The Federal Trade Commission has reason to smile after an appellate win in a case involving an attempt by dentists in North Carolina to corner the market on teeth whitening services. It's the agency's second recent victory in a case involving anticompetitive conduct by state actors.
The U.S. Court of Appeals for the Fourth Circuit on May 31 upheld an FTC order that the North Carolina Dental Board wrongly stifled competition by attempting to prevent non-dentists from offering lower-cost teeth whitening services, the FTC announced today.
The decision comes on the heels of a unanimous win before the U.S. Supreme Court earlier this year in FTC v. Phoebe Putney, a hospital merger case that also a involved a government entity claiming to be exempt from antitrust scrutiny.
“We are pleased that the Fourth Circuit agreed that a state regulatory board dominated by self-interested private actors cannot shield its anticompetitive conduct from antitrust review using the state action doctrine,” FTC chairwoman Edith Ramirez said in a statement. “This decision…recognizes that exemptions to the antitrust laws are to be applied narrowly and that consumers are best off when there is vigorous competition.”
The case involves teeth whitening—applying peroxide to the teeth via a gel or strip, which triggers a chemical reaction that results in whiter teeth. In the 1990s, dentists in North Carolina began offering teeth whitening, and in about 2003, non-dentists began doing so as well, but usually at a much lower cost.
State dentists complained to the North Carolina Dental Board, which is comprised of six dentists, one hygienist and one consumer advocate who are elected by their peers. Under North Carolina law, it is unlawful to practice dentistry in the state without a license from the board.
The board subsequently issued at least 47 cease-and-desist letters to the non-dentists and sent letters to mall operators asking them not to lease kiosk space to non-dentist teeth whitening providers.
“In sum, the Board successfully expelled non-dentist providers from the North Carolina teeth-whitening market,” wrote Judge Dennis Shedd, who was joined by James Wynn Jr.. Judge Barbara Milano Keenan wrote a separate concurring opinion.
In 2010, the FTC issued an administrative complaint against the board, charging it with violating Section 5 of the FTC Act. In a 2011 decision and order, the FTC found that the board's actions were illegal and led to higher prices and reduced choices for consumers.
On appeal, the board argued that it was shielded from federal antitrust laws under the state action doctrine, which exempts some conduct by states from antitrust oversight. The FTC, however, countered that the board was a private party and was not actively supervised by the state.
The Fourth Circuit panel agreed. “At the end of the day, this case is about a state board run by private actors in the marketplace taking action outside of the procedures mandated by state law to expel a competitor from the market,” Shedd wrote.
The court also found that the board’s “behavior was likely to cause significant anticompetitive harms… It is not difficult to understand that forcing low-cost teeth-whitening providers from the market has a tendency to increase a consumer’s price for that service.”
Noel Lee Allen of Allen, Pinnix & Nichols argued the case for the board. Imad Dean Abyad argued for the FTC.
The case attracted significant amicus interest, with 24 groups including the American Medical Association and the American Dental Association supporting the board. The American Antitrust Institute filed a brief in support of the FTC.