirements are not satisfied, the actors are not shielded with “state-action antitrust immunity,” and could be subject to antitrust claims.
North Carolina’s dental board asserted state-action antitrust immunity based on state policy allowing them to exclude unlicensed dentists from the practice of dentistry.
However, the Court noted that North Carolina law did not expressly include “teeth whitening” as the “practice of dentistry.” Instead, the board members – some of which provided teeth-whitening services themselves – simply declared that teeth whitening was the practice of dentistry when it sent 47 cease-and-desist letters to nondentists.
That is, the dental board did not seek input from the North Carolina Rules Review Commission, appointed by the state legislature, which must approve the rules and regulations relating to dental practice. The U.S. Supreme Court majority ruled that immunity did not apply because the board acted without active state supervision.
“Here, the Board did not receive active supervision by the State when it interpreted [state law] as addressing teeth whitening and when it enforced that policy by issuing cease-and-desist letters to nondentist teeth whiteners,” wrote Justice Anthony Kennedy.
The majority noted that limits on state action immunity are particularly important when states delegate regulatory power to “active market participants” who could be susceptible to anticompetitive behavior in order to protect their own livelihoods.
“Active market participants cannot be allowed to regulate their own markets free from antitrust accountability,” Justice Kennedy noted for the majority. “When a state empowers a group of active market participants to decide who can participate in its market, and on what terms, the need for supervision is manifest. If a state wants to rely on active market participants as regulators, it must provide active supervision.”
Justice Samuel Alito wrote a dissenting opinion, joined by Justices Clarence Thomas and Antonin Scalia. The dissenters said North Carolina’s dental board is a state agency, and the state empowered the board to take action concerning regulation of dentistry.
“North Carolina did not authorize a private entity to enter into an anticompetitive arrangement,” Justice Alito wrote. “North Carolina created a state agency and gave that agency the power to regulate a particular subject affecting public health and safety.”
Numerous groups raised concerns by filing amicus briefs in North Carolina State Board of Dental Examiners, including the state bar associations in four states.
The state bars of North Carolina, West Virginia, Nevada and Florida argued that denying state-action antitrust immunity to the dental board members could impair the ability of state regulators to enforce state laws enacted to protect public health.
Specifically, they said resources available to prosecute lawyer misconduct and prevent the unauthorized practice of law (UPL) could be diverted to litigation on antitrust issues.
They also argued that state bars could be forced to defend costly antitrust suits, and fewer lawyers would be willing to serve on boards or commissions that regulate law practice. The state bars in these states are charged with regulating the practice of law.
Other organizations representing the interests of self-regulated professions had similar concerns. In addition, the National Governors Association and the National Conference of State Legislatures, in an amicus brief, noted that states use boards and commissions as state agents to carry out important regulatory state functions, with rules and standards of conduct to prohibit self-dealing by members who are market participants.
A rule that requires “active supervision” by the state “places an impracticable burden on States that depend on hundreds of boards to carry out regulatory and policymaking functions,” the brief stated. It said states would be forced to reduce reliance on boards.
LegalZoom, Others Supported Decision
While self-regulated professions and government associations raised concerns about a decision against state-action antitrust immunity for a board designated to regulate the practice of dentistry, others supported a decision to expand antitrust accountability.
Among the supporters was LegalZoom and other online providers of self-help legal documents and information. They argued that boards that self-regulate professions are private entities subject to antitrust claims regardless of whether they are “state agents.”
LegalZoom’s amicus brief noted previous state bar efforts to restrict competition from alternative legal service providers and said such efforts stifle access to justice. An adverse decision, it said, would lift an important check on self-regulated professions.
Further, the American Antitrust Institute said allowing antitrust immunity in this case “would encourage the misuse of financially interested state licensing boards to exclude competitors without any assurance that it was the State’s policy to do so.”
Impact in Wisconsin?
Wisconsin regulates professional occupations through the Wisconsin Department of Safety and Professional Services (DSPS). Some occupations are regulated by independent examining and credentialing boards under DSPS supervision.
Wisconsin dentists, physicians, and accountants are regulated by examining boards, in addition to numerous other professions, including nurses and real estate professionals. A majority of examining board members are members of the profession they regulate.
In general, examining boards have the power to seek remedies against persons who violate rules and regulations governing practice, including those who practice without a license.
For instance, Wis. Stat. section 447.10 allows the Dentistry Examining Board to investigate and enjoin persons from engaging in the unlicensed practice of dentistry. Thus, the U.S. Supreme Court’s decision has the potential to impact these boards.
But Mark Paget, executive director for the Wisconsin Dental Association, notes that Wisconsin’s Dentistry Board operates differently than the dental board in North Carolina and hopes the U.S. Supreme Court decision won’t have a direct impact here.
“In fact, we believe the North Carolina situation is not the norm and suspect few dental boards across the nation could be viewed as being run in a similar fashion,” Paget said in a written statement.
Paget noted that Wisconsin’s Dentistry Examining Board operates under the direction of DSPS, has legal counsel, the governor controls the appointment process, and each appointment must be confirmed by the state Senate. “This further guarantees direct state oversight of the Dentistry Examining Board and its role in ensuring the public's safety and regulation of the important dental health care profession,” he said.
Impact on Lawyer Regulation?
Unlike other professions in Wisconsin, attorneys are not regulated by DSPS. The Wisconsin Supreme Court has inherent authority to regulate the practice of law and does so through various agencies, including the Board of Bar Examiners (BBE), the Office of Lawyer Regulation (OLR), and the Board of Administrative Oversight (BOA). Like other self-regulated professions, most members of these boards are lawyers.
The State Bar of Wisconsin – with a board of 49 attorneys and three nonlawyers – does not license or regulate attorneys, unlike some other state bar associations.
The main function of the State Bar of Wisconsin is to aid the Wisconsin courts in the administration of justice, provide continuing legal education and other services to State Bar members, and educate the public about the legal system.
The BBE, the OLR, the BOA, and the State Bar of Wisconsin all play a role in shaping rules and regulations governing lawyers and the legal system. But regulatory changes involving lawyer regulation must be approved by the Wisconsin Supreme Court.
Arguably, any actions that are approved by the state supreme court, as the state policymaker on lawyer regulation, have state-action antitrust immunity.3
Actions that don’t have express approval from the state supreme court may not be immune, as North Carolina State Board of Dental Examiners illustrates. That’s why the State Bar of Wisconsin maintains strict policies against anticompetition, particularly related to fees.
However, neither the State Bar of Wisconsin nor Wisconsin’s lawyer licensing and regulation agencies pursue actions against nonlawyers for unlicensed law practice, which was the situation that gave rise to antitrust litigation in North Carolina.
In 2007, in response to complaints of nonlawyers engaging in the practice of law to the detriment of citizens, the State Bar of Wisconsin asked the supreme court to more clearly define the practice of law and create a mechanism for those harmed by the unauthorized practice of law (UPL) to pursue remedies by a private right of action.
At that time, the State Bar viewed Wis. Stat. section 757.30 – which institutes criminal penalties for practicing law without a license – as inadequate and rarely enforced, in part because the statute’s definition of the practice of law was too vague.
In the last 15 years, only six cases have been charged under section 757.30 in three of Wisconsin’s most populated counties (one in Milwaukee, two in Dane County, and three in Waukesha County), according to court statistics. The defendant was found guilty in all but one of those cases.
The supreme court adopted a new rule (SCR 23) to more clearly define the practice of law, but did not adopt any mechanism to pursue a private right of action.
While OLR handles UPL by suspended lawyers, UPL complaints against nonlawyers are directed to the local district attorney’s offices, according to the OLR.
“Our lawyer regulation system does not task the OLR with enforcing the unauthorized practice of law under [SCR] Chapter 23,” said OLR Director Keith Sellen. “So I don’t think the North Carolina case directly applies to the lawyer regulation system here.”
1 135 S.Ct. 1101 (2015).
2 Id. at 1110.
3 In Bates v. State Bar of Arizona, 433 U.S. 350 (1977), the U.S. Supreme Court allowed antitrust immunity where the state bar enforced rules on attorney advertising approved by the Arizona Supreme Court. But in Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975), the Court ruled that the state bar did not have antitrust immunity for publishing minimum fee schedules not approved by the state supreme court.