After North Carolina Dental Examiners v. FTC (2015), how must Idaho actively supervise its occupational licensing boards to keep them shielded from federal antitrust liability under the State Action Doctrine?
Subject
How Idaho must actively supervise the decisions of state boards and commissions controlled by market participants in order to preserve their immunity from federal antitrust liability under the State Action Doctrine, in light of North Carolina State Board of Dental Examiners v. FTC (2015), and what legislative steps are needed.
Currency note
This opinion was issued in 2016. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Plain-English summary
For decades, Idaho's occupational licensing boards (medical, dental, real estate, contractors, cosmetology, and so on) operated under a working assumption that their disciplinary and rulemaking decisions were shielded from federal antitrust suits, because they were creatures of the state. The U.S. Supreme Court's 2015 decision in North Carolina State Board of Dental Examiners v. FTC, 135 S. Ct. 1101, broke that assumption.
In NC Dental, the North Carolina dental board, made up mostly of practicing dentists, sent cease-and-desist letters telling non-dentists to stop offering teeth-whitening services. The FTC sued for antitrust violations. The state board argued it was immune under the Parker v. Brown "state action doctrine." The Supreme Court disagreed: a state agency controlled by active market participants must show both (1) a clearly articulated state policy displacing competition and (2) active supervision by a non-market-participant state official before its anticompetitive conduct gets antitrust immunity.
AG Wasden's 2016 opinion translated that holding into practical guidance for the Idaho Legislature. The key questions:
Which Idaho boards are "controlled by market participants"? Per FTC guidance, a market participant is anyone who is licensed by the board, or who provides a service the board regulates. A doctor on a medical board is a market participant; a shampooer on a cosmetology board that regulates shampooers is a market participant. Control does not require a numerical majority. If active market participants effectively decide outcomes through veto power, tradition, or practice, the board is "controlled" by them and triggers the active supervision requirement.
What does "active supervision" require? NC Dental set three benchmarks:
1. The supervisor (a legislative board or other disinterested state official) must review the substance of the anticompetitive decision, not just the procedure.
2. The supervisor must have power to veto or modify decisions to align with the state's clearly articulated policy.
3. The supervisor cannot be a market participant.
Active supervision lies between rubber-stamping (not enough) and micromanaging daily operations (more than required). The state's review mechanism must give a realistic assurance that the conduct promotes state policy, not private self-interest.
Where did Idaho stand in 2016? AG Wasden flagged a gap. The Department of Self-Governing Agencies and the Bureau of Occupational Licensing housed roughly 30 market-participant boards, but neither structure included an independent state official with authority to substantively review and veto board decisions. The only Idaho board the AG identified as already meeting active supervision was the Idaho State Bar, because the Idaho Supreme Court approves Bar rules and adjudicates disciplinary recommendations under Idaho Code § 3-408.
What did the AG recommend? Three options for the Legislature, not mutually exclusive:
- Reduce market-participant control. Add public (non-market) members so professionals do not control the board. Reductions in market-participant seats can also work. Trade-off: keeping enough subject-area expertise to make competent decisions.
- Layer in an independent reviewer. Make board decisions advisory until a non-market-participant state official (an agency administrator, the Attorney General, or another disinterested officer) reviews the evidentiary record, evaluates the substantive merits against legislative policy, and issues a written approval, modification, or rejection.
- Audit the necessity of boards and commissions. Some may not need to exist at all once the antitrust costs are factored in.
The opinion also noted situations that should not trigger antitrust concern. Statutes enacted by the Legislature itself, and rules approved annually by the Legislature, are sovereign action and remain immune. Strict ministerial enforcement (denying a license to an applicant who failed to submit required materials) is not "anticompetitive conduct" requiring active supervision. Other antitrust doctrines (Noerr-Pennington petitioning immunity, the rule of reason for restraints of trade) provide additional defenses regardless of state action immunity.
The bottom line for Idaho in 2016: most occupational licensing boards were potentially exposed to antitrust suits over their disciplinary actions, scope-of-practice rulings, and unauthorized-practice cease-and-desist letters. The Legislature had to act to restructure board composition or to install an independent reviewer if it wanted to keep the Parker shield in place.
Common questions
Q: Why does antitrust law care about a state licensing board?
Because licensing boards regulate who can compete in a market. Telling someone they cannot offer teeth whitening, or cannot sell certain services, restrains trade. Restraint of trade is the core of antitrust law. The Parker doctrine carves out an exception when the state itself acts as sovereign, but the Supreme Court has been narrowing the carve-out for boards run by the people they regulate.
Q: What is "Parker immunity"?
The doctrine, named for Parker v. Brown, 317 U.S. 341 (1943), that federal antitrust laws do not reach anticompetitive conduct by a state acting in its sovereign capacity. The doctrine recognizes that states can choose to limit competition for legitimate public purposes (like requiring a medical license).
Q: Does the Idaho State Bar have the same problem?
The opinion treated the State Bar as already meeting the active supervision requirement, because the Idaho Supreme Court has rulemaking-approval authority and disciplinary judgment authority over Bar matters under Idaho Code § 3-408. The Court's actions are sovereign action by definition.
Q: What if an Idaho board has a 4-3 non-market-participant majority?
The opinion warned that lacking a market-participant majority is not by itself dispositive. If active market participants control outcomes through veto power, custom, or the practical deference of public members to expert members, the board is still "controlled" by market participants for state-action purposes. The analysis is fact-specific.
Q: Did the Idaho Legislature ever fix this?
The opinion was a recommendation. Whether and how the Legislature responded is a separate matter that this page does not track. Anyone advising a board today should check whether subsequent legislation, gubernatorial executive orders, or board reorganizations created an active-supervision regime.
Background and statutory framework
The federal antitrust laws (Sherman Act, Clayton Act, FTC Act) are designed to keep competition unrestrained. Under Parker and its successors, state action in the state's sovereign capacity is immune; state-created subordinate entities are immune only if they act pursuant to a clearly articulated state policy to displace competition. When the subordinate entity is controlled by market participants, the entity must additionally be actively supervised by the state.
The "clear articulation" test, developed in Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985), and S. Motor Carriers Rate Conference v. U.S., 471 U.S. 48 (1985), and refined in FTC v. Phoebe Putney Health System, Inc., 133 S. Ct. 1003 (2013), is satisfied when the displacement of competition is "the inherent, logical, or ordinary result of the exercise of authority delegated by the state legislature."
The "active supervision" test, developed in Patrick v. Burget, 486 U.S. 94 (1988), and FTC v. Ticor Title Ins. Co., 504 U.S. 621 (1992), and crystallized in NC Dental, 135 S. Ct. 1101 (2015), requires a substantive review mechanism that gives realistic assurance the conduct promotes state policy.
Idaho's Competition Act (Idaho Code § 48-102 et seq.) is to be construed in harmony with federal antitrust law, and conduct exempt under federal antitrust laws is also exempt under Idaho's Act, so the analysis in this opinion applies equally to state-law antitrust exposure.
The opinion also pointed to the Snake River Valley Elec. Ass'n v. PacifiCorp litigation as a precedent for legislative action curing an active-supervision gap. After the Ninth Circuit found Idaho's electric-utility regulation lacked active supervision (238 F.3d 1189 (2001)), the Legislature responded with House Bill No. 1 in a 2000 Extraordinary Session (2001 Idaho Sess. Laws 1), and the Ninth Circuit later confirmed the cure (357 F.3d 1042 (2004)).
Citations
Idaho Code:
- § 3-408
- § 48-102(1); § 48-102(3); § 48-107(1)(a)
- § 67-2601 et seq.; § 67-2602(1)
Session Laws:
- 2001 Idaho Sess. Laws 1
U.S. Supreme Court Cases:
- North Carolina Dental Exam'rs v. F.T.C., 135 S. Ct. 1101, 191 L.Ed.2d 35 (2015)
- Parker v. Brown, 317 U.S. 341 (1943)
- Hoover v. Ronwin, 466 U.S. 558 (1984)
- City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365 (1991)
- Cal. Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980)
- Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985)
- S. Motor Carriers Rate Conference, Inc. v. U.S., 471 U.S. 48 (1985)
- F.T.C. v. Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003 (2013)
- F.T.C. v. Ticor Title Ins. Co., 504 U.S. 621 (1992)
- Patrick v. Burget, 486 U.S. 94 (1988)
- Cal. Dental Ass'n v. FTC, 526 U.S. 756 (1999)
- Prof'l Real Estate Investors v. Columbia Pictures Indus., 508 U.S. 49 (1993)
- Standard Oil Co. of N.J. v. U.S., 221 U.S. 1 (1911)
Other Federal Cases:
- Mun. Utilities Bd. v. Ala. Power Co., 934 F.2d 1493 (11th Cir. 1991)
- Saint Alphonsus Med. Ctr.-Nampa, Inc. v. St. Luke's Health System, Ltd., 778 F.3d 775 (9th Cir. 2015)
- Snake River Valley Elec. Ass'n v. PacifiCorp, 238 F.3d 1189 (9th Cir. 2001)
- Snake River Valley Elec. Ass'n v. PacifiCorp, 357 F.3d 1042 (9th Cir. 2004)
Other Authorities:
- F.T.C. Staff Guidance on Active Supervision of State Regulatory Boards Controlled by Market Participants (October 2015)
Source
- Landing page: https://www.ag.idaho.gov/office-resources/opinions/
- Original PDF: https://ag.idaho.gov/content/uploads/2018/04/Opinion16-1.pdf
Original opinion text
Best-effort transcription from a scanned PDF. Minor errors may remain, and the linked PDF is authoritative.
STATE OF IDAHO
OFFICE OF THE ATTORNEY GENERAL
LAWRENCE G. WASDEN
ATTORNEY GENERAL OPINION NO. 16-01
TO: The Honorable Lee Heider The Honorable Fred Wood
Idaho State Senator Idaho State Representative
Statehouse Statehouse
VIA HAND DELIVERY VIA HAND DELIVERY
Per Request for Attorney General's Opinion
You have asked this office for an answer to the following two questions:
QUESTIONS PRESENTED
-
Based upon the Supreme Court's decision in North Carolina State Board
of Dental Examiners v. F.T.C., __ U.S. __, 135 S.Ct. 1101 (2015), how
must the State actively supervise Idaho's boards and commissions to
preserve their immunity from antitrust liability under the State Action
Doctrine? -
What steps should the Legislature take to assist Idaho's boards and
commissions in order to protect them from antitrust liability and litigation?
CONCLUSION
-
Under North Carolina Dental Exam'rs v. F.T.C., __ U.S. __, 135 S. Ct. 1101,
191 L.Ed.2d 35 (2015), the actions of certain of Idaho's boards and commissions must be
overseen by a State official who is not a participant of the market the board or commission
is regulating. The State official must have the authority, substantively, to review board and
commission actions and veto or modify them when necessary to accord with State policy. -
It is recommended that the Legislature inquire as to the membership and
control of the State's boards and commissions and determine which of those entities are
"controlled" by "participants" of the market the specific entity regulates. For such "market-
participant controlled" entities, the Legislature should consider providing substantive,
independent State oversight of the entities' regulatory actions.
ANALYSIS
I.
BACKGROUND TO UNDERSTANDING APPLICATION OF IMMUNITIES UNDER
FEDERAL AND STATE ANTITRUST LAW
Recently, in North Carolina Dental, the U.S. Supreme Court articulated a new
standard for determining whether certain state boards and commissions are entitled to
immunity from antitrust actions under what is called the "State Action Doctrine." This
immunity is important because it shields these boards and commissions from adverse
judgments, and the expense and burden of antitrust litigation. Where the State Action
Doctrine applies, it deters lawsuits from being filed. Even where a suit is filed, however, the
state can promptly move to dismiss it, often before expensive and time-consuming
discovery (the norm in antitrust litigation) commences. This saves the state, its boards or
commissions, and their members the burden of defending such lawsuits. The State Action
Doctrine is important because it allows state boards, commissions, their members, and
employees to exercise their discretion over their required duties under the law without the
interference of the threat of antitrust litigation.
Before North Carolina Dental, many understood that state licensing boards were
afforded a broader or easier to obtain protection from antitrust suits under the State Action
Doctrine's immunity. North Carolina Dental narrowed that protection by looking specifically
at the composition of the boards with market participants and the actions of those boards to
protect their respective markets. This means that Idaho will need to examine the
composition, statutory framework and operations of its licensing boards and commissions to
determine whether their activities can withstand scrutiny under North Carolina Dental.
A. Overview of Antitrust Law
The federal Sherman, Clayton, and Federal Trade Commission Acts operate in
concert to outlaw monopolies and other practices resulting in the unreasonable restraints of
trade. They form the core of federal antitrust law. The purpose of these antitrust laws, and
Idaho's Competition Act, is to promote competition in the market place. The premise for
these laws is that they protect consumers from the harmful effects of monopolies and
various unreasonable restraints in trade, such as price fixing, promote robust innovation,
and ensure the best possible consumer choice and service. The antitrust laws work to keep
the free-enterprise system functioning properly. As the Legislature has stated in the Idaho
Competition Act:
The Idaho legislature finds that fair competition is fundamental to the free market
system. The unrestrained interaction of competitive forces will yield the best
allocation of Idaho's economic resources, the lowest prices, the highest quality,
and the greatest material progress, while at the same time providing an
environment conducive to the preservation of our democratic and social
institutions.
Idaho Code § 48-102(1).
B. State Agencies Are Subject to Antitrust Law
Under principles of federalism, "States possess a significant measure of sovereignty
...." North Carolina Dental, 135 S. Ct. at 1110 (citations omitted). In enacting the antitrust
laws, Congress has not intended to preclude states from limiting or restricting competition in
order to promote other policies of import to the state. Thus, the Supreme Court has ruled
that the federal antitrust laws do not reach anticompetitive conduct engaged in by a state
that is acting in its sovereign capacity. Parker v. Brown, 317 U.S. 341, 351-52, 63 S. Ct.
307, 313-14, 87 L. Ed. 315 (1943). The effect of this is that the state may "impose
restrictions on occupations, confer exclusive or shared rights to dominate a market, or
otherwise limit competition to achieve public objectives." North Carolina Dental, 135 S. Ct.
at 1109.
But this principle of federalism does not automatically confer immunity from
antitrust law on every state agency or commission and its members for all of its actions and
decisions. How and when this immunity attaches, then, is the result of a number of U.S.
Supreme Court cases, and these decisions have come to formulate what is known as the
"State Action Doctrine" or "State Action Immunity."
C. State Action Immunity
In Parker v. Brown, the U.S. Supreme Court first recognized antitrust immunity for
anticompetitive conduct by states, so long as the state was acting in its sovereign capacity.
As the North Carolina Dental Court states, while
[t]he Sherman Act ... serves to promote robust competition[,] .... [t]he
States ... need not adhere in all contexts to a model of unfettered
competition. ... [T]hey [the States] impose restrictions on occupations,
confer exclusive or shared rights to dominate a market, or otherwise limit
competition to achieve public objectives. If every ... state law or policy were
required to conform to ... the Sherman Act, thus promoting competition at
the expense of other values a State may deem fundamental, federal antitrust
law would impose an impermissible burden on the States' power to regulate.
[Citations omitted.]
For these reasons, ... Parker v. Brown interpreted the antitrust laws
to confer immunity on anticompetitive conduct by the States when acting in
their sovereign capacity. [Citation omitted.] [Parker] recognized Congress'
purpose to respect the federal balance and to "embody in the Sherman Act
the federalism principle that the States possess a significant measure of
sovereignty under our Constitution." [Citation omitted.]
135 S. Ct. at 1109-10 (citations omitted).
The State Action Doctrine or State Action Immunity was first known as "Parker
Immunity." Since Parker, the Supreme Court has extended and fleshed out the application
of this immunity. There are three general groups or entities that qualify (some under
specific enumerated conditions) for State Action Immunity: (1) the state acting as
sovereign; (2) subordinate state-created governmental entities and municipalities; and (3)
subordinate state-created governmental entities in which private parties serve on the
entity's board or commission.
- Actions by the State as a Sovereign
Actions taken directly by the state in its sovereign capacity (i.e., the legislative,
judicial, or executive branch) are automatically exempted from antitrust liability. Hoover v.
Ronwin, 466 U.S. 558, 574, 579-80, 104 S. Ct. 1989, 1998, 2001, 80 L.Ed.2d 590 (1984).
The sovereign's State Action Immunity is broad and complete. It is not affected by whether
the state's action in question was illegal or the result of bribery. City of Columbia v. Omni
Outdoor Advertising, Inc. 499 U.S. 365, 378, 111 S. Ct. 1344, 1353, 113 L.Ed.2d 382
(1991). Nor will this antitrust immunity be defeated because the state officials have
conspired with private parties. Id. at 374. With the possible exception of instances where
the state itself is acting as a market participant, any action of the state in its sovereign
capacity qualifies for State Action Immunity and is per se exempt from the scope of the
antitrust laws.
- Actions by Subordinate Government Entities and Municipalities Without
Private Participants on the Entities' Board or Commission
"State agencies are not simply by their governmental character sovereign actors for
purposes of state-action immunity." North Carolina Dental, 135 S. Ct. at 1111. Subordinate
state governmental entities and municipalities have State Action Immunity, but only so long
as they are acting pursuant to a "clearly articulated and affirmatively expressed state policy
to displace competition," the details of which are discussed below. If the subordinate state
governmental entity includes private parties on the entity's board or commission, however,
then there is an additional requirement to be satisfied before immunity will attach, discussed
next.
- Actions by Subordinate Government Entities and Municipalities With Private
Participants on the Entities' Board or Commission
A subordinate state government entity that includes private parties serving on its
board or commission can qualify for State Action Immunity only if the anticompetitive
conduct at issue satisfies two separate tests. First, as is true for subordinate state
governmental entities in general, the action must be pursuant to a "clearly articulated and
affirmatively expressed state policy" to displace competition. The second requirement is
that the action at issue must also be "actively supervised by the State itself." Cal. Retail
Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 105, 100 S. Ct. 937, 940, 63
L.Ed.2d 233 (1980). These two tests are discussed in detail below.
Prior to North Carolina Dental, many assumed that state licensing boards and
commissions fit within the second group of subordinate state entities and that to obtain
State Action Immunity all the regulatory board or commission needed to do was establish
that its contested action was pursuant to the "clearly articulated and affirmatively expressed
state policy" test mentioned above. North Carolina Dental invalidates that assumption, at
least with respect to those entities where the board or commission is "controlled" by market
participants.
a. Market-Participant-Controlled-State Agencies
It is first necessary to define a market-participant-controlled-state agency. According
to the Federal Trade Commission (F.T.C.), a market participant is a person who (i) is
licensed by the board or commission engaged in the alleged anticompetitive conduct or
who (ii) provides any service that is subject to the regulatory authority of the board. Thus,
a doctor on a medical board would be a market participant. A shampooer on a cosmetology
board that not only regulates cosmetologists but shampooers would be a market participant,
too. F.T.C. Staff Guidance on Active Supervision of State Regulatory Boards Controlled by
Market Participants, p. 7 (October 2015).
The F.T.C. has stated that a person who "temporarily suspends" his or her active
participation in an occupation "for the purpose of serving on a board or commission that
regulates his or her former (and intended future) occupation" will still be considered a
market participant. Id.
If a state board or commission has market participants serving on them, then the
inquiry focuses on whether these persons "control" the regulating entity. The F.T.C. has
also discussed what constitutes "control" of boards or commissions by market participants:
Active market participants need not constitute a numerical majority
of the members of a state regulatory board in order to trigger the
requirement of active supervision. A decision that is controlled, either as a
matter of law, procedure, or fact, by active participants in the regulated
market (e.g., through veto power, tradition, or practice) must be actively
supervised to be eligible for the state action defense.
F.T.C. Staff Guidance on Active Supervision of State Regulatory Boards Controlled by
Market Participants, p. 8 (October 2015).
The sum of this is that those entities in which market participants constitute a
majority of the board or commission will meet the test of an entity controlled by market
participants. The mere lack of a majority of market participants on a board or commission
will not be definitive of whether the entity is controlled by market participants. Rather, there
will need to be additional scrutiny, on a fact-specific basis, of whether the entity is
nonetheless controlled by market participants through veto power, tradition, or practice.
And, it is fair to say that there will be instances in which a board or commission is deemed
controlled by market participants even when the majority of the board or commission is
made up of non-market participants.
State entities that are "controlled" by "market participants," then, will need to satisfy
the two tests mentioned above and discussed in detail below to obtain State Action
Immunity. It is to these two tests we now turn.
b. The Clear Articulation Test
The clear articulation test requires the anticompetitive action under review to be a
foreseeable result of the action authorized by the state. An express statement that the state
intends the action to have anticompetitive effects is ideal, but not necessary. Generalized
grants of power, on the other hand, are insufficient to express a state policy to displace
competition.
With respect to the clear articulation test, if the statutory provision or rule plainly
shows that the state contemplated the sort of activity which is challenged, the "clear
articulation" requirement is satisfied. Town of Hallie v. City of Eau Claire, 471 U.S. 34, 44,
105 S. Ct. 1713, 1719, 85 L.Ed.2d 24 (1985). In S. Motor Carriers Rate Conference, Inc. v.
U.S., 471 U.S. 48, 64-65, 105 S. Ct. 1721, 1730-31, 85 L.Ed.2d 36 (1985) (citations
omitted), the Court held that "a state policy that expressly permits, but does not compel,
anticompetitive behavior may be 'clearly articulated.'" Id. at 61, (footnote omitted). The
most recent Supreme Court case to address the clear articulation test is F.T.C. v. Phoebe
Putney Health Sys., Inc., __ U.S. __, 133 S. Ct. 1003, 185 L.Ed.2d 43 (2013). In that case,
the Court stated that the clear articulation requirement is satisfied "where the
displacement of competition [is] the inherent, logical, or ordinary result of the exercise of
authority delegated by the state legislature. In that scenario, the State must have
foreseen and implicitly endorsed the anticompetitive effects as consistent with its policy
goals." Id. at 1013.
As noted above, the State's clear articulation of the intent to displace competition is
not alone sufficient to trigger State Action Immunity for those regulatory licensing boards
and commissions controlled by market participants. The reason for this, according to the
U.S. Supreme Court, is that a legislature's clearly-articulated delegation of authority to such
a state regulatory entity to displace competition may be "defined at so high a level of
generality as to leave open critical questions about how and to what extent the market
should be regulated." The concern for such boards or commissions, then, is that the
delegated discretion will be used by active market participants to pursue private interests in
restraining trade, in lieu of implementing the state's policy goals. North Carolina Dental,
135 S. Ct. at 1112. Accordingly, the Supreme Court has also required that the conduct at
issue of such market-participant-controlled boards or commissions be actively supervised
by the state.
c. The Active Supervision Test
With respect to the active supervision test, in order to meet this requirement, it must
be shown that the state "exercise[s] ultimate control over the challenged anticompetitive
conduct." F.T.C. v. Ticor Title Ins. Co., 504 U.S. 621, 634, 112 S. Ct. 2169, 2177, 119
L.Ed.2d 410 (1992) quoting Patrick v. Burget, 486 U.S. 94, 101, 108 S. Ct. 1658, 1663, 100
L.Ed.2d 83 (1988). The test requires that "state officials have and exercise power to review
particular anticompetitive acts of private parties and disapprove those that fail to accord with
state policy." Id. In other words, the inquiry is "whether private parties or public authorities
made the operative decisions regarding the challenged anticompetitive conduct." Mun.
Utilities Bd. v. Ala. Power Co., 934 F.2d 1493, 1503 (11th Cir. 1991).
Active supervision does not require the state to micromanage a board or commission
or even be involved on a daily basis. On the other hand, it is clear that rubber-stamped
approval will be inadequate. Active supervision lies somewhere between these two
positions. There must be enough state involvement and oversight to make the actions of
the agency those of the state and not a hidden advancement of private interests.
The North Carolina Dental Court provided three benchmarks for active state
supervision:
(1) The supervisor (who could be a legislative board or other disinterested
state official) must review the substance of the anticompetitive decision, not merely
the procedures;
(2) The supervisor must have the power to veto or modify decisions to
accord with the clearly articulated policy of the State; and
(3) The supervisor cannot be a market participant.
See North Carolina Dental, 135 S. Ct. at 1116.
Other than these requirements, active supervision is a circumstantial determination.
The guiding principle is this: The state's review mechanism must provide a realistic
assurance that the anticompetitive conduct that has been undertaken promotes state policy
rather than private interests.
D. North Carolina Dental Should Not Cause Concern In Many Routine Situations
A few additional observations are warranted as regards to State Action Immunity.
First, if the challenged conduct is the enactment of an Idaho statute or the adoption of a
rule, both should be immune from challenge as a result of the Legislature's action of
enacting the statute at question or, annually, expressly approving the rule at issue. This
action by the Legislature is action by the sovereign and is immune from liability.
Second, if the antitrust challenge involves the literal application or interpretation of a
rule or statute, the revocation of a license due to a materially false statement about one's
qualifications in an application, for example, it is probably not necessary for there to be
active supervision of such denial or revocation. The F.T.C. Staff Guidance provides the
following example:
A state statute requires that an applicant for a chauffeur's license submit to
the regulatory board, among other things, a copy of the applicant's diploma
and a certified check for $500. An applicant fails to submit the required
materials. If for this reason the regulatory board declines to issue a
chauffeur's license to the applicant, such action would not be considered an
unreasonable restraint. In the circumstances described, the denial of a license
is a ministerial or non-discretionary act of the regulatory board.
F.T.C. Staff Guidance on Active Supervision of State Regulatory Boards Controlled by
Market Participants, p. 6 (October 2015).
Third, the fact that State Action Immunity may not apply or cover a specific state
agency or commission, or its members, does not mean that the entity will necessarily be
liable under the antitrust laws. There are other immunities that may apply. For example, in
general, a regulatory agency can initiate and prosecute a lawsuit. Such petitioning of the
court, so long as it is not a sham, is conduct protected by a separate antitrust exemption.
Prof'l Real Estate Investors v. Columbia Pictures Indus., 508 U.S. 49, 113 S. Ct. 1920, 123
L.Ed.2d 611 (1993).
Further, even where there is no applicable exemption, not all restraints of trade
violate the antitrust laws. For starters, the antitrust laws only prohibit unreasonable
restraints of trade. Standard Oil Co. of N.J. v. U.S., 221 U.S. 1, 31 S. Ct. 502, 55 L. Ed. 619
(1911). Thus, for example, a regulatory board may prohibit members of the occupation
from engaging in fraudulent business practices without creating antitrust liability; such action
is not an unreasonable restraint of trade. Indeed, it is a reasonable one. Likewise, a
regulatory board also may prohibit members of the occupation from engaging in untruthful
or deceptive advertising. Cal. Dental Ass'n v. FTC, 526 U.S. 756, 119 S. Ct. 1604, 143
L.Ed.2d 935 (1999).
II.
NECESSARY STATE LAWS AND PRACTICES TO ENSURE APPLICATION OF STATE
ACTION IMMUNITY TO ACTIONS OF MARKET-PARTICIPANT-CONTROLLED-STATE
BOARDS AND COMMISSIONS AND THEIR MEMBERS
A. Current Makeup of Idaho Boards and Commissions
Fundamentally, qualification for State Action Immunity turns on the makeup and
structure of Idaho's boards and commissions. This will be challenging, because Idaho's
boards and commissions are structured in a variety of ways. The Department of Self-
Governing Agencies has within it the Division of Building Safety, the Idaho Commission on
Hispanic Affairs, the Idaho State Historical Society, the Idaho Commission for Libraries, the
Idaho State Lottery, the State Appellate Public Defender, the Real Estate Commission and
the Division of Veterans Services. While most of these agencies do not license occupations
and are not populated by market participants, there are a few that do — health related
boards, the Real Estate Commission, and the Division of Building Safety contain boards
that are so populated.
Also within the Department of Self Governing Agencies is the statutorily-created
Bureau of Occupational Licensing. See Idaho Code § 67-2601, et seq. The Bureau is
authorized to provide "administrative or other services as provided by law," Idaho Code §
67-2602(1) to more than 30 agencies, many of which license and regulate various
professions and whose boards or commissions are populated by a controlling number of
market participants.
Where an Idaho board or commission is located, or how their members are
appointed, however, is irrelevant for purposes of State Action Immunity, because in no
instance, except the Idaho State Bar and (as noted above) the Legislature's review and
oversight over agency rulemakings, is any Idaho market-participant-controlled board or
commission at present overseen by an independent state official with the authority to
approve, veto, or modify decisions of the respective board or commission, as consistent
with state policies.
The Department of Self Governing Agencies is a department in name only; there is
presently no director to oversee the boards and commissions within the Department and
there is no state official with the authority to approve, veto or modify their decisions, again to
ensure that state policies are being upheld. For those entities located within the Bureau of
Occupational Licensing, there is, again, no statutory authority granted the Chief of the
Bureau authority to approve, veto, or modify decisions of the Bureau's respective boards or
commissions.
This present lack of active state supervision of the state's market-participant-
controlled boards and commissions is fatal to the application of State Action Immunity for
such state entities. There are a couple of ways to address this, however, should the
Legislature wish to obtain State Action Immunity for its boards and commissions. These
options are discussed below.
B. Potential Solutions for Increasing State Supervision of Market-Participant-
Controlled State Boards and Commissions
- Increase Non-Market Participant (Public) Membership on Boards
The first course of action would be to provide that for market-participant-controlled
boards and commissions there be an increase in public (non-market participant) members
serving thereon, such that the market participants do not control the board. Equally
available would be a provision decreasing the number of market participants such that there
is no longer a market participant control issue. This alternative must strike an appropriate
balance between the need for subject area expertise within the board with a check on the
ability of the board to control market access. Many no doubt share the view expressed by
Justice Breyer during oral argument in the North Carolina Dental case: "[W]hat the State
says is: We would like this group of brain surgeons to decide who can practice brain
surgery in this State. I don't want a group of bureaucrats deciding that. I would like brain
surgeons to decide that." North Carolina Dental, transcript of oral argument, Tr. p. 31 (Oct.
14, 2014). This means that care will need to be taken to preserve a balance of expertise
with a balance of active engaged non-market participant board members.
- Assign an Independent State Official the Authority to Approve, Reject, or
Modify Market-Participant-Controlled Board Decisions
The second option would be to provide that the decisions of market-participant-
controlled boards and commissions shall be subject to review by an independent state
official with the authority to approve, veto or modify their decisions, as consistent with state
policies. This could be done in a variety of ways, but the requirements would be
straightforward: for each market-participant-controlled Idaho board and commission,
decisions regarding licensees would be advisory in nature and, before becoming effectual,
must be reviewed by an independent state official with authority to approve, veto or modify
such decisions. The F.T.C. has endorsed this approach:
Suppose that, acting in its adjudicatory capacity, a regulatory board
controlled by active market participants determines that a licensee has
violated a lawful and valid standard of ethics, competency, conduct, or
performance, and for this reason, the regulatory board proposes that the
licensee's license to practice in the state be revoked or suspended. In order to
invoke the state action defense, the regulatory board would need to show
both clear articulation and active supervision.
In this context, active supervision may be provided by the
administrator who oversees the regulatory board (e.g., the secretary of
health), the state attorney general, or another state official who is not an
active market participant. The active supervision requirement of the state
action defense will be satisfied if the supervisor: (i) reviews the evidentiary
record created by the regulatory board; (ii) supplements this evidentiary
record if and as appropriate; (iii) undertakes a de novo review of the
substantive merits of the proposed disciplinary action, assessing whether
the proposed disciplinary action comports with the policies and standards
established by the state legislature; and (iv) issues a written decision that
approves, modifies, or disapproves the disciplinary action proposed by the
regulatory board.
F.T.C. Staff Guidance on Active Supervision of State Regulatory Boards Controlled by
Market Participants, p. 12 (October 2015).
- The Necessity of Boards and Commissions Should Be Evaluated
North Carolina Dental provides the Legislature with the opportunity to evaluate
the propagation of its boards and commissions to determine their necessity. This office
takes no position on any board or commission, but recognizes that with the antitrust
issues related to market participant controlled boards, it may make more legal sense to
limit such boards and commissions to only those that the Governor and Legislature find
absolutely necessary in order to carry out state policies.
CONCLUSION
North Carolina Dental has forced states to evaluate anew their various board and
commission makeup and oversight, to the degree they wish for State Action Immunity to
continue to apply to the actions and decisions of such boards and commissions.
Specifically, the case requires states to consider the makeup of those boards and
commissions that are controlled by market participants and how to actively supervise them.
Active state supervision will be satisfied when a non-market-participant state official has and
exercises power to substantively review such entities' decisions and determine whether the
action at issue effectuates the state's regulatory policies. Where the action does effectuate
state policies, the state official will need to have the authority to, and in fact, approve the
action. Where the action does not effectuate state policies, the state official will need to
have the authority, and in fact, utilize it to modify or veto such actions.
AUTHORITIES CONSIDERED
-
Idaho Code:
§ 3-408.
§ 48-102(1).
§ 48-102(3).
§ 48-107(1)(a).
§ 67-2601, et seq.
§ 67-2602(1). -
Session Laws:
2001 Idaho Sess. Laws 1. -
United States Supreme Court Cases:
Cal. Dental Ass'n v. FTC, 526 U.S. 756, 119 S. Ct. 1604, 143 L.Ed.2d 935 (1999).
Cal. Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S. Ct. 937, 63 L.Ed.2d 233 (1980).
City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 111 S. Ct. 1344, 113 L.Ed.2d 382 (1991).
F.T.C. v. Phoebe Putney Health Sys., Inc., __ U.S. , 133 S. Ct. 1003, 185 L.Ed.2d 43 (2013).
F.T.C. v. Ticor Title Ins. Co., 504 U.S. 621, 112 S. Ct. 2169, 119 L.Ed.2d 410 (1992).
Hoover v. Ronwin, 466 U.S. 558, 104 S. Ct. 1989, 80 L.Ed.2d 590 (1984).
North Carolina Dental Exam'rs v. F.T.C., __ U.S. , 135 S. Ct. 1101, 191 L.Ed.2d 35 (2015).
Parker v. Brown, 317 U.S. 341, 63 S. Ct. 307, 87 L. Ed. 315 (1943).
Patrick v. Burget, 486 U.S. 94, 108 S. Ct. 1658, 100 L.Ed.2d 83 (1988).
Prof'l Real Estate Investors v. Columbia Pictures Indus., 508 U.S. 49, 113 S. Ct. 1920, 123 L.Ed.2d 611 (1993).
S. Motor Carriers Rate Conference, Inc. v. U.S., 471 U.S. 48, 105 S. Ct. 1721, 85 L.Ed.2d 36 (1985).
Standard Oil Co. of N.J. v. U.S., 221 U.S. 1, 31 S. Ct. 502, 55 L. Ed. 619 (1911).
Town of Hallie v. City of Eau Claire, 471 U.S. 34, 105 S. Ct. 1713, 85 L.Ed.2d 24 (1985). -
Other Cases:
Mun. Utilities Bd. v. Ala. Power Co., 934 F.2d 1493 (11th Cir. 1991).
Saint Alphonsus Med. Ctr.-Nampa, Inc. v. St. Luke's Health System, Ltd., 778 F.3d 775 (9th Cir. 2015).
Snake River Valley Elec. Ass'n v. PacifiCorp, 238 F.3d 1189 (9th Cir. 2001).
Snake River Valley Elec. Ass'n v. PacifiCorp, 357 F.3d 1042 (9th Cir. 2004). -
Other Authorities:
F.T.C. Staff Guidance on Active Supervision of State Regulatory Boards Controlled by Market Participants (October 2015).
Dated this 13th day of January, 2016.
LAWRENCE G. WASDEN
Attorney General
Analysis by:
BRETT T. DELANGE
Deputy Attorney General