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N.C. State Bd. of Dental Exam'rs v. FTC - 717 F.3d 359 (4th Cir. 2013)

Rule:

Section 1 of the Sherman Antitrust Act, 15 U.S.C.S. § 1, prohibits every contract, combination, or conspiracy, in restraint of trade. To establish a § 1 antitrust violation, a plaintiff must prove (1) a contract, combination, or conspiracy, (2) that imposed an unreasonable restraint of trade.

Facts:

The North Carolina State Board of Dental Examiners sent letters to non-dentists who were providing teeth-whitening services in the state, telling them that such activity constituted the practice of dentistry and that they were violating the North Carolina Dental Practice Act by engaging in it. The letters effectively caused non-dentists to stop providing teeth-whitening services in North Carolina and also caused manufacturers and distributors of teeth-whitening products used by these non-dentist providers to exit or hold off entering North Carolina. In sum, the Board successfully expelled non-dentist providers from the North Carolina teeth-whitening market. On June 17, 2010, the Federal Trade Commission (FTC) issued an administrative complaint against the Board, charging it with violating 15 U.S.C. § 45, the Federal Trade Commission Act, by excluding non-dentist teeth whiteners from the market. The Board moved to dismiss the complaint, arguing that the FTC lacked jurisdiction over it and that it was exempt from the federal antitrust laws under the "state action" doctrine. An Administrative Law Judge (ALJ) denied the motion. Subsequently, the FTC, applying a de novo standard of review, affirmed and entered a final order against the Board that included a cease-and-desist order enjoining the Board from, inter alia, continuing to unilaterally issue extra-judicial orders to teeth-whitening providers in North Carolina. The Board thereafter petitioned for review of the FTC’s final order.

Issue:

Did the North Carolina State Board of Dental Examiners violate the Federal Trade Commission Act by engaging in unfair competition in the market for teeth-whitening services in North Carolina?

Answer:

Yes.

Conclusion:

The Supreme Court of the United States held that substantial evidence supported a conclusion that the Board had engaged in concerted action that amounted to an unreasonable restraint of trade under 15 U.S.C.S. § 1. According to the Court, the Board was not exempt from the antitrust laws under the state action doctrine. The Court ruled that although the board was a state agency, it was operated by market participants who were elected by other market participants. Thus, it functioned as a private actor. As such, without active supervision by the state, the Board did not qualify for state-action immunity. The Court concluded that an unfairness finding under § 45(a)(1) was not error because the Board, as a professional organization made up of competing dental providers, was capable of conspiring with itself. The Court denied the Board's petitions for review of the order by which the FTC had found that the Board violated the FTC Act, 15 U.S.C. § 45, by engaging in unfair competition in the market for teeth-whitening services in North Carolina. 

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