Markets Wired

The North Carolina State Board of Dental Examiners illegally thwarted competition by working to bar non-dentist providers of teeth whitening goods and services from selling their products to consumers, according to a unanimous Opinion and Final Order issued by the Federal Trade Commission.

The Commission held that the Dental Board sought to, and did, exclude non-dentist providers from the market for teeth whitening services, in violation of Section 5 of the Federal Trade Commission Act. The Commission found that the Dental Board’s conduct constituted concerted action, and that the Dental Board had failed to advance a legitimate procompetitive justification for its conduct. The Commission found liability under both an abbreviated (or “quick look”) approach, as well as under a full, “rule of reason” antitrust analysis.

The Dental Board’s illegal actions led to higher prices and reduced choices for consumers, according to the Commission.

The Commission’s Final Order requires the Dental Board to cease ordering non-dentists to stop providing teeth whitening products or services. The Final Order also requires the Dental Board to stop informing non-dentist teeth whitening providers and certain other persons that it is illegal for non-dentists to provide teeth whitening products or services.

The FTC’s decision upholds a July 2011 Initial Decision by Chief Administrative Law Judge D. Michael Chappell and adopts with minor changes the order entered by Judge Chappell. The FTC issued its Opinion and Final Order on December 2, 2011, meeting a self-imposed deadline designed to expedite the agency’s administrative trial process. Under the FTC’s Revised Rules of Practice, which were finalized in April 2009, the Commission must issue its ruling within 100 days after a case is argued before the Commission. In this case, the Commission issued its decision 35 days after oral argument.

The Dental Board. 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 has no authority over non-dentists but may ask a state court to determine that particular conduct constitutes the unauthorized practice of dentistry and issue an injunction.

The administrative complaint, which was issued in June 2010, alleged that the Dental Board sent dozens of letters instructing non-dentist teeth whitening providers that they were practicing dentistry illegally, and ordering them to stop. The Dental Board also threatened or discouraged non-dentists who were considering opening teeth whitening businesses. The complaint also alleged that the Dental Board sent letters to mall owners and property management companies urging them not to lease space to non-dentist teeth whitening providers.

According to the complaint, the Dental Board’s actions reduced the availability of teeth- whitening services in North Carolina and constituted an anticompetitive conspiracy among the dentists on the Dental Board. The complaint included proposed relief intended to stop the Dental Board’s allegedly illegal conduct and to ensure that North Carolina consumers benefit from competition between dentists and non-dentists for teeth whitening services.

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 that board is actively supervised by the state. In February 2011, the FTC denied a Dental Board motion to dismiss the complaint on these grounds.

In an Initial Decision issued July 14, 2011, the ALJ found 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 had a tendency to harm competition. The ALJ further found that the Dental Board’s action had no valid pro-competitive justification and constituted an unreasonable restraint of trade and an unfair method of competition. He accordingly issued an order requiring the Dental Board to stop engaging in the challenged conduct.

The Final Opinion and Order. In its Opinion, the Commission concluded that the Dental Board violated of Section 5 of the FTC Act, and agreed with the ALJ that the Dental Board’s conduct “constituted concerted action, . . . had a tendency to harm competition and did in fact harm competition,” and had no legitimate pro-competitive justification.

The Commission concluded that the Dental Board’s conduct could be deemed illegal under the “inherently suspect” mode of analysis because the challenged conduct had a clear tendency to suppress competition and lacked any countervailing procompetitive virtue. In addition, the Commission found that there was direct evidence of anticompetitive effects.

The Final Order bars the Dental Board from:

• directing a non-dentist provider to stop providing teeth whitening goods or services;
• prohibiting, restricting, impeding, or discouraging the provision of teeth whitening goods or services by a non-dentist provider;
• communicating to a non-dentist provider that it is violating, or has violated, the Dental Practice Act by providing teeth whitening goods or services, or that providing such services would violate the Act;
• communicating to a prospective non-dentist provider that it would violate the Dental Practice Act by providing teeth whitening goods or services, or that providing such services would violate the Act;
• communicating to a commercial property lessor (such as a mall operator) or any other third party that the provision of teeth whitening services by a non-dentist provider is a violation of the Dental Practice Act, or that any non-dentist provider is violating the Act by providing such services;
• communicating to any prospective manufacturer, distributor, or seller of teeth whitening services used by non-dental teeth whitening providers that providing such services is a violation of the Dental Practice Act; and
• inducing, urging, encouraging, assisting, or attempting to induce anyone to do anything that would violate the provisions listed above.

The Final Order specifically does not prohibit the Dental Board from investigating other non-dental providers for suspected violations of the State’s Dental Practice Act, filing a court action against a non-dentist for alleged violations of the Act, or communicating its belief or opinion regarding whether a particular method of teeth whitening may violate the Dental Practice Act.

The Commission vote approving the Opinion and Final Order was 3-0, with Commissioner Julie Brill recused. The Dental Board may file a petition for review with the U.S. Circuit Court of Appeals within 60 days of service of the Final Order.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., Room 7117, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook and follow us on Twitter.

(FTC Docket No. 9343)
(NC Dental.final.wpd)