Originally published in the August 2011 NABP Newsletter
By Dale J. Atkinson, JD
Generally, the Legal Briefs article is reserved for an analysis of a judicial opinion of binding or persuasive precedent in the regulatory community. Occasionally, cases are initiated that are worthy of coverage prior to their final disposition. As illustrated at the NABP 107th Annual Meeting recently held in San Antonio, TX, a pending case initiated by the United States Federal Trade Commission (FTC) was discussed during the “open mic” forum. Attendees pontificated on the merits and defenses of the action to a degree signifying a need to provide an analysis of the matter, which has yet to be determined on the merits.
The case was originally filed in June 2010 by the FTC as an administrative complaint against the North Carolina Board of Dental Examiners (Board), which filed its answer on July 6, 2010. Since that date, numerous procedural and other relevant motions related to discovery have been filed, briefed, and argued. As of press time, discovery has been conducted and the parties are preparing for trial. This article will only address the FTC complaint and the answer and defenses of the Board. Readers are encouraged to stay tuned as the issues in dispute are significant and have the potential to identify the parameters of the federal government’s jurisdiction over state agency matters and eventually impact all regulatory boards.
The FTC was created in 1914 with a principle purpose of preventing unfair methods of competition in commerce. Over the years, the US Congress has enacted laws to further expand the authority of the FTC and clarify its authority to police anticompetitive practices. This federal agency’s work is performed by the Bureaus of Consumer Protection, Competition, and Economics. Specifically, the FTC is authorized to investigate and prosecute businesses and others alleged to have violated the FTC Act, generally related to anticompetitive activities. Enforcement proceedings are adjudicated through an administrative process before an administrative law judge in a “trial-type proceeding” conducted under the FTC Rules of Practice.
The June 2010 FTC complaint against the Board consisted of seven pages with the nature of the case described as follows:
Dentists in North Carolina, acting through the instrument of the North Carolina Board of Dental Examiners (“Dental Board”), are colluding to exclude non-dentists from competing with dentists in the provision of teeth whitening services. The actions of the Dental Board prevent and deter non-dentists from providing or expanding teeth whitening services, increase prices and reduce consumer choice without any legitimate justification or defense, including the “state action” defense. The actions of the Dental Board unreasonably restrain competition and violate Section 5 of the Federal Trade Commission Act.
The complaint identifies the Board as an agency of the state and specifically references the fact that the Board is composed of six licensed dentists, one licensed hygienist, and one public member. The FTC alleges that conduct of the Board “constitutes a concerted action by its members and the dentists of North Carolina.” It further notes that the Board is a “person” within the meaning of the FTC Act and that the activities of the Board are in commerce and/or affect commerce.
The FTC complaint next identifies the relevant market subjected to teeth-whitening services in North Carolina and notes that such services are offered by dentists and non-dentists. The complaint notes that there has been an expansion of teeth whitening operations by non-dentists and that kits can be purchased over-the-counter (OTC) by consumers at retail establishments, including pharmacies, salons, and mall kiosks. The complaint concludes that OTC products are not satisfactory to consumers. It also describes the teeth whitening process and alleges that non-dentists typically charge $100 to $200 per session, while dentists typically charge $300 to $700 per session with “some procedures costing as much as $1,000.”
The heart of the complaint states that “THE DENTAL BOARD IS ACTING TO SUPPRESS COMPETITION” and specifically alleges the following:
15. The North Carolina dental statute does not expressly address whether, or under what circumstances, a non-dentist may engage in teeth whitening.
16. The Dental Board has decided that the provision of teeth whitening services by non-dentists constitutes UPD [unauthorized practice of dentistry]. As detailed herein, the Dental Board has acted in various ways to eliminate the provision of teeth whitening services by non-dentists.
17. The Dental Board interprets the North Carolina dental statute as permitting non-dentists to engage in the retail sale of teeth whitening products for use at home. However, the Dental Board has determined that any service provided along with a teeth whitening product, including advice, guidance, providing a customer with a personal tray, whitening solution, mouth piece and/or LED light, or providing a location to use the whitening product, constitutes the practice of dentistry.
The complaint continues:
19. In particular, the Dental Board has engaged in extra-judicial activities aimed at preventing non-dentists from providing teeth whitening services in North Carolina. These activities are not authorized by statute and circumvent any review or oversight by the State.
20. On 42 occasions, the Dental Board transmitted letters to non-dentist teeth whitening providers, communicating to the recipients that they were illegally practicing dentistry without a license and ordering the recipients to cease and desist from providing teeth whitening services.
21. On at least six occasions, agents of the Dental Board also threatened and discouraged non-dentists who were considering opening teeth whitening businesses by communicating to them that teeth whitening services could be provided only under the direct supervision of a dentist.
22. Furthermore, the Dental Board issued at least 11 letters to third parties, including mall owners and property management companies, with interests in approximately 27 malls, stating that teeth whitening services offered at mall kiosks are illegal. The purpose of these letters was to block the expansion of teeth whitening kiosks in shopping malls.
23. The Dental Board’s exclusion of the provision of teeth whitening services by non-dentists does not qualify for a state action defense nor is it reasonably related to any efficiencies or other benefits sufficient to justify its harmful effect on competition.
The complaint concludes that the conspiracy, acts, and practices of the Board constitute anticompetitive and unfair methods of competition in or affecting commerce in violation of section 5 of the FTC Act. In addition to requiring the Board to reverse previous Board actions and provide notice to all impacted parties, the complaint seeks relief that would require the Board to notify an independent state authority of any proposed or contemplated action of the Board that may restrain the provision of teeth whitening services by non-dentists.
On July 6, 2010, the Board filed a 24-page response to the complaint. The response includes the following sections:
The True Nature of the Case
In this section, the Board emphasizes the enforcement of statutory language (not rule/regulation or policy) and that such legislative enactment specifically makes it illegal for non-dentists to provide the service of “removal of stains” from teeth and concludes that teeth whitening must, by its very nature, include the removal of stains from teeth. Additionally, this section identifies the existence of at least 20 other states with similar legislation.
This section identifies the Board and the make-up of its members and addresses and offsets the alleged conflicts of interest that are contained in the complaint, including citation to the US Supreme Court precedent which finds that board members “are assumed to be men of conscience and intellectual discipline, capable of judging a particular controversy fairly and on the basis of its own circumstances.”
The FTC Does Not Have the Authority or Jurisdiction to Force the Board as a State Agency to Abrogate a State Statute
This section of the response concludes that the Board is entitled to immunity under a “state actions doctrine” and that the FTC lacks the jurisdiction to force a board to abrogate a state statute.
The Real Competition for Unlicensed Teeth Whitening Comes From OTC Sales of Teeth Whitening Kits Which Are Not Regulated by the Board
This section distinguishes between OTC products and the provision of professional services as defined in the scope of practice contained in North Carolina law, which require licensure as a prerequisite to practice, a clear authority vested in the state legislature.
The Dental Board is Acting to Protect the Public, Not to Suppress Competition
This section identifies the technical nature of the practice of dentistry and the fact that stain removal is a professional undertaking in need of regulation as defined by North Carolina law. It concludes that the enforcement of the statute is, indeed, in the best interest of public protection, subject to oversight by North Carolina state officials, open meetings and records acts, and other applicable laws.
The Board’s Enforcement of the State Statute Solely Protects the Public and Has No Adverse Effects on Lawful Competition
This section identifies that past Board actions have contributed to public protection results and that enforcement of the statute decreases the likelihood that unlicensed persons will engage in activities within the defined scope of practice.
The Board’s Efforts to Protect the Public Do Not Constitute Violations of the Antitrust Laws
This section denies the existence of any contract, combination, or any conspiracy and that collusion cannot be inferred merely by the fact that dentists sit on the regulatory board.
The FTC’s Contemplated Relief Exceeds the FTC’s Authority and Would Unconstitutionally Impair the Ability of the State of North Carolina to Protect Its Citizens Under the Tenth and Eleventh Amendments to the Constitution
This section alleges that the relief sought by the FTC “belies a fundamental disregard for the prerogative of a state to protect its citizens by statute.” This section further undertakes a relief by relief analysis of the request for relief and argues against the authority of the FTC to seek such redress.
Finally, and in addition to the above-referenced denials, the response sets forth various defenses to the action, including failure to state a claim under which relief can be granted, immunity under state action doctrine, sovereign immunity under the 11th Amendment of the US Constitution, and reservation of powers to the states under the 10th Amendment of the US Constitution.
As mentioned, this matter remains pending and the parties are preparing for an administrative trial. This Newsletter article merely identifies some of the complex legal arguments that will be propounded by the parties and is not a complete analysis of each respective position. Essential to NABP member boards, as well as potentially all other regulatory boards, is the issue of whether the federal government and certain federal laws abrogate the rights of the states to enact legislation intended to protect its citizens and provide immunity protection to members of boards created and empowered to enforce such laws. Stay tuned.
Federal Trade Commission v North Carolina Board of Dental Examiners, Docket No. 9343 filed June 17, 2010.