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Court upholds FTC: Board engaged in anti-competitive practices

The Fourth Circuit Court of Appeals, in a May 31 decision, rejected the arguments of the North Carolina state dental board in its appeal of an FTC decision that the board had engaged in uncompetitive practices when it sent cease-and-desist letters to unlicensed teeth-whitening services

(North Carolina State Board of Dental Examiners v. Federal Trade Commission).

The board, composed of six practicing dentists, one dental hygienist, and one consumer representative, opened an investigation into the practice of unlicensed individuals providing teeth-whitening services in response to several complaints from dentists, many of whom provided a similar service at a high price, and who objected to the procedure being performed by unlicensed individuals.

While state law permits the board to discipline dental licensees, it does not impart the power to discipline unlicensed practice. If the board learns of unlicensed practice, it is limited to filing a court suit to halt the practice or requesting that the state’s attorney general charge the offender.

Faced with these limitations, the board chose a different course of action, issuing cease-and-desist letters to non-dentists who provided teeth-whitening that informed the recipients they were criminally practicing dentistry without a license. Letters were also sent to shopping malls where many of the teeth-whitening services were located, in an effort to keep mall operators from renting to the services. Anecdotal evidence indicates that the board’s efforts were successful in curtailing the practice.

Then, in June 2010, the Federal Trade Commission entered the picture by issuing an administrative complaint against the dental board for improperly excluding the unlicensed teeth-whiteners from the market. The complaint was eventually substantiated by an agency ruling that the board had violated the FTC Act and that the board was prohibited from issuing any further cease-and-desist letters.

The court of appeals agreed that the actions of the board would cause “significant anticompetitive harms” to consumers. “It is not difficult to understand,” the judge wrote, “that forcing low-cost teeth-whitening providers from the market has a tendency to increase a consumer’s price for that service.” 

In its appeal to the Fourth Circuit, the board made three primary arguments: First, that it is exempt from antitrust laws because it is a state agency; second, that it did not engage in “concerted action,” the wording used to describe collusion between competitors in relevant federal law; and third, that it did not, in actuality, manage to constrain any trade, in violation of the law.

The appeals court disagreed. The FTC had determined that the board, comprised as it was of private members elected by the practitioners it regulates, must be considered a private actor instead of a state entity, and would only be exempt if its actions were sufficiently supervised by the state. The Fourth Circuit court, citing Supreme Court doctrine, echoed this reasoning, noting that the offending cease-and-desist letters were sent without state oversight.

Referring to the board’s claim that its members were not capable of collusion, the court again upheld the reasoning of the Commission, noting that the individual members of the board, as active dental practitioners, were at least potential competitors who had a financial interest in the exclusion of non-licensees from performing teeth-whitening.