Supreme Court gives entrepreneurs a tool to fight back

Moments ago, the United States Supreme Court issued its decision in North Carolina Board of Dental Examiners v. FTC, an antitrust lawsuit in which the Federal Trade Commission sued a state agency that regulates the practice of the dental industry. The Board claimed that it was immune from antitrust laws, and could therefore prohibit people from practicing the harmless trade of teeth whitening without a license, without having to answer to federal laws that forbid restrictions on economic competition. Sadly, antitrust law is so riddled with immunities that government—the one entity that can actually create coercive monopolies—is exempt from laws against monopolistic behavior.

We filed an amicus brief, joined by our friends at the Cato Institute, arguing that government antitrust immunities should be reined in to prevent politically powerful entities from using government power to outlaw their own competition. In its decision today, the Court agreed with that position, although it did not go as far as we had hoped. The Court holds that because the North Carolina Dental Board is made up entirely of practicing dentists—elected to their positions by other practicing dentists—it can’t claim to be a true government entity acting in the public interest. Federal law, declared Justice Kennedy for a 6-3 majority, “does not authorize the States to abandon markets to the unsupervised control of active market participants, whether trade associations or hybrid agencies. If a State wants to rely on active market participants as regulators, it must provide active supervision” of those it deputizes.

This is a good step forward, though it does not go far enough. Whatever one thinks of antitrust law—and we don’t think much of it—the arbitrary and irrational immunity doctrines that courts have adopted have made it much worse. Government has the authority, as a regulator, to set rules for who can practice dentistry and other trades. But it should not be able to create a monopoly in that industry that only serves the interests of influential private businesses. Sadly, the conservative Justices, Alito, Scalia, and Thomas, dissented from today’s opinion on the grounds that “until today, [antitrust] immunity was never conditioned on the proper use of state regulatory authority.” But it ought to be. The Supreme Court has declared that the antitrust laws announce a national policy of free competition. And free competition is a constitutional right. For states to assert the power to nullify federal law and create monopolies that abridge that right is an anomaly to begin with, and such power ought to be limited, at the very least, to only those cases in which restricting economic freedom is justified by the needs of public safety.

I explain our position more fully in this series of blog posts (part 1, part 2, part 3, part 4) or in my article in Regulation magazine. You can read our brief here.