Justices Rule for Open Teeth-Whitening Market

     (CN) – A North Carolina state dental board overstepped its authority when it directed non-dentists to stop offering teeth-whitening services to their customers, a divided U.S. Supreme Court ruled Wednesday.
     The 6-3 vote upheld the position of the Federal Trade Commission, which had said the actions of the North Carolina Board of Dental Examiners deprived consumers of the benefits of price competition and a choice of services.
     Those services – essentially the application of peroxide to teeth by means of a gel or strip – have become increasingly popular over the past decade, inspiring nondentists to enter the field, significantly undercutting the costs dentists charge for the same procedure.
     
Complaints from dentists led the North Carolina Board of Dental Examiners to issue at least 47 cease-and-desist letters to 29 nondentists.
     Several of the letters indicated the sale or use of teeth-whitening products by a nondentist is a misdemeanor. The board also sent letters to mall operators asking them not to lease kiosk space to nondentist teeth-whitening providers.
     Its strategy proved highly effective, essentially expelling nondentist providers from the North Carolina teeth-whitening market.
     In June 2010, the Federal Trade Commission issued an administrative complaint against the board, charging it with violating Section 5 of the Federal Trade Commission Act. It decided a year later that the board’s actions were illegal and harmed consumers because they resulted in higher prices and reduced choices in whitening services.
     Though the board filed suit for declaratory judgment, a federal judge in North Carolina dismissed the action as an improper attempt to enjoin ongoing administrative procedure.
     A three-judge panel of the 4th Circuit later shot down the board’s claims that it was exempt from federal antitrust laws under the state action doctrine, which shields some conduct by states from anti-trust oversight.
     In an opinion written Justice Anthony Kennedy, the Justices said that while state entities are usually exempt to federal antitrust claims, the exemption did not apply in this case because the dental examiners are not directly overseen by the state and because the board was made up of self-interested parties.
     “Limits on state-action immunity are most essential when the State seeks to delegate its regulatory power to active market participants, for established ethical standards may blend with private anticompetitive motives in a way difficult even for market participants to discern,” Kennedy wrote. “Dual allegiances are not always apparent to an actor.”
     Writing in dissent, Justice Samuel Alito said the majority’s decision “will create practical problems and is likely to have far-reaching effects on the States’ regulation of professions.”
     “States may find it necessary to change the composition of medical, dental and other boards, but it is not clear what sort of changes are needed to satisfy the test that the Court now adopts,” he continued, adding, “The Court faults the structure of the North Carolina Board because ‘active market participants’ constitute ‘a controlling number of decision makers’ … but this test raises many questions.
     Justices Clarence Thomas and Antonin Scalia joined Alito in his dissent, with Scalia opining that the majority’s position “diminishes our traditional respect for federalism and state sovereignty.”
     Federal Trade Commission Chairwoman Edith Ramirez said she was pleased with the ruling, saying it recognized ” that a state may not give private market participants unsupervised authority to suppress competition even if they act through a formally designated ‘state agency’.”
     “The Court’s decision makes clear that state agencies constituted in this manner are subject to the federal antitrust laws unless the state actively supervises their decisions,” Ramirez said.

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