Yesterday, I wrote about the doctrine that “state action” is immune from federal antitrust law, a doctrine that dates back to the Parker v. Brown case from 1943. Today, I’ll talk about the details of North Carolina Board of Dental Examiners v. FTC, the recent Fourth Circuit case that involves state-action immune and that has a pending cert petition at the Supreme Court right now.

First, what is this Board? The North Carolina State Board of Dental Examiners is, by statute, “the agency of the State for the regulation of the practice of dentistry” in North Carolina. The board consists of six dentists licensed in North Carolina, one dental hygienist licensed in North Carolina, and one citizen member. The dentist members serve three-year terms and are elected by North Carolina-licensed dentists. The dental hygienist member also serves a three-year term and is elected by North Carolina-licensed dental hygienists. The citizen member serves a  three-year term and is appointed by the governor.

The board has the power to license dentists: “No person shall engage in the practice of dentistry in this State, or offer or attempt to do so, unless such person is the holder of a valid license or certificate of renewal of license duly issued by the North Carolina State Board of Dental Examiners.” And the statute defines what “dentistry” means. It’s a list of 13 items, but the important one for our purposes is the second one: “[r]emov[ing] stains, accretions or deposits from the human teeth.” (The first is diagnosing and treating tooth and gum disease, the third is tooth extraction, the eighth is making prosthetic dentures, and the ninth is making and reading dental X-rays. There follows a separate list of fourteen acts that don’t constitute dentistry, for instance “[a]ny act by a duly licensed physician or surgeon performed in the practice of his profession.”)


So teeth-whitening is defined by statute as dentistry and therefore requires a license from the Board. Here’s an intro to teeth-whitening, in the words of the Fourth Circuit opinion:

Teeth-whitening is a popular cosmetic dental procedure that is available in North Carolina, as in most states, in several forms, including as an in-office dental treatment, as dentist-provided take-home kits, as over-the-counter products, and as services provided by non-dentists at salons, mall kiosks, and other locations. Each of these teeth-whitening services involves applying peroxide to the teeth by means of a gel or strip, which triggers a chemical reaction that results in whiter teeth. The services differ, however, in the immediacy of the results, the ease of use, the necessity of repeat applications, the need for technical support, and price. Not surprisingly, in-office dentist whitening procedures are fast, effective, and usually do not require repeated applications, but they are also the “most costly” offering. In contrast, over-the-counter whitening products typically contain lower concentrations of peroxide and may require multiple applications to achieve results, but they cost far less.
Beginning in the 1990s, dentists started providing whitening services throughout North Carolina. In about 2003, non-dentists also started offering teeth-whitening services, often at a significantly lower price than dentists. Shortly thereafter, dentists began complaining to the Board about the non-dentists’ provision of these services.

And what did the Board do, faced with this clear violation of North Carolina law—people practicing dentistry without a license from the Board? It sent dozens of letters to these non-dentist providers, asserting that their activities constituted the illegal practice of dentistry and ordering them to cease and desist. Here’s an example of such a letter:

To Whom It May Concern:
The North Carolina State Board of Dental Examiners is investigating a report that you are engaged in the unlicensed practice of dentistry. Practicing dentistry without a license in North Carolina is a crime. [Citation to statutes.]
You are hereby ordered to CEASE AND DESIST any and all activity constituting the practice of dentistry or dental hygiene as defined by [statutes] and the Dental Board Rules promulgated hereunder.
Specifically, [statute] states that: [citing relevant statutory provisions].
The North Carolina State Board of Dental Examiners is the state agency charged with regulating the practice of dentistry in North Carolina and is the proper agency to conduct this investigation. The Board may use any legal means at its disposal to conduct this investigation including, but not limited to, interviews with current and former patients, surveillance, and the hiring of undercover agents.
The Board requests that you cooperate in the current investigation by calling the Board’s office and arranging to be interviewed by the Board’s investigator and by submitting a written response to this notice and order within fifteen (15) days of the receipt of this letter.

Note that the Board didn’t threaten that it could impose fines itself: all it can do to enjoin violations is sue the violator in state court, which is the same power held by the Attorney General of North Carolina, any district attorney, or, indeed, “any resident citizen.” What it threatened in the letter quoted above was interviewing people, and (legal) surveillance and hiring of undercover agents. The request for an interview also seemed purely “voluntary”, though I can understand how legally unsophisticated non-dentist teeth-whiteners might have taken it to imply that the Board had more coercive power here than it actually did.


As a result, non-dentist teeth whiteners were successfully excluded from North Carolina.

*     *     *

The FTC brought an action against the Board for violations of federal antitrust law. The FTC’s position was that state-action immunity didn’t apply. Recall the first prong of the Midcal test I discussed in the last post: the policy has to be clearly articulated by the state for immunity to apply. That’s clearly present: the statute, as I’ve described it above, clearly indicates that there’s no free entry into the practice of dentistry in North Carolina; licenses from the Board are required.

If the Board were a municipality or a government agency, we’d be done: under the Hallie test (again, see the previous post), the “clear articulation” prong is all there is. But the FTC’s position was that the Board was actually private, which meant that it also had to show the second prong of Midcal, active supervision by the state, to benefit from state-action immunity. Because the Board can’t show active supervision, the public-or-private question became all-important.


The FTC’s position was that the state action exemption required active supervision “in circumstances where the state agency’s decisions are not sufficiently independent from the entities that the agency regulates.” This includes cases where the agency has a “financial interest in the restraint that [it] seeks to enforce” and is “controlled by private market participants” “who [stand] to benefit from the regulatory action.”

Using this framework, the FTC concluded that the Board must meet the active supervision requirement if it wants to benefit from state action immunity. “Because North Carolina law requires that six of the eight Board members be North Carolina licensed dentists, the Board is controlled by North Carolina licensed dentists.” Moreover, dentists perform teeth whitening. Therefore, “Board actions in this area could be self interested.”

According to the FTC, the need for active supervision is especially acute when the agency “is not accountable to the public but rather to the very industry it purports to regulate.” This political unaccountability concern was present here: the Board was only accountable to dentists, since “the six dentist members of the Board are elected directly by their professional colleagues, the other licensed dentists in North Carolina.” This election business doesn’t seem to have been absolutely necessary for the FTC, which said that merely being a market participant was enough; perhaps the political accountability was just gravy, or just an extra argument for someone who wasn’t already completely convinced.


So, according to the FTC, because the Board couldn’t show that it was actively supervised, it wasn’t immune from federal antitrust law. The FTC went on to determine that there was an antitrust violation—the Board’s actions were anticompetitive, and in the FTC’s view, the Board’s proferred procompetitive justifications didn’t hold water. (An interesting analysis, but not important for us right now.)

The Fourth Circuit upheld all that—at least where, as here, the Board was both composed of market participants and not politically accountable. So the FTC’s possible plus-factor seems to be part of the Fourth Circuit’s test.

The Fourth Circuit’s approach is quite different from that of the other circuits. As I mentioned before, the Second, Fifth, and Tenth Circuits take an approach that’s very likely to find that a board is public—that’s at the opposite extreme from the Fourth Circuit’s and FTC’s approaches. And the First, Ninth, and Eleventh Circuits take an intermediate approach, which requires balancing a bunch of factors—as opposed to the FTC’s and Fourth Circuit’s approaches, which give dispositive weight to one or two factors, market participation and political accountability. But that’s a subject for the next post.