Antitrust Law, Licensing Boards and North Carolina Dental



Practice Areas

Timothy P. Misner and Stephen D. Feldman
Robinson Bradshaw Publication
Dec. 1, 2021

State agencies, and occupational licensing boards in particular, can be targets of antitrust allegations. When those allegations manifest themselves into federal lawsuits, state agencies usually assert the state-action doctrine as a defense. This doctrine shields conduct from federal antitrust liability when the conduct can be attributed to a state government.

The state-action doctrine finds its roots in a 1943 decision of the U.S. Supreme Court called Parker v. Brown. In Parker, the Supreme Court concluded that, because of federalism and state-sovereignty principles, the Sherman Act should not be interpreted to condemn conduct that is truly conduct of a state itself.

Decisions issued after Parker have provided guidance on the standards that control whether the doctrine applies to particular types of conduct. In 2015, the U.S. Supreme Court issued an important new decision of this type in North Carolina State Board of Dental Examiners v. Federal Trade Commission. The decision clarified the showing that a state occupational licensing board must make to enjoy the protections of the state-action doctrine.

This article looks back at North Carolina Dental and provides an overview of key opinions and agency guidance that followed.

The North Carolina Dental decision

In North Carolina Dental, the Supreme Court announced that a licensing board controlled by market participants can successfully invoke the state-action doctrine only if the board satisfies the same two-part test that a private party must satisfy to obtain the doctrine’s protections.

First, the board must show that the state legislature clearly articulated the board’s authority to engage in the allegedly anticompetitive conduct.

Second, the board must show that the conduct is actively supervised by a state official.

Even before North Carolina Dental, courts required licensing boards to show the first element, known as clear articulation. But North Carolina Dental broke new ground with its ruling that a state licensing board must also demonstrate active supervision.

As to what might constitute active supervision, North Carolina Dental provided some degree of instruction. It states that active supervision is present when a board can show four things:

  1. the supervisor’s review is substantive, not merely procedural;
  2. the supervisor has power to veto or modify decisions;
  3. there is actual review, not the mere potential for review; and
  4. the supervisor is a disinterested state official rather than an active market participant. 

North Carolina Dental also characterized the active-supervision inquiry as “flexible and context dependent.” This characterization signaled that future decisions would play an important role in defining the contours of the active-supervision requirement.

FTC Staff Guidance

In October 2015, before any further judicial decisions were issued on active supervision, the FTC issued guidance on active supervision. The guidance provides both general principles and factual examples. According to that guidance, active supervision is present in these scenarios:

The FTC’s guidance also provided fact patterns that, standing alone, would fall short of proving active supervision:

Teladoc, Inc. v. Texas Medical Board

One of the first decisions on active supervision following North Carolina Dental was issued by a federal court in Texas. In that case, the Texas Medical Board passed a regulation that required telemedicine providers to conduct a physical examination of patients prior to issuing certain prescriptions.

Teladoc sued the board, alleging a violation of the Sherman Act. In response, the board argued that its conduct was actively supervised by the state of Texas because the board’s regulations were subject to judicial review and legislative oversight.

The federal court disagreed. It held that judicial review could not constitute active supervision because Texas courts were limited to deciding only whether the rule exceeded the board’s statutory authority or complied with procedural requirements.

The federal court also concluded that the legislature’s oversight did not count as active supervision because the legislature was only permitted to vote on whether to disband the agency or not, rather than to modify or evaluate any particular rule.

In sum, because neither the legislature nor the courts could alter the board’s conduct to ensure that such conduct comported with state policy, the board could not establish active supervision.

In re Louisiana Real Estate Appraisers Board

Further guidance on active supervision can be found in the FTC’s 2018 challenge to a regulation enacted by the Louisiana Real Estate Appraisers Board.

In that matter, the FTC accused the board of unreasonably restraining price competition through a regulation that instructed appraisal management companies on how to set their fees. The board revoked the rule, sent it to the legislature and reissued it following legislative approval, but the FTC — acting in its role as agency adjudicator — concluded that the board still did not establish active supervision.

The FTC cited four reasons to support its conclusion. First, there was insufficient evidence to demonstrate that the reissuance of the rule was the result of state action and not merely an agreement between private parties. Next, the board did not show a sufficient nexus between the rule and any state policy. The FTC next cited the absence of any hearings or questions submitted by the legislature regarding the rule. Finally, although the Louisiana governor could suspend or veto any board action, that authority reflected only the potential for supervision and not active supervision.

Veritext v. Bonin

A challenge to another Louisiana licensing board provides an additional data point on active supervision.

The plaintiffs in Veritext v. Bonin charged the Louisiana Board of Examiners of Certified Shorthand Reporters with unlawfully restraining trade through a rule that stopped court reporters from entering into long-term or volume-based contracts with frequent clients.

On active supervision, the board argued that the legislature could amend or veto the rule under Louisiana’s Administrative Procedure Act. The Fifth Circuit, however, concluded that active supervision “requires more than the bare possibility that the law might be changed.”

SmileDirectClub v. Battle

A relatively recent decision from the Eleventh Circuit provides a final data point on active supervision. In SmileDirectClub v. Battle, the court concluded that the Georgia Dental Board had not established active supervision where the governor — who was empowered to approve, remand, reverse or modify proposed rules — approved the board’s rule on a document entitled “Certification of Active Supervision.” The Eleventh Circuit explained that the certificate did not make up for a lack of substantive review of the rule.

For more on SmileDirectClub, we recommend Matt Sawchak’s article — found here — about the case, its impact and the arguments raised by both sides.


The decisions discussed above, as well as the FTC’s guidance, create some important parameters for evaluating whether a licensing board’s conduct can satisfy active supervision in the wake of North Carolina Dental. Active supervision requires formal, substantive review by a state official with actual authority to modify board conduct. A rubber stamp, even one from a court, a governor or a legislature, is not enough. Licensing boards that want to ensure immunity from federal antitrust scrutiny should consider the state’s role in the board’s decision-making process, and whether the requirements articulated by North Carolina Dental itself are truly present.

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