United States: U.S. Supreme Court Holds That State Action Immunity Does Not Apply To State Boards If The Board Is Controlled By Active Market Participants

On Feb. 25, 2015, the U.S. Supreme Court held, in a 6-3 decision, that a state board with a controlling number of decision-makers, who are active market participants in the occupation the board regulates, does not enjoy state action immunity from federal antitrust laws unless "the State has articulated a clear policy to allow the anticompetitive conduct, and, the State provides active supervision of [the] anticompetitive conduct." N.C. State Bd. of Dental Exam'rs v. F.T.C., 135 S. Ct. 1101, 1112 (2015). (Click here for a copy of the opinion.)

In Parker v. Brown, 317 U.S. 341, 350-51 (1943), the Supreme Court held that state agencies acting in their sovereign capacity are immunized from liability under federal antitrust laws. Since Parker, state action immunity (also known as Parker immunity) has been extended to non-state entities in two circumstances. First, private actors seeking immunity must 1) act pursuant to a "clearly articulated and affirmatively expressed" state policy, and 2) be subject to active state supervision when advancing that policy. See, e.g., California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 104-05 (1980). Second, municipalities and more vaguely defined "substate governmental entities" need only satisfy the clearly articulated state policy requirement to gain immunity. See, e.g.,F.T.C. v. Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003, 1010-11 (2013) (applying rule for substate entities);Town of Hallie v. City of Eau Claire, 471 U.S. 34, 46-47 (1985) (applying rule for municipalities); see also N.C. State Bd., 135 S. Ct. at 1112-13.

The Supreme Court used this framework in Dental Examiners to evaluate whether the North Carolina State Board of Dental Examiners ("Board") enjoyed immunity from antitrust claims when it issued anticompetitive cease and desist letters, where it was a state agency but a majority of its members were licensed dentists regulating their own trade without active state supervision.


Under the North Carolina Dental Practice Act ("Act"), North Carolina created the Board as an "agency of the State," and entrusted to it the oversight and regulation of the practice of dentistry. See N. C. Gen. Stat. Ann. § 90-22, § 90-48 (2013) ("[The Board] shall be and is hereby vested, as an agency of the State, with full power and authority to enact rules and regulations governing the practice of dentistry within the State...."). The Board is funded by fees paid by in-state licensed dentists and dental hygienists, and is composed of eight members:  one practicing dental hygienist, one consumer, and six practicing licensed dentists, who are selected by other in-state licensed dentists. Id. at § 90-22; In the Matter of the N.C. Bd. of Dental Exam'r, No. 081-0133, 2011 WL 11798452, at *1, *12-13 (F.T.C. July 14, 2011). Individuals seeking to practice dentistry must be licensed by the Board, which has the authority to refuse to issue a license, refuse to renew a license, revoke or suspend a license, or take disciplinary actions against licensees. N.C. State Bd. of Dental Exam'rs v. F.T.C., 717 F.3d 359, 365 (4th Cir. 2013), aff'd sub nom., 135 S. Ct. 1101 (2015).

By 2003, the Board—responding to complaints from licensed dentists—had undertaken what its Chief Operating Officer coined a "battle" against non-dentists performing lower-cost teeth-whitening services in competition with licensed dentists. N.C. State Bd., 135 S. Ct. at 1108. In particular, the Board issued cease-and-desist letters on Board letterhead to non-dentists (in some cases, suggesting they committed misdemeanors) and teeth-whitening product manufacturers in order to eliminate the provision of all teeth-whitening services by non-dentists in North Carolina. The Act is silent on whether teeth-whitening services—which had begun to be sold after the Act was passed—are even included in the practice of dentistry. N.C. State Bd., 717 F.3d at 364. Additionally, the Board's authority over unlicensed persons is limited, and extends to bringing actions to enjoin the practice of dentistry or referring a matter to the District Attorney for criminal prosecution. Id. Nonetheless, the Board's campaign ensued and its efforts were successful. N.C. State Bd., 135 S. Ct. at 1108.

The Federal Trade Commission brought an administrative action against the Board, alleging that sending the cease-and-desist letters without state authorization or supervision constituted an unlawful restraint of trade in violation of Section 5 of the FTC Act. In the Matter of the N.C. Bd. of Dental Exam'rs, No. 81-0137, 2010 WL 2544427, at *3 (F.T.C. June 17, 2010). The Board moved to dismiss on the grounds of state action immunity, arguing that, as a state board, it needed to show a clearly articulated state policy (the first of the two Parker prongs). N.C. State Bd., 135 S. Ct. at 1109. The Administrative Law Judge found in favor of the FTC. N.C. State Bd., 2011 WL 11798452 at *1. The U.S. Circuit Court of Appeals for the 4th Circuit affirmed, holding that agencies, like the Board, in which a "decisive coalition (usually a majority)" is made up of participants in the regulated market, and who are chosen by and accountable to their fellow market constituents, are like any private party required to show both a clearly articulated state policy and active state supervision. N.C. State Bd., 717 F.3d at 368-70. The Supreme Court granted review.

The Supreme Court's Decision

The Supreme Court affirmed in an opinion written by Justice Anthony Kennedy, who explained that Parker immunity attaches to actors operating within the scope of a state's sovereign authority. N.C. State Bd., 135 S. Ct. at 1110. Accordingly, the Court held that non-sovereign actors entrusted by a state to perform state actions enjoy Parker immunity only when the restraint is, first, "clearly articulated and affirmatively expressed as state policy," which requires displacement of competition in ways that the state must have foreseen and endorsed (explicitly or implicitly), and, second, "actively supervised by the state." Id. at 1111-12. The latter must be assessed on a case-by-case basis, but at a minimum requires that:  1) the state supervisor review the substance of the anticompetitive act and not just the process that brought it about; 2) the supervisor have the power to veto or modify the act; and 3) there is active supervision and not just the mere potential for supervision. Id. at 1116.

As the Court explained, state action immunity must be bounded. Id. at 1111. State agencies "are not simply by their governmental character sovereign actors" for purposes of immunity determinations. Id. Of particular concern, private actors—lacking political accountability and yet delegated state authority to self-police their trade—can be expected to act based on self-interest and in concerted ways contrary to the precepts of the antitrust laws. Id. Moreover, "established ethical standards may blend with private anticompetitive motives in a way difficult even for market participants to discern." Id. As such, the Court held that the supervision mandate announced in Midcal, which demands that a private party's anticompetitive conduct actually promote state policy, must be satisfied when a state board is controlled by decision-makers who are active market participants in the occupation the Board regulates.

The Court reaffirmed that municipalities and other substate entities need only show a clearly articulated state policy. Id. at 1112-13. As explained by the Court in Hallie, "[w]here the actor is a municipality, there is little or no danger that it is involved in a private price-fixing arrangement. The only real danger is that it will seek to further purely parochial public interests at the expense of more overriding state goals." Hallie, 471 U.S. at 35.

The Court also reaffirmed that there can be no conspiracy exception that would void immunity for state actors found to have conspired with non-sovereign parties in anticompetitive ways. N.C. State Bd., 135 S. Ct. at 1113-14; see also City of Columbia v. Omni Outdoor Adver., Inc., 499 U.S. 365, 367-68, 374 (1991). Trying to identify actionable conspiratorial corruption in this context was deemed too "unworkable." N.C. State Bd., 135 S. Ct. at 1113-14.

Applying these considerations, the Court held that the Board was not relieved of the requirement to prove active state supervision, and that it failed to establish such supervision. Id. at 1116-17. The Court explained that North Carolina delegated authority over licensed dentistry to the Board, but was silent as to teeth-whitening services. Id. Upon receiving complaints, the Board—composed of interested and active market participants—undertook acts beyond its authority to expel competitors without state oversight. Id. The state did nothing to approve or disapprove of the Board's actions, and there was no evidence of supervision. Id. Consequently, the Board was not immune from the antitrust laws, although the Court noted that the case did not offer the occasion to address the possibility of immunity from damages liability. Id.

The Dissent

Justice Alito (joined by Justices Scalia and Thomas) dissented based on concerns primarily regarding implementation of the Court's decision. Id. at 1117-18. Justice Alito reasoned that the Board was an immunized agency as understood in Parker because the North Carolina legislature determined the practice of dentistry affected public health, created the Board to regulate the practice, specified the Board's membership, defined the practice to be regulated, set out the steps the Board can take against licensees and unlicensed persons (including injunctions and investigations), and established reporting requirements the Board must follow. Id. at 1117-19, 1120. By treating the Board as something other than a bona fide state agency, Justice Alito argued, the majority created a "morass" that will require courts to engage in the difficult task of evaluating the possibility of industry capture. Id. at 1118.


The Court's ruling has important implications because many professional licensing boards include active market participants. The decision clarifies that the state's delegation of authority to a private actor, even if the state intended the actor to entirely self-regulate, is insufficient to provide immunity. Rather, there must be active interactions between the state and the private entity whereby the entity, even if pursuing a self-interested aim, advances a state interest while under state supervision. Yet, as the dissent points out, the determination of what is a state agency and how much supervision suffices will need to await development in subsequent cases.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.