ALJ Rules Boards Illegal Conduct is an Unreasonable Restraint of Trade and an Unfair Method of Competition
In an Initial Decision announced today, Chief Administrative Law Judge D. Michael Chappell has concluded that the North Carolina Board of Dental Examiners violated the law by trying to block non-dentists in the state from providing teeth-whitening goods or services.
Ruling that the Dental Board does not have the authority to order non-dentists to discontinue providing teeth whitening goods or services, Chappell issued an Order in connection with the Decision barring the Board from engaging in the same anticompetitive conduct in the future. The Order also requires the Board to send follow-up letters to non-dentists whom it had previously warned would or might be violating state law by providing teeth-whitening services.
The Dental Board is a state agency created to regulate the practice of dentistry in North Carolina. It consists of eight members, including six licensed dentists. Any person who wants to practice dentistry in the state must be licensed by the Dental Board. The Dental Board also may ask a state court to determine that particular conduct constitutes the unauthorized practice of dentistry and issue an injunction.
The administrative complaint issued in June 2010 included proposed relief intended to stop the Dental Board’s allegedly illegal conduct, to ensure that North Carolina consumers benefit from competition between dentists and non-dentists for teeth-whitening services. The complaint alleged that the Dental Board’s actions reduced the availability of teeth-whitening services in North Carolina, and that the Dental Board’s conduct constituted an anticompetitive conspiracy among the dentists on the Dental Board, in violation of federal law.
In North Carolina, teeth whitening services provided by non-dentists often are available at salons, retail stores, and mall kiosks. The state’s dentists offer whitening services in their offices, and also provide take-home kits. According to the June 2010 complaint, the Dental Board sent 42 letters instructing non-dentist teeth-whitening providers that they were practicing dentistry illegally, and ordering them to stop. In at least six cases, the complaint alleged, the Dental Board threatened or discouraged non-dentists who were considering opening teeth-whitening businesses. The complaint also alleged that the Dental Board sent at least 11 letters to third-parties – mall owners and property management companies – stating that teeth-whitening services offered in malls are illegal.
The complaint also challenged the Dental Board’s claim that its conduct is protected from federal antitrust scrutiny by the state action doctrine, which exempts some conduct by boards from antitrust oversight if it is actively supervised by the state. In February 2011, the FTC denied a Dental Board motion to dismiss the complaint on these grounds.
The Initial Decision. Chappell determined that complaint counsel “has demonstrated by a preponderance of the evidence that dentist members of the Dental Board had a common scheme or design, and hence an agreement, to exclude non-dentists from the market for teeth whitening services and to deter potential providers of teeth whitening services from entering the market.”
The Administrative Law Judge wrote that non-dentists compete with dentists to provide teeth-whitening services in North Carolina, and that the Dental Board’s “concerted action to exclude non-dentist-provided teeth whitening services from the market constitutes an agreement to exclude rivals, which by its nature has the tendency to harm competition.”
Chappell found that the Dental Board’s action had no valid pro-competitive justification, and “constitutes an unreasonable restraint of trade and an unfair method of competition, in violation of Section 5 of the FTC Act.”
Chappell wrote that because the Commission had already determined that the conduct of the Dental Board was not shielded from federal antitrust scrutiny by the state action doctrine, he was not required to conduct a further analysis of the issue.
Based on these and other findings, the ALJ issued an Order requiring the Dental Board to “cease and desist” from engaging in the anticompetitive conduct alleged in the complaint, including, for example:
- directing non-dentist providers of teeth whitening goods or services to stop providing these goods or services;
- prohibiting, restricting, impeding, or discouraging the provision of such goods or services by non-dentists;
- telling non-dentist providers, or prospective providers, that they are violating or will violate North Carolina’s Dental Practice Act by providing such goods or services;
- communicating to a lessor of commercial property or any other third party (such as a mall owner where a teeth whitening kiosk is located) that the provision of such goods or services by a non-dentist violates the Dental Practice Act; and
- inducing or encouraging anyone, or attempting to induce or encourage anyone, to engage in any of the defined anticompetitive conduct.
Chappell also ordered the Dental Board, within 30 days from the date the Order becomes final, to send a copy of the Order and the Complaint to each of its members. Within 30 days from the date the Order becomes final, the Dental Board must also send a letter to each of the people or businesses, that it had warned not to provide teeth whitening goods or services, stating that “the Board does not have the authority to order you to discontinue providing Teeth Whitening Goods or Teeth Whitening Services,” and that “only a court may determine that you are violating, or have violated, any law.”
The Appeals Process. The Judge’s Initial Decision is subject to review by the full Federal Trade Commission on its own motion, or at the request of any party. The Initial Decision will become the decision of the Commission 30 days after it is served upon the parties, unless a party files a timely notice of appeal – and thereafter files a timely appeal brief – or the Commission places the case on its own docket for review or stays the effective date of the decision.
Copies of the public version of the Initial Decision by the Administrative Law Judge are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.
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