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

United States Court of Appeals, Fourth Circuit

May 31, 2013

THE NORTH CAROLINA STATE BOARD OF DENTAL EXAMINERS, Petitioner,
v.
FEDERAL TRADE COMMISSION, Respondent. AMERICAN DENTAL ASSOCIATION; AMERICAN OSTEOPATHIC ASSOCIATION; AMERICAN VETERINARY MEDICAL ASSOCIATION; AMERICAN ACADEMY OF PEDIATRIC DENTISTRY; AMERICAN ACADEMY OF PERIODONTOLOGY; AMERICAN ASSOCIATION OF ORTHODONTISTS; AMERICAN ASSOCIATION OF DENTAL BOARDS; FEDERATION OF STATE MEDICAL BOARDS; AMERICAN MEDICAL ASSOCIATION; NORTH CAROLINA MEDICAL SOCIETY; SOUTH CAROLINA MEDICAL ASSOCIATION; MEDICAL SOCIETY OF VIRGINIA; WEST VIRGINIA STATE MEDICAL ASSOCIATION; NATIONAL ASSOCIATION OF BOARDS OF PHARMACY; NORTH CAROLINA BOARD OF PHARMACY; THE FEDERATION OF STATE BOARDS OF PHYSICAL THERAPY; THE FEDERATION OF ASSOCIATIONS OF REGULATORY BOARDS; THE ASSOCATION OF SOCIAL WORK BOARDS; THE AMERICAN ASSOCIATION OF VETERINARY STATE BOARDS; THE FEDERATION OF CHIROPRACTIC LICENSING BOARDS; THE FEDERATION OF STATE MASSAGE THERAPY BOARDS; INTERNATIONAL CONFERENCE OF FUNERAL SERVICE EXAMINING BOARDS, INCORPORATED; THE NATIONAL ASSOCIATION OF LONG TERM CARE ADMINISTRATOR BOARDS; THE NATIONAL BOARD FOR CERTIFICATION IN OCCUPATIONAL THERAPY, Amici Supporting Petitioner, AMERICAN ANTITRUST INSTITUTE, Amicus Supporting Respondent.

Argued: December 5, 2012

On Petition for Review of an Order of the Federal Trade Commission. (No. 9343)

ARGUED:

Noel Lee Allen, ALLEN, PINNIX & NICHOLS, P.A., Raleigh, North Carolina, for Petitioner.

Imad Dean Abyad, FEDERAL TRADE COMMISSION, Washington, D.C., for Respondent.

ON BRIEF:

M. Jackson Nichols, Catherine E. Lee, Nathan E. Standley, Brenner A. Allen, ALLEN, PINNIX & NICHOLS, P.A., Raleigh, North Carolina, for Petitioner.

Richard A. Feinstein, Director, Richard B. Dagen, William L. Lanning, Willard K. Tom, General Counsel, John F. Daly, Deputy General Counsel for Litigation, FEDERAL TRADE COMMISSION, Washington, D.C., for Respondent. Jack R. Bierig, Dale E. Thomas, SIDLEY AUSTIN LLP, Chicago, Illinois, for American Dental Association, American Osteopathic Association, American Veterinary Medical Association, American Academy of Pediatric Dentistry, American Academy of Periodontology, American Association of Orthodontists, American Association of Dental Boards, and Federation of State Medical Boards, Amici Supporting Petitioner. Leonard A. Nelson, AMERICAN MEDICAL ASSOCIATION, Chicago, Illinois; Stephen W. Keene, NORTH CAROLINA MEDICAL SOCIETY, Raleigh, North Carolina; J. Mitchell Armbruster, SMITH, ANDERSON, BLOUNT, DORSETT, MITCHELL & JERNIGAN, L.L.P., Raleigh, North Carolina, for The American Medical Association and the Medical Associations for the States of North Carolina, South Carolina, Virginia, and West Virginia, Amici Supporting Petitioner. Matthew W. Sawchak, Stephen D. Feldman, ELLIS & WINTERS LLP, Raleigh, North Carolina, for The National Association of Boards of Pharmacy and The North Carolina Board of Pharmacy, Amici Supporting Petitioner. Lee K. Van Voorhis, Jennifer A. Semko, Jeremy W. Cline, BAKER & MCKENZIE, LLP, Washington, D.C., for The Federation of State Boards of Physical Therapy, The Federation of Associations of Regulatory Boards, The Association of Social Work Boards, The American Association of Veterinary State Boards, The Federation of Chiropractic Licensing Boards, The Federation of State Massage Therapy Boards, International Conference of Funeral Service Examining Boards, Incorporated, The National Association of Long Term Care Administrator Boards, and The National Board for Certification in Occupational Therapy, Amici Supporting Petitioner. Richard M. Brunell, Director of Legal Advocacy, AMERICAN ANTITRUST INSTITUTE, Washington, D.C.; Peter C. Carstensen, UNIVERSITY OF WISCONSIN LAW SCHOOL, Madison, Wisconsin; K. Craig Wildfang, Ryan W. Marth, Scott M. Kranz, ROBINS, KAPLAN, MILLER & CIRESI L.L.P., Minneapolis, Minnesota, for American Antitrust Institute, Amicus Supporting Respondent.

Before SHEDD, KEENAN, and WYNN, Circuit Judges.

SHEDD, Circuit Judge:

The North Carolina State Board of Dental Examiners (the Board) petitions for review of the Federal Trade Commission (FTC) order finding that the Board violated the FTC Act, 15 U.S.C. § 45, by engaging in unfair competition in the market for teeth-whitening services in North Carolina. For the following reasons, we deny the petition.

I.

The Board is a state agency, N.C. Gen. Stat. § 90-48, created because the "practice of dentistry" in North Carolina affects "the public health, safety and welfare, " N.C. Gen. Stat. § 90-22(1)(a). The eight-member Board is comprised of six licensed dentists, one licensed dental hygienist, and one consumer member. N.C. Gen. Stat. § 90-22(b). Dentists elect the six dental members, and dental hygienists elect the hygienist member. Id. § 90-22(c). If an election ends in a tie, the candidates are allowed to describe their positions on issues that will come before the Board before a revote is held. The Governor appoints the consumer member. The Board is funded by fees paid by licensed dentists and dental hygienists in North Carolina. Board members—other than the consumer member—are required to maintain an active dentistry practice while serving, and during the relevant time frame, several Board members provided teeth-whitening services.

North Carolina's Dental Practice Act provides that it is unlawful for an individual to practice dentistry in North Carolina without a license from the Board. See N.C. Gen. Stat. § 90-29(a). Under the Dental Practice Act, a person "shall be deemed to be practicing dentistry" if that person, inter alia, "[r]emoves stains, accretions or deposits from the human teeth." N.C. Gen. Stat. § 90-29(b)(2). The Board has the "power" to (1) refuse to issue a license to practice dentistry; (2) refuse to renew a license; (3) revoke or suspend a license; or (4) take other disciplinary measures "against a licensee as it deems fit and proper." N.C. Gen. Stat. § 90-41. If the Board suspects an individual of engaging in the unlicensed practice of dentistry, it may bring an action to enjoin the practice in North Carolina Superior Court or may refer the matter to the District Attorney for criminal prosecution. See N.C. Gen. Stat. § 90-40.1. This power is hardly unique, however, because such actions may also be maintained by the "Attorney General for the State of North Carolina, the district attorney of any of the superior courts, " or "any resident citizen." Id. Moreover, the Board does not have the authority to discipline unlicensed individuals or to order non-dentists to stop violating the Dental Practice Act.

This case involves the market for teeth-whitening services in North Carolina. Teeth-whitening is a popular cosmetic dental procedure that is available in North Carolina, as in most states, in several forms, including as an in-office dental treatment, as dentist-provided take-home kits, as over-the-counter products, and as services provided by non-dentists at salons, mall kiosks, and other locations. Each of these teeth-whitening services involves applying peroxide to the teeth by means of a gel or strip, which triggers a chemical reaction that results in whiter teeth. The services differ, however, in the immediacy of the results, the ease of use, the necessity of repeat applications, the need for technical support, and price. Not surprisingly, in-office dentist whitening procedures are fast, effective, and usually do not require repeated applications, but they are also the "most costly" offering. (J.A. 146). In contrast, over-the-counter whitening products typically contain lower concentrations of peroxide and may require multiple applications to achieve results, but they cost far less.

Beginning in the 1990s, dentists started providing whitening services throughout North Carolina. In about 2003, non-dentists also started offering teeth-whitening services, often at a significantly lower price than dentists. Shortly thereafter, dentists began complaining to the Board about the non-dentists' provision of these services.

Relevant here, after receiving complaints from dentists, the Board opened an investigation into teeth-whitening services performed by non-dentists. A case officer (a dentist board member) spearheaded the investigation, leading an investigatory panel consisting of the Board's Deputy Operations Officer, an Investigator, and on occasion the Board's legal counsel. Although permitted to do so, neither the consumer member nor the hygienist member participated in any of the teeth-whitening investigations. During meetings, the Board discussed the increasing number of complaints regarding non-dentist teeth-whitening services and indicated to practicing dentists that the Board was attempting to shut down these non-dentist providers.

As a result of the investigations, the Board issued at least 47 cease-and-desist letters to 29 non-dentist teeth-whitening providers. The letters were issued on official letterhead and requested that the target cease and desist "all activity constituting the practice of dentistry." (J.A. 159). Several letters indicated that the sale or use of teeth-whitening products by a non-dentist is a misdemeanor. These letters effectively caused non-dentists to stop providing teeth-whitening services in North Carolina and also caused manufacturers and distributors of teeth-whitening products used by these non-dentist providers to exit or hold off entering North Carolina. The Board also sent letters to mall operators in an effort to stop malls from leasing kiosk space to non-dentist teeth-whitening providers; additionally, the Board contacted the North Carolina Board of Cosmetic Art Examiners to request that the Cosmetic Board inform its members and licensees to refrain from providing teeth-whitening services.

In sum, the Board successfully expelled non-dentist providers from the North Carolina teeth-whitening market. On June 17, 2010, the Federal Trade Commission issued an administrative complaint against the Board, charging it with violating 15 U.S.C. § 45, the FTC Act, by excluding non-dentist teeth whiteners from the market. The Board moved to dismiss the complaint, arguing that the FTC lacked jurisdiction over it and, alternatively, that it was exempt from the federal antitrust laws under the "state action" doctrine. An Administrative Law Judge (ALJ) denied the motion, and the FTC affirmed. Interlocutory Order In re North Carolina State Bd. of Dental Exam'rs, 151 F.T.C. 607, 2011 WL 3568990 (FTC February 3, 2011) (Interlocutory Order). In response, the Board filed a federal declaratory action, raising the same grounds and requesting that a federal court stop the administrative proceeding against it. The district court dismissed that action as an improper attempt to enjoin ongoing administrative procedure.[1] North Carolina State Bd. of Dental Examiners v. FTC, 768 F.Supp.2d 818 (E.D. N.C. 2011).

The ALJ then held a merits trial and issued an opinion finding that the Board violated the FTC Act. On appeal, the FTC—applying a de novo standard of review—affirmed and entered a final order against the Board that included a cease-and-desist order enjoining the Board from, inter alia, continuing to unilaterally issue extra-judicial orders to teeth-whitening providers in North Carolina. In re North Carolina State Bd. of Dental Exam'rs, 2011-2 Trade Cases P 77705, 2011 WL 6229615, at *2-5 (FTC December 7, 2011) (Final Order).

The Board petitions for review of the FTC's final order, raising three arguments: that it is exempt from the antitrust laws under the state action doctrine; that it did not engage in concerted action under ยง 1 of the Sherman Act; and that its activities did ...


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