North Carolina State Board of Dental Examiners v. FTC: When Will Enough Active State Supervision Be Enough?

Alexandra W. Jabs

In North Carolina State Board of Dental Examiners v. Federal Trade Commission, the United States Supreme Court considered whether a state regulatory board's anticompetitive actions were entitled to state action immunity from antitrust law scrutiny. The Court held that a state regulatory board with a “controlling number of active market participants” must show that the challenged market restraint was “clearly articulated” as state policy and “actively supervised” by the State itself. The Court ultimately affirmed the Fourth Circuit's decision, concluding that the North Carolina State Board of Dental Examiners could not invoke the state action doctrine because the state regulatory board did not contend that the State had actively supervised its anticompetitive actions.

The Court was correct in holding that the active supervision prong of the Midcal test should apply to state regulatory boards, under federal antitrust policy. Even though the Court came to the correct holding, the Court did not articulate clear guidance for adequate state supervision to invoke state action immunity. Instead, because the Court could not reach the issue of what constitutes active state supervision on the merits, it left the door open for the Federal Trade Commission (“FTC”) to pronounce exacting standards for the active state supervision prong of the Midcal test. Consequently, a regulatory board must effectively act as solely an advisory board to the State in order to invoke the state action exemption for any anticompetitive actions.