On February 25, 2015, the US Supreme Court held in North Carolina State Board of Dental Examiners v. Federal Trade Commission that the State Board of Dental Examiners (Board) was not protected by state-action immunity when it allegedly violated the Federal Trade Commission (FTC) Act by prohibiting non-dentists from providing teeth-whitening services in North Carolina in an unreasonable restraint of trade (574 U.S. __ (2015)).

The FTC's administrative complaint arose out of the Board's investigation of non-dentists offering teeth-whitening services in North Carolina, which led to the Board issuing at least 47 cease-and-desist letters to those providers. According to the FTC, the demands to cease-and-desist had various anticompetitive effects, including causing:

On review, the US Court of Appeals for the Fourth Circuit held, among other things, that the Board's actions were not protected by the state action doctrine, and the Board appealed.

For more information on the Fourth Circuit opinion, see Legal Update, FTC Wins Fourth Circuit's Approval on both State Action and Section 1 Challenges.

The Supreme Court affirmed the Fourth Circuit's decision and held that the Board was not protected by state-action immunity. The Court based its decision on Parker v. Brown, where it held that because requiring states to conform to the Sherman Act may harm the state's other fundamental values, states are immune from antitrust liability where anticompetitive acts are conducted under a state's sovereign authority (317 U.S. 341 (1943)). However the Court noted that state-action immunity is only granted when the action in question arises out of the state's sovereign power. In the case of a non-sovereign actor, like the Board, anticompetitive actions are only subject to state-action immunity if two requirements are met:

The Court noted that where the state delegates regulatory power to a non-sovereign authority comprised of active market participants, like the Board, limits on state-action immunity are particularly necessary to prevent private anticompetitive motives.

The parties and the Court assumed that the first requirement was satisfied because North Carolina statutorily delegates control over the practice of dentistry to the Board, though the statute does not address teeth whitening. To satisfy the second requirement, the Board was required to show that its supervisor:

The Court found that the second requirement was not satisfied. The Court noted that the Board did not receive active supervision over its policy enforcement, nor did the Board even allege it was supervised at all. Instead, the Board argued that the second requirement should be waived, as it had been in the past for a municipality. The Court noted that the second requirement has sometimes been excused, but explained that it was a necessity when the non-state actor in question was controlled by active market participants that may be tempted to restrain trade or engage in other anticompetitive activity.

The Board argued that by affirming the Fourth Circuit, the Court would dissuade knowledgeable citizens from serving on state agencies that regulate the market in which the citizen participates, particularly if those citizens are susceptible to money damages for antitrust violations. The Court noted that though North Carolina does not offer the opportunity to address whether agency officials are subject to money damages, private citizens are still welcome and encouraged to serve on state agencies and may enjoy Parker immunity as long as procompetitive policies are in place.

In the dissent, Justices Alito, Scalia and Thomas argued that under a strict reading of Parker, antitrust laws including the Sherman Act and the FTC Act do not apply to state agencies, and the Board and its actions were therefore immune from antitrust liability.