USD Law Prof Bob Fellmeth Quoted in National Law Journal Article on Effects of NC Dental Board v. FTC

USD Law Prof Bob Fellmeth Quoted in National Law Journal Article on Effects of NC Dental Board v. FTC

New York (May 11, 2015) – University of San Diego (USD) School of Law Professor Robert C. Fellmeth was quoted in a National Law Journal article discussing the North Carolina Board of Dental Examiners v. Federal Trade Commission decision and the effects the decision will have on state bars.

The U.S. Supreme Court decision is forcing state bars to re-examine their operations to avoid potentially huge antitrust liability. At the same time, three public interest-consumer organizations are pressing the nation's 50 state attorneys general to enforce the high court's ruling.

The justices' February 25 decision held that the doctrine of state-action immunity did not shield the board from Sherman Act antitrust regulation. The doctrine extends immunity to bodies acting in their sovereign capacity.

"Active market participants cannot be allowed to regulate their own markets free from antitrust accountability," Justice Anthony Kennedy wrote for a 6-3 court. "When a state empowers a group of active market participants to decide who can participate in its market, and on what terms, the need for supervision is manifest. If a state wants to rely on active market participants as regulators, it must provide active supervision."

The North Carolina dental board's members included six dentists, one dental hygienist and one consumer who enforce a licensing system for dentists. After the board issued numerous cease-and-desist letters to nondentist teeth-whitening service providers, the Federal Trade Commission filed an administrative complaint accusing the board of anti-competitive behavior in excluding nondentists from the market for teeth-whitening services.

The high court ruling was not limited to the dental board and teeth whitening, in the view of antitrust experts including Fellmeth, a former prosecutor and current director of the Center for Public Interest (CPIL) Law at USD School of Law, where he also teaches and writes in the areas of children's rights, regulation, antitrust, and consumer law. CPIL, along with Consumers Union and the Citizen Advocacy Center, sent a letter to state attorneys general asking for information about their compliance with the decision.

"This was a cosmic case where the Supreme Court said any agency controlled by active participants in the trade regulated does not have sovereign protection," Fellmeth said. "They are in same position as a cartel of truckers, insurance agents and other horizontal competitors meeting and deciding what to do. And, by the way, lawyers are included here."

The vast majority of occupational licensing boards and commissions nationwide, including state bars, now comprise majorities—even supermajorities—of licensed professionals "in the very economic tribal grouping with an economic interest in restraints of trade benefiting them," the groups wrote in their letter.

The groups recognize that many members of these regulatory boards and commissions believe they are acting in the public interest, they wrote. However, the dominance by professionals and lack of active supervision by a state higher authority have led to cozy relationships that do not serve the public interest. They used state bars as an example.

"State bars controlled by attorneys rarely discipline for excessive billing or intellectual dishonesty," they wrote. "Few require any demonstration whatever of competence in the actual practice area of law relied upon by clients. Few require malpractice insurance, or in any way ameliorate the harm from attorney incompetence. The point is, each of the many agencies within your state is empowered to carve out momentous exceptions from federal antitrust law, and those decisions in particular require a level of independence from the implicit focus of current practitioners."

State bars raised concerns about the high court case in an amicus brief filed before the decision. They warned that "by denying these state regulators state-action immunity unless they show active supervision by other parts of state government, the decision impairs the ability of state regulators to enforce state laws enacted to protect the public."

In their decision, the justices held there must be "active supervision" to invoke state action immunity. To meet that requirement, the court said, "The supervisor must review the substance of the anti-competitive decision, not merely the procedures followed to produce it; the supervisor must have the power to veto or modify particular decisions to ensure they accord with state policy, and the 'mere potential for state supervision is not an adequate substitute for a decision by the state.' Further, the state supervisor may not itself be an active market participant."

Under earlier law, state-action immunity was a "relatively efficient way" to defend against an antitrust claim, Merritt said. "Even for people who are state actors, it's not as clean a defense anymore, and it's a defense that could be expensive to bring before a court. The reality is this is going to play out over time."

But not too much time, said San Diego's Fellmeth, who wants state attorneys general to move quickly on licensing-board changes. They need to tell board members they may be liable for a felony offense and treble damages, he said.

"Three to four years from now, a few of my friends will file antitrust actions against individual board members and there will be a $10 million or $20 million judgment," he said. "And then others will do it. I have friends in that community, and they are already salivating at the prospect.

"If I'm an attorney general, I want to say with pride, 'I saw this coming and we created some way of addressing it.' Either get rid of a majority of the trade members or create some oversight that passes muster."

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About Robert Fellmeth

Robert Fellmeth is the Price Professor of Public Interest Law at the University of San Diego School of Law, where he teaches and writes in the areas of children's rights, regulation, antitrust, and consumer law. Professor Fellmeth is also the executive director of both USD’s Center for Public Interest Law and Children's Advocacy Institute.

About the University of San Diego School of Law

Celebrating 60 years of alumni success, the University of San Diego (USD) School of Law is recognized for the excellence of its faculty, depth of its curriculum, and strength of its clinical programs. Each year, USD educates approximately 900 Juris Doctor and graduate law students from throughout the United States and around the world. The law school is best known for its offerings in the areas of business and corporate law, constitutional law, intellectual property, international and comparative law, public interest and taxation.

USD School of Law is one of the 81 law schools elected to the Order of the Coif, a national honor society for law school graduates. The law school’s faculty is a strong group of outstanding scholars and teachers with national and international reputations and currently ranks 23rd worldwide in all-time faculty downloads on the Social Sciences Research Network (SSRN). The school is accredited by the American Bar Association and is a member of the Association of American Law Schools. Founded in 1954, the law school is part of the University of San Diego, a private, nonprofit, independent, Roman Catholic university chartered in 1949.

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