In February, the U.S. Supreme Court took a bite out of dentists in North Carolina. And at the same time, the high court made state professional boards everywhere nervous, including mandatory state bars.
By a 6-3 vote in North Carolina Board of Dental Examiners v. Federal Trade Commission, the Supreme Court imposed a higher hurdle for nonsovereign licensing boards to gain the state-action immunity that shields board members from federal antitrust liability.
Coincidentally, just a few years ago, a wise-cracking dentist friend had mentioned during a golf round how dentists were becoming annoyed over the growing number of non-dentists — mostly, cosmetologists, offering teeth-whitening services to the public. Beauticians were not only beautifying hair and skin but were now traipsing onto teeth territory and offering lower cost teeth-whitening services than dentists.
I only remember his story because, as a horse-owner, several years before, horse veterinarians around the country were trying to get non-veterinary dental lay practitioners (NVDLPs) banned from floating a horse’s teeth. The “float” is the name of the file used to smooth or contour a horse’s teeth and horse-shoers, self-taught cowpokes, and self-described ‘equine dental technicians’ had been biting into horse vet incomes by offering more affordable floating services.
A license for everyone?
When it comes to protecting turf, it’s always financial self-interest at the root of it. Never mind the chest and table pounding about protecting the public. No wonder an increasing number of everyday occupations hanker for licensing ‘protection.’ They think it heightens consumer perceptions of quality and increases demand. And of course, licensing restricts supply which translates into higher prices.
But in many instances, occupational licensing offers only an illusion of quality while doing little to actually protect consumers. Instead, occupational licensing simply creates self-serving barriers to entry, which makes the provided service more expensive and more unavailable.
And because it means additional revenue while offering a public protection sop to the electorate, government bureaucrats don’t mind creating more licensing categories to feed the bureaucratic maw. No wonder some call it a plague.
Tooth or Consequences in North Carolina.
So what happened in North Carolina is that its 8-member dental board made up of 6 licensed dentists elected by their fellow dentists, began sending out cease-and-desist letters to individual non-dentists and even to the North Carolina Board of Cosmetic Art Examiners warning them that under North Carolina law, the unlicensed practice of dentistry was a crime. And teeth-whitening was considered the practice of dentistry.
The cease-and-desist letters totaling 47 had their intended effect, chasing out the non-dentist teeth-whiteners out of the dental temple. But they also attracted the unwanted attention of the Federal Trade Commission (FTC) who suspected the board’s actions weren’t motivated so much by high-mindedness about consumer protection as they were over non-dentist competitors gumming up revenues.
In the FTC’s view, where the regulatory agency has a “financial interest in the restraint [it] seeks to enforce” and is “controlled by private market participants who [stand] to benefit from the regulatory action,” 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.”
As a consequence, the FTC concluded that the Board had to meet the active supervision requirement if it wanted 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.” You think? See “How a state dentistry board hounded non-dentist teeth-whiteners out of North Carolina” and Brief of Respondent Federal Trade Commission.
A bite out of the bar.
Why should lawyers care?
Because it may lead to more legal challenges given our over-regulated legal market. And it will engender more defiance against the host of anti-competitive actions taken by mandatory bar associations. Indeed, on June 3, 2015, Legal Zoom filed a $10.5M antitrust suit against the North Carolina Bar.
Some legal analysts even think it will mandate more “active supervision” of state bars by their state supreme courts. Said one, “the decision probably will lead to state supreme courts having stronger relationships with their state bars and oversight to see whether they are acting consistent with statutory authority or the authority granted by their state supreme court.” Still others think it might shake up unauthorized practice of law (UPL) restrictions and “revive challenges to UPL rules.” See PrawfsBlawg: Teeth Whitening for Lawyers
Oh, woe. Oh, scream.
And claiming their work would be impaired, mandatory bars had predicted a parade of horribles in the wake of the decision. By denying them state action immunity under the Sherman Act, private regulatory boards with a controlling number of decision-makers actively participating in that profession, i.e., “market participants,” would be forced to act under a clearly articulated state policy and under active supervised by the state. “Active market participants,” the Court said, “cannot be allowed to regulate their own markets free from antitrust accountability.” Oh, woe. Oh, scream.
As Amici Curiae in support of the North Carolina Dental Board, the North Carolina, Nevada, West Virginia and Florida State Bars had paraded the horribles in their Brief, including that “the limited resources available to prosecute lawyer misconduct and to prevent the unauthorized practice of law will be diverted to litigating whether the state bar’s action has been actively supervised in a manner sufficient to provide state action immunity.”
Additionally, they predicted “State bars will have to defend expensive antitrust actions even though states explicitly authorize the state bars to regulate the conduct being challenged.” And worse, they claimed lawyers won’t want to serve on bar governing boards “for fear of being sued—and of being held individually liable—in treble-damage antitrust actions.” Last, they proclaimed those “who do agree to serve may be deterred from fulfilling their state-authorized enforcement duties against defendants who threaten antitrust claims.”
The non-state agency state bar.
As for the State Bar of Arizona, legal elites here have been pondering the implications of the North Carolina case, including whether or not to leaven the influence of active market participant lawyers with more non-lawyers on its governing board.
But in my opinion, there are likely more ominous reverberations than merely decreasing the number of foxes in the hen-house. As its website proclaims, the Arizona Bar proudly claims it’s “not a state agency.” So it would seem that as “a nonsovereign actor controlled by active market participants,” to avoid antitrust liability, it will have to work even harder now to satisfy the two requirements of clearly articulated state policy and active State supervision.
In Bates v. State Bar of Arizona 433 U.S. 350 (1977), the U.S. Supreme Court held that the Arizona Supreme Court’s rule restricting lawyer advertising violated the First and Fourteenth Amendments and ruled that commercial speech merited First Amendment protection. Admittedly, the nation’s high court went along with the Arizona Supreme Court’s determination in Bates that the Arizona Bar was immune from federal antitrust liability because in enforcing the Court’s then rule against lawyer advertising the Bar’s role had been “completely defined by the court” and moreover, the Bar acted “as the agent of the court under its continuous supervision.”
After North Carolina Dental Board v. FTC, whether this will be true in every instance implicating anticompetitiveness should be worrisome for the non-state agency Arizona Bar particularly when Goldfarb v. Virginia State Bar (421 U.S. 773, 791 (1975) was also cited by the Court for the principle that while state bars are a state agency for some limited purposes, that fact does not create an “antitrust shield that allows it to foster anticompetitive practices for the benefits of its members.”
Photo Credits: “mooning the neighbourhood,” by Pixel Addict at Flickr Creative Commons Attribution; “Roger Daltrey …” by greg westfall at Flickr Creative Commons Attribution;”Bite Me Bar Sign,” by Sam Howzit at Flickr Creative Commons Attribution;”Munch — it’s a scream,” by Ian Burt at Flickr Creative Commons Attribution;”The Scream,” by Jeremy Keith at Flickr Creative Commons Attribution;”Scream” by Mooganic at Flickr Creative Commons Attribution.