Written by
Joanne Ceballos
Earlier this
year DE Health Law reported on a decision by the U.S. Supreme Court, North Carolina State Board of Dental Examiners
v. Federal Trade Commission, holding that a state professional licensing
board could be liable under federal antitrust laws for engaging in
anticompetitive behavior in the absence of “active supervision” of the board by
the state. In particular, the Supreme
Court held that a state board on which a controlling number of decision makers
are active market participants in the occupation the board regulates may invoke
the “state action defense” to federal antitrust enforcement only when two
requirements are satisfied: first, the challenged restraint must be clearly
articulated and affirmatively expressed as state policy; and second, the policy
must be actively supervised by a state official (or state agency) that is not a
participant in the market that is being regulated. (Click here to review the
previous post.)
In the wake of
the Supreme Court’s decision, state officials sought guidance from the Federal
Trade Commission regarding antitrust compliance for state boards regulating
occupations. In response, the FTC’s
Bureau of Competition issued a 13-page document (available by clicking here) that provides an overview of
antitrust considerations implicated by the activities of state licensing boards
and also offers specific examples of when “active state supervision” is
required and what may constitute “active state supervision” for purposes
of the “state action defense.”
The state must
exercise “active supervision” over a board “on which a controlling number of decision
makers are active market participants.”
According to the guidance, an “active market participant” is an
individual who is licensed by the board or “provides any service subject to the
regulatory authority of the board.” Active market participants constitute a
“controlling number of decision makers” if they comprise a majority of the
board, or if they effectively control the board’s decisions as a matter of
procedure or custom. While the guidance
cautions that whether a board is controlled by active market participants is a
fact-bound inquiry, it provides several examples of scenarios when a board
might be considered controlled by active market participants even when
licensees comprise a minority of the board’s voting members.
As to what may
constitute “active state supervision” that satisfies the state action defense,
the guidance identifies a number of factors the FTC will consider, namely
whether the “supervisor” (1) has obtained the information necessary for a
proper evaluation of the action recommended by the regulatory board; (2) has
evaluated the substantive merits of the recommended action and assessed whether
the recommended action comports with the standards established by the state
legislature; and (3) has issued a written decision approving, modifying, or
disapproving the recommended action, and explaining the reasons and rationale
for such decision. The guidance goes on
to give examples of what might be considered satisfactory state supervision in
the contexts of a board’s issuance of a regulation with potential
anticompetitive effects and a board’s administration of its disciplinary
process.
With the
exception of the Board of Examiners of Nursing Home Administrators, the
majority of members of all the boards licensing health care professionals in
Delaware are required by statute to be licensees and, hence, “active market
participants.” Accordingly, the Supreme
Court’s decision and the FTC’s subsequent guidance are particularly relevant to
the conduct of those boards.
Labels: Antitrust, Licensing Board, State Action
