throbber
(Slip Opinion)
`
`
`
` OCTOBER TERM, 2014
`
`
`Syllabus
`
`1
`
` NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
`
`
`
` being done in connection with this case, at the time the opinion is issued.
`
`
`
` The syllabus constitutes no part of the opinion of the Court but has been
`
` prepared by the Reporter of Decisions for the convenience of the reader.
`
` See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
`
`
`SUPREME COURT OF THE UNITED STATES
`
`
`
` Syllabus
`
` NORTH CAROLINA STATE BOARD OF DENTAL
`
`
`
` EXAMINERS v. FEDERAL TRADE COMMISSION
`
`CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
`
`THE FOURTH CIRCUIT
` No. 13–534. Argued October 14, 2014—Decided February 25, 2015
`
`North Carolina’s Dental Practice Act (Act) provides that the North Car-
`olina State Board of Dental Examiners (Board) is “the agency of the
`State for the regulation of the practice of dentistry.” The Board’s
`principal duty is to create, administer, and enforce a licensing system
`
`
` for dentists; and six of its eight members must be licensed, practicing
`dentists.
`
`The Act does not specify that teeth whitening is “the practice of
`dentistry.” Nonetheless, after dentists complained to the Board that
`nondentists were charging lower prices for such services than den-
`tists did, the Board issued at least 47 official cease-and-desist letters
`to nondentist teeth whitening service providers and product manu-
`
`
` facturers, often warning that the unlicensed practice of dentistry is a
`
` crime. This and other related Board actions led nondentists to cease
`
`offering teeth whitening services in North Carolina.
`
`The Federal Trade Commission (FTC) filed an administrative com-
`
`plaint, alleging that the Board’s concerted action to exclude
`nondentists from the market for teeth whitening services in North
`Carolina constituted an anticompetitive and unfair method of compe-
`tition under the Federal Trade Commission Act. An Administrative
`Law Judge (ALJ) denied the Board’s motion to dismiss on the ground
`of state-action immunity. The FTC sustained that ruling, reasoning
`that even if the Board had acted pursuant to a clearly articulated
`state policy to displace competition, the Board must be actively su-
`pervised by the State to claim immunity, which it was not. After a
`hearing on the merits, the ALJ determined that the Board had un-
`reasonably restrained trade in violation of antitrust law. The FTC
`
`
`again sustained the ALJ, and the Fourth Circuit affirmed the FTC in
`
`
`
`
`
`
`
`
`
`
`
`
`
`

`
`2
`
`
`NORTH CAROLINA STATE BD. OF DENTAL
`EXAMINERS v. FTC
`
`
`Syllabus
`
`
`
`
`all respects.
`Held: Because a controlling number of the Board’s decisionmakers are
`
`active market participants in the occupation the Board regulates, the
`Board can invoke state-action antitrust immunity only if it was sub-
`
`
`ject to active supervision by the State, and here that requirement is
`
`not met. Pp. 5–18.
`
`
`(a) Federal antitrust law is a central safeguard for the Nation’s free
`
`market structures. However, requiring States to conform to the
`mandates of the Sherman Act at the expense of other values a State
`may deem fundamental would impose an impermissible burden on
`the States’ power to regulate. Therefore, beginning with Parker v.
`
`Brown, 317 U. S. 341, this Court interpreted the antitrust laws to
`confer immunity on the anticompetitive conduct of States acting in
`their sovereign capacity. Pp. 5–6.
`
`(b) The Board’s actions are not cloaked with Parker immunity. A
`
`nonsovereign actor controlled by active market participants—such as
`the Board—enjoys Parker immunity only if “ ‘the challenged restraint
`
`. . . [is] clearly articulated and affirmatively expressed as state poli-
`cy,’ and . . . ‘the policy . . . [is] actively supervised by the State.’ ”
`
`FTC v. Phoebe Putney Health System, Inc., 568 U. S. ___, ___ (quoting
`
`California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445
`
`
`U. S. 97, 105). Here, the Board did not receive active supervision of
`
`its anticompetitive conduct. Pp. 6–17.
`
`
`
`(1) An entity may not invoke Parker immunity unless its actions
`are an exercise of the State’s sovereign power. See Columbia v. Omni
`Outdoor Advertising, Inc., 499 U. S. 365, 374. Thus, where a State
`delegates control over a market to a nonsovereign actor the Sherman
`Act confers immunity only if the State accepts political accountability
`for the anticompetitive conduct it permits and controls. Limits on
`state-action immunity are most essential when a State seeks to dele-
`
`gate its regulatory power to active market participants, for dual alle-
`
`
`giances are not always apparent to an actor and prohibitions against
`
`anticompetitive self-regulation by active market participants are an
`axiom of federal antitrust policy. Accordingly, Parker immunity re-
`quires that the anticompetitive conduct of nonsovereign actors, espe-
`cially those authorized by the State to regulate their own profession,
`result from procedures that suffice to make it the State’s own.
`Midcal’s two-part test provides a proper analytical framework to re-
`solve the ultimate question whether an anticompetitive policy is in-
`deed the policy of a State. The first requirement—clear articula-
`tion—rarely will achieve that goal by itself, for entities purporting to
`act under state authority might diverge from the State’s considered
`definition of the public good and engage in private self-dealing. The
`
`
`second Midcal requirement—active supervision—seeks to avoid this
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`

`
`
`Cite as: 574 U. S. ____ (2015)
`
`
`Syllabus
`harm by requiring the State to review and approve interstitial poli-
`cies made by the entity claiming immunity. Pp. 6–10.
`
`
`
`(2) There are instances in which an actor can be excused from
`Midcal’s active supervision requirement. Municipalities, which are
`electorally accountable, have general regulatory powers, and have no
`private price-fixing agenda, are subject exclusively to the clear articu-
`lation requirement. See Hallie v. Eau Claire, 471 U. S. 34, 35. That
`Hallie excused municipalities from Midcal’s supervision rule for
`these reasons, however, all but confirms the rule’s applicability to ac-
`tors controlled by active market participants. Further, in light of
`
`Omni’s holding that an otherwise immune entity will not lose im-
`
`munity based on ad hoc and ex post questioning of its motives for
`making particular decisions, 499 U. S., at 374, it is all the more nec-
`
`essary to ensure the conditions for granting immunity are met in the
`first place, see FTC v. Ticor Title Ins. Co., 504 U. S. 621, 633, and
`Phoebe Putney, supra, at ___. The clear lesson of precedent is that
`
`
`
`Midcal’s active supervision test is an essential prerequisite of Parker
`immunity for any nonsovereign entity—public or private—controlled
`
`by active market participants. Pp. 10–12.
`
`
`(3) The Board’s argument that entities designated by the States
`as agencies are exempt from Midcal’s second requirement cannot be
`reconciled with the Court’s repeated conclusion that the need for su-
`pervision turns not on the formal designation given by States to regu-
`
`lators but on the risk that active market participants will pursue pri-
`
`vate interests in restraining trade. State agencies controlled by
`
`active market participants pose the very risk of self-dealing Midcal’s
`supervision requirement was created to address. See Goldfarb v.
`Virginia State Bar, 421 U. S. 773, 791. This conclusion does not
`question the good faith of state officers but rather is an assessment of
`the structural risk of market participants’ confusing their own inter-
`ests with the State’s policy goals. While Hallie stated “it is likely
`that active state supervision would also not be required” for agencies,
`
`
`471 U. S., at 46, n. 10, the entity there was more like prototypical
`state agencies, not specialized boards dominated by active market
`participants. The latter are similar to private trade associations
`
`vested by States with regulatory authority, which must satisfy
`Midcal’s active supervision standard. 445 U. S., at 105–106. The
`similarities between agencies controlled by active market partici-
`
`pants and such associations are not eliminated simply because the
`
`former are given a formal designation by the State, vested with a
`measure of government power, and required to follow some procedur-
`
`al rules. See Hallie, supra, at 39. When a State empowers a group of
`active market participants to decide who can participate in its mar-
`
`ket, and on what terms, the need for supervision is manifest. Thus,
`
`
`
`
`
`
`
`3
`
`
`
`
`
`
`
`
`
`
`
`

`
`NORTH CAROLINA STATE BD. OF DENTAL
`EXAMINERS v. FTC
`
`
`Syllabus
`
`the Court holds today that a state board on which a controlling num-
`ber of decisionmakers are active market participants in the occupa-
`
`tion the board regulates must satisfy Midcal’s active supervision re-
`quirement in order to invoke state-action antitrust immunity.
`Pp. 12–14.
`
`
`(4) The State argues that allowing this FTC order to stand will
`discourage dedicated citizens from serving on state agencies that
`regulate their own occupation. But this holding is not inconsistent
`with the idea that those who pursue a calling must embrace ethical
`standards that derive from a duty separate from the dictates of the
`State. Further, this case does not offer occasion to address the ques-
`tion whether agency officials, including board members, may, under
`some circumstances, enjoy immunity from damages liability. Of
`course, States may provide for the defense and indemnification of
`agency members in the event of litigation, and they can also ensure
`Parker immunity is available by adopting clear policies to displace
`competition and providing active supervision. Arguments against the
`
`wisdom of applying the antitrust laws to professional regulation ab-
`
`sent compliance with the prerequisites for invoking Parker immunity
`
`must be rejected, see Patrick v. Burget, 486 U. S. 94, 105–106, partic-
`ularly in light of the risks licensing boards dominated by market par-
`ticipants may pose to the free market. Pp. 14–16.
`
`
`(5) The Board does not contend in this Court that its anticompet-
`itive conduct was actively supervised by the State or that it should
`receive Parker immunity on that basis. The Act delegates control
`over the practice of dentistry to the Board, but says nothing about
`teeth whitening. In acting to expel the dentists’ competitors from the
`market, the Board relied on cease-and-desist letters threatening
`criminal liability, instead of other powers at its disposal that would
`have invoked oversight by a politically accountable official. Whether
`or not the Board exceeded its powers under North Carolina law, there
`
`is no evidence of any decision by the State to initiate or concur with
`the Board’s actions against the nondentists. P. 17.
`
`(c) Here, where there are no specific supervisory systems to be re-
`viewed, it suffices to note that the inquiry regarding active supervi-
`
`sion is flexible and context-dependent. The question is whether the
`State’s review mechanisms provide “realistic assurance” that a non-
`sovereign actor’s anticompetitive conduct “promotes state policy, ra-
`ther than merely the party’s individual interests.” Patrick, 486 U. S.,
`
`100–101. The Court has identified only a few constant requirements
`of active supervision: The supervisor must review the substance of
`the anticompetitive decision, see id., at 102–103; the supervisor must
`have the power to veto or modify particular decisions to ensure they
`accord with state policy, see ibid.; and the “mere potential for state
`
`
`
`4
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`

`
`5
`
`
`
`
`
` Cite as: 574 U. S. ____ (2015)
`
`
`Syllabus
`supervision is not an adequate substitute for a decision by the State,”
`Ticor, supra, at 638. Further, the state supervisor may not itself be
`an active market participant. In general, however, the adequacy of
`
`supervision otherwise will depend on all the circumstances of a case.
`Pp. 17–18.
`717 F. 3d 359, affirmed.
`KENNEDY, J., delivered the opinion of the Court, in which ROBERTS,
`
`
` C. J., and GINSBURG, BREYER, SOTOMAYOR, and KAGAN, JJ., joined.
`
`
`
`
`ALITO, J., filed a dissenting opinion, in which SCALIA and THOMAS, JJ.,
`
`
`joined.
`
`
`
`
`
`
`

`
`
`
`
`
` Cite as: 574 U. S. ____ (2015)
`
`Opinion of the Court
`
`1
`
`
` NOTICE: This opinion is subject to formal revision before publication in the
`
`
`
` preliminary print of the United States Reports. Readers are requested to
`
` notify the Reporter of Decisions, Supreme Court of the United States, Wash­
`
` ington, D. C. 20543, of any typographical or other formal errors, in order
`
`
` that corrections may be made before the preliminary print goes to press.
`
`
`
`
`SUPREME COURT OF THE UNITED STATES
`
`_________________
`
` No. 13–534
`_________________
`
` NORTH CAROLINA STATE BOARD OF DENTAL
`
`EXAMINERS, PETITIONER v. FEDERAL
`
`
`
` TRADE COMMISSION
`
`ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
`
`
`APPEALS FOR THE FOURTH CIRCUIT
`
`
`[February 25, 2015]
`
` JUSTICE KENNEDY delivered the opinion of the Court.
`This case arises from an antitrust challenge to the
`
`actions of a state regulatory board. A majority of the
`board’s members are engaged in the active practice of
`
`the profession it regulates. The question is whether the
`board’s actions are protected from Sherman Act regulation
`under the doctrine of state-action antitrust immunity, as
`defined and applied in this Court’s decisions beginning
`with Parker v. Brown, 317 U. S. 341 (1943).
`I
`
`A
`
`In its Dental Practice Act (Act), North Carolina has
`
`declared the practice of dentistry to be a matter of public
`
`concern requiring regulation. N. C. Gen. Stat. Ann. §90–
`22(a) (2013). Under the Act, the North Carolina State
`Board of Dental Examiners (Board) is “the agency of the
`State for the regulation of the practice of dentistry.” §90–
`22(b).
`The Board’s principal duty is to create, administer, and
`
`enforce a licensing system for dentists. See §§90–29 to
`
`
`
`
`
`
`

`
`2
`
`
`NORTH CAROLINA STATE BD. OF DENTAL
`EXAMINERS v. FTC
`
`Opinion of the Court
`
`90–41. To perform that function it has broad authority
`over licensees. See §90–41. The Board’s authority with
`respect to unlicensed persons, however, is more restricted:
`like “any resident citizen,” the Board may file suit to
`“perpetually enjoin any person from . . . unlawfully prac­
`ticing dentistry.” §90–40.1.
`
`The Act provides that six of the Board’s eight members
`must be licensed dentists engaged in the active practice of
`dentistry. §90–22. They are elected by other licensed
`dentists in North Carolina, who cast their ballots in elec­
`tions conducted by the Board. Ibid. The seventh member
`must be a licensed and practicing dental hygienist, and he
`or she is elected by other licensed hygienists. Ibid. The
`
`final member is referred to by the Act as a “consumer” and
`is appointed by the Governor. Ibid. All members serve
`3-year terms, and no person may serve more than two con­
`secutive terms. Ibid. The Act does not create any mecha­
`
`nism for the removal of an elected member of the Board by
`
`a public official. See ibid.
`
`Board members swear an oath of office, §138A–22(a),
`and the Board must comply with the State’s Administra­
`tive Procedure Act, §150B–1 et seq., Public Records Act,
`§132–1 et seq., and open-meetings law, §143–318.9 et seq.
`The Board may promulgate rules and regulations govern­
`ing the practice of dentistry within the State, provided
`those mandates are not inconsistent with the Act and are
`approved by the North Carolina Rules Review Commis­
`sion, whose members are appointed by the state legisla­
`ture. See §§90–48, 143B–30.1, 150B–21.9(a).
`B
`
`In the 1990’s, dentists in North Carolina started whiten­
`ing teeth. Many of those who did so, including 8 of the
`Board’s 10 members during the period at issue in this
`case, earned substantial fees for that service. By 2003,
`nondentists arrived on the scene. They charged lower
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`

`
`
`
`
`
`
`
` Cite as: 574 U. S. ____ (2015)
`
`Opinion of the Court
`prices for their services than the dentists did. Dentists
`soon began to complain to the Board about their new
`competitors. Few complaints warned of possible harm to
`consumers. Most expressed a principal concern with the
`low prices charged by nondentists.
`Responding to these filings, the Board opened an inves­
`
`tigation into nondentist teeth whitening. A dentist mem­
`ber was placed in charge of the inquiry. Neither the
`Board’s hygienist member nor its consumer member par­
`ticipated in this undertaking. The Board’s chief opera­
`tions officer remarked that the Board was “going forth to
`do battle” with nondentists. App. to Pet. for Cert. 103a.
`
`The Board’s concern did not result in a formal rule or
`regulation reviewable by the independent Rules Review
`
`Commission, even though the Act does not, by its terms,
`specify that teeth whitening is “the practice of dentistry.”
`
`Starting in 2006, the Board issued at least 47 cease-and­
`
`desist letters on its official letterhead to nondentist teeth
`whitening service providers and product manufacturers.
`Many of those letters directed the recipient to cease “all
`activity constituting the practice of dentistry”; warned
`that the unlicensed practice of dentistry is a crime; and
`strongly implied (or expressly stated) that teeth whitening
`constitutes “the practice of dentistry.” App. 13, 15. In
`early 2007, the Board persuaded the North Carolina
`Board of Cosmetic Art Examiners to warn cosmetologists
`against providing teeth whitening services. Later that
`year, the Board sent letters to mall operators, stating that
`kiosk teeth whiteners were violating the Dental Practice
`Act and advising that the malls consider expelling viola­
`tors from their premises.
`These actions had the intended result. Nondentists
`
`
`ceased offering teeth whitening services in North Carolina.
`
`C
`In 2010, the Federal Trade Commission (FTC) filed an
`
`3
`
`
`
`
`
`
`
`

`
`
`
`4
`
`
`NORTH CAROLINA STATE BD. OF DENTAL
`EXAMINERS v. FTC
`
`Opinion of the Court
`
`administrative complaint charging the Board with violat­
`ing §5 of the Federal Trade Commission Act, 38 Stat. 719,
`as amended, 15 U. S. C. §45. The FTC alleged that the
`Board’s concerted action to exclude nondentists from the
`market for teeth whitening services in North Carolina
`constituted an anticompetitive and unfair method of com­
`petition. The Board moved to dismiss, alleging state-
`action immunity. An Administrative Law Judge (ALJ)
`
`denied the motion. On appeal, the FTC sustained the
`ALJ’s ruling. It reasoned that, even assuming the Board
`had acted pursuant to a clearly articulated state policy to
`
`displace competition, the Board is a “public/private hy­
`
`brid” that must be actively supervised by the State to
`claim immunity. App. to Pet. for Cert. 49a. The FTC
`further concluded the Board could not make that showing.
`
`Following other proceedings not relevant here, the ALJ
`conducted a hearing on the merits and determined the
`
`Board had unreasonably restrained trade in violation of
`antitrust law. On appeal, the FTC again sustained the
`ALJ. The FTC rejected the Board’s public safety justifica­
`tion, noting, inter alia, “a wealth of evidence . . . suggest­
`ing that non-dentist provided teeth whitening is a safe
`cosmetic procedure.” Id., at 123a.
`
`The FTC ordered the Board to stop sending the cease­
`and-desist letters or other communications that stated
`nondentists may not offer teeth whitening services and
`products. It further ordered the Board to issue notices to
`
`all earlier recipients of the Board’s cease-and-desist orders
`advising them of the Board’s proper sphere of authority
`and saying, among other options, that the notice recipients
`
`had a right to seek declaratory rulings in state court.
`
`On petition for review, the Court of Appeals for the
`Fourth Circuit affirmed the FTC in all respects. 717 F. 3d
`359, 370 (2013). This Court granted certiorari. 571 U. S.
`
`___ (2014).
`
`
`
`
`
`

`
`
`
`5
`
`
`
` Cite as: 574 U. S. ____ (2015)
`
`Opinion of the Court
`
`
` II
`
`Federal antitrust law is a central safeguard for the
`
`Nation’s free market structures. In this regard it is “as
`
`important to the preservation of economic freedom and our
`free-enterprise system as the Bill of Rights is to the pro­
`tection of our fundamental personal freedoms.” United
`States v. Topco Associates, Inc., 405 U. S. 596, 610 (1972).
`
`The antitrust laws declare a considered and decisive pro­
`hibition by the Federal Government of cartels, price fixing,
`
`and other combinations or practices that undermine the
`free market.
`The Sherman Act, 26 Stat. 209, as amended, 15 U. S. C.
`
`§1 et seq., serves to promote robust competition, which in
`turn empowers the States and provides their citizens with
`opportunities to pursue their own and the public’s welfare.
`See FTC v. Ticor Title Ins. Co., 504 U. S. 621, 632 (1992).
`
`The States, however, when acting in their respective
`
`realm, need not adhere in all contexts to a model of unfet­
`tered competition. While “the States regulate their econ­
`omies in many ways not inconsistent with the antitrust
`laws,” id., at 635–636, in some spheres they impose re­
`
`strictions on occupations, confer exclusive or shared rights
`to dominate a market, or otherwise limit competition to
`achieve public objectives. If every duly enacted state law
`or policy were required to conform to the mandates of the
`Sherman Act, thus promoting competition at the expense
`of other values a State may deem fundamental, federal
`antitrust law would impose an impermissible burden on
`the States’ power to regulate. See Exxon Corp. v. Gover-
`nor of Maryland, 437 U. S. 117, 133 (1978); see also
`Easterbrook, Antitrust and the Economics of Federalism,
`26 J. Law & Econ. 23, 24 (1983).
`For these reasons, the Court in Parker v. Brown inter­
`
`
`preted the antitrust laws to confer immunity on anticom­
`petitive conduct by the States when acting in their sover­
`
`eign capacity. See 317 U. S., at 350–351. That ruling
`
`
`
`
`
`
`
`
`

`
`6
`
`
`
`
`NORTH CAROLINA STATE BD. OF DENTAL
`EXAMINERS v. FTC
`Opinion of the Court
`recognized Congress’ purpose to respect the federal bal­
`
`ance and to “embody in the Sherman Act the federalism
`
`principle that the States possess a significant measure of
`sovereignty under our Constitution.” Community Com-
`munications Co. v. Boulder, 455 U. S. 40, 53 (1982). Since
`1943, the Court has reaffirmed the importance of Parker’s
`central holding. See, e.g., Ticor, supra, at 632–637; Hoover
`v. Ronwin, 466 U. S. 558, 568 (1984); Lafayette v. Louisi-
`ana Power & Light Co., 435 U. S. 389, 394–400 (1978).
`
`III
`
`In this case the Board argues its members were invested
`by North Carolina with the power of the State and that, as
`a result, the Board’s actions are cloaked with Parker
`immunity. This argument fails, however. A nonsovereign
`actor controlled by active market participants—such as
`the Board—enjoys Parker immunity only if it satisfies two
`requirements: “first that ‘the challenged restraint . . . be
`one clearly articulated and affirmatively expressed as
`state policy,’ and second that ‘the policy . . . be actively
`supervised by the State.’” FTC v. Phoebe Putney Health
`System, Inc., 568 U. S. ___, ___ (2013) (slip op., at 7) (quot­
`ing California Retail Liquor Dealers Assn. v. Midcal Alu-
`
`minum, Inc., 445 U. S. 97, 105 (1980)). The parties have
`assumed that the clear articulation requirement is satis­
`fied, and we do the same. While North Carolina prohibits
`
`the unauthorized practice of dentistry, however, its Act is
`silent on whether that broad prohibition covers teeth
`whitening. Here, the Board did not receive active super­
`vision by the State when it interpreted the Act as ad­
`dressing teeth whitening and when it enforced that policy
`
`by issuing cease-and-desist letters to nondentist teeth
`whiteners.
`
`
`
`
`
`
`
`A
`
`Although state-action immunity exists to avoid conflicts
`
`
`
`

`
`
`
`7
`
`
`
` Cite as: 574 U. S. ____ (2015)
`
`Opinion of the Court
`between state sovereignty and the Nation’s commitment to
`
`a policy of robust competition, Parker immunity is not
`unbounded. “[G]iven the fundamental national values of
`free enterprise and economic competition that are embod­
`ied in the federal antitrust laws, ‘state action immunity is
`disfavored, much as are repeals by implication.’” Phoebe
`Putney, supra, at ___ (slip op., at 7) (quoting Ticor, supra,
`at 636).
`
`
`
`An entity may not invoke Parker immunity unless the
`actions in question are an exercise of the State’s sovereign
`power. See Columbia v. Omni Outdoor Advertising, Inc.,
`499 U. S. 365, 374 (1991). State legislation and “deci­
`sion[s] of a state supreme court, acting legislatively rather
`
`than judicially,” will satisfy this standard, and “ipso facto
`are exempt from the operation of the antitrust laws” be­
`cause they are an undoubted exercise of state sovereign
`authority. Hoover, supra, at 567–568.
`
`But while the Sherman Act confers immunity on the
`States’ own anticompetitive policies out of respect for
`federalism, it does not always confer immunity where, as
`here, a State delegates control over a market to a non-
`sovereign actor. See Parker, supra, at 351 (“[A] state does
`not give immunity to those who violate the Sherman Act
`by authorizing them to violate it, or by declaring that their
`action is lawful”). For purposes of Parker, a nonsovereign
`actor is one whose conduct does not automatically qualify
`as that of the sovereign State itself. See Hoover, supra, at
`567–568. State agencies are not simply by their govern­
`mental character sovereign actors for purposes of state-
`
`action immunity. See Goldfarb v. Virginia State Bar, 421
`U. S. 773, 791 (1975) (“The fact that the State Bar is a
`state agency for some limited purposes does not create an
`antitrust shield that allows it to foster anticompetitive
`practices for the benefit of its members”). Immunity for
`state agencies, therefore, requires more than a mere fa­
`
`cade of state involvement, for it is necessary in light of
`
`
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`
`
`
`

`
`8
`
`
`
`
`NORTH CAROLINA STATE BD. OF DENTAL
`EXAMINERS v. FTC
`Opinion of the Court
`Parker’s rationale to ensure the States accept political
`accountability for anticompetitive conduct they permit and
`control. See Ticor, 504 U. S., at 636.
`
`Limits on state-action immunity are most essential
`when the State seeks to delegate its regulatory power to
`active market participants, for established ethical stand­
`ards may blend with private anticompetitive motives in a
`way difficult even for market participants to discern. Dual
`allegiances are not always apparent to an actor. In conse­
`quence, active market participants cannot be allowed to
`regulate their own markets free from antitrust account­
`ability. See Midcal, supra, at 106 (“The national policy in
`favor of competition cannot be thwarted by casting [a]
`gauzy cloak of state involvement over what is essentially a
`private price-fixing arrangement”). Indeed, prohibitions
`
`against anticompetitive self-regulation by active market
`participants are an axiom of federal antitrust policy. See,
`
`e.g., Allied Tube & Conduit Corp. v. Indian Head, Inc., 486
`
`U. S. 492, 501 (1988); Hoover, supra, at 584 (Stevens, J.,
`dissenting) (“The risk that private regulation of market
`entry, prices, or output may be designed to confer monop­
`oly profits on members of an industry at the expense of the
`consuming public has been the central concern of . . . our
`antitrust jurisprudence”); see also Elhauge, The Scope of
`Antitrust Process, 104 Harv. L. Rev. 667, 672 (1991). So it
`follows that, under Parker and the Supremacy Clause, the
`States’ greater power to attain an end does not include the
`lesser power to negate the congressional judgment embod­
`ied in the Sherman Act through unsupervised delegations
`
`to active market participants. See Garland, Antitrust and
`
`State Action: Economic Efficiency and the Political Pro­
`cess, 96 Yale L. J. 486, 500 (1986).
`
`Parker immunity requires that the anticompetitive
`conduct of nonsovereign actors, especially those author­
`ized by the State to regulate their own profession, result
`from procedures that suffice to make it the State’s own.
`
`
`
`
`
`
`
`
`
`

`
`
`
`9
`
`
`
` Cite as: 574 U. S. ____ (2015)
`
`Opinion of the Court
`See Goldfarb, supra, at 790; see also 1A P. Areeda & H.
`Hovencamp, Antitrust Law ¶226, p. 180 (4th ed. 2013)
`(Areeda & Hovencamp). The question is not whether the
`challenged conduct is efficient, well-functioning, or wise.
`See Ticor, supra, at 634–635. Rather, it is “whether anti­
`competitive conduct engaged in by [nonsovereign actors]
`should be deemed state action and thus shielded from the
`antitrust laws.” Patrick v. Burget, 486 U. S. 94, 100
`(1988).
`To answer this question, the Court applies the two-part
`
`test set forth in California Retail Liquor Dealers Assn. v.
`Midcal Aluminum, Inc., 445 U. S. 97, a case arising from
`California’s delegation of price-fixing authority to wine
`merchants. Under Midcal, “[a] state law or regulatory
`
`
`scheme cannot be the basis for antitrust immunity unless,
`first, the State has articulated a clear policy to allow the
`anticompetitive conduct, and second, the State provides
`active supervision of [the] anticompetitive conduct.” Ticor,
`supra, at 631 (citing Midcal, supra, at 105).
`Midcal’s clear articulation requirement is satisfied
`
`“where the displacement of competition [is] the inherent,
`logical, or ordinary result of the exercise of authority
`delegated by the state legislature. In that scenario, the
`State must have foreseen and implicitly endorsed the
`
`anticompetitive effects as consistent with its policy goals.”
`Phoebe Putney, 568 U. S., at ___ (slip op., at 11). The
`
`
`active supervision requirement demands, inter alia, “that
`state officials have and exercise power to review particular
`anticompetitive acts of private parties and disapprove
`those that fail to accord with state policy.” Patrick, supra,
`
`U. S., at 101.
`The two requirements set forth in Midcal provide a
`
`proper analytical framework to resolve the ultimate ques­
`
`tion whether an anticompetitive policy is indeed the policy
`of a State. The first requirement—clear articulation—
`rarely will achieve that goal by itself, for a policy may
`
`
`
`
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`
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`
`
`

`
`
` 10
`
`
`NORTH CAROLINA STATE BD. OF DENTAL
`EXAMINERS v. FTC
`Opinion of the Court
`satisfy this test yet still be defined at so high a level of
`generality as to leave open critical questions about how
`and to what extent the market should be regulated. See
`Ticor, supra, at 636–637. Entities purporting to act under
`state authority might diverge from the State’s considered
`definition of the public good. The resulting asymmetry
`between a state policy and its implementation can invite
`private self-dealing. The second Midcal requirement—
`active supervision—seeks to avoid this harm by requiring
`the State to review and approve interstitial policies made
`by the entity claiming immunity.
`
`Midcal’s supervision rule “stems from the recognition
`that ‘[w]here a private party is engaging in anticompeti­
`tive activity, there is a real danger that he is acting to
`further his own interests, rather than the governmental
`interests of the State.’” Patrick, supra, at 100. Concern
`about the private incentives of active market participants
`animates Midcal’s supervision mandate, which demands
`“realistic assurance that a private party’s anticompetitive
`conduct promotes state policy, rather than merely the
`party’s individual interests.” Patrick, supra, at 101.
`B
`
`In determining whether anticompetitive policies and
`
`conduct are indeed the action of a State in its sovereign
`capacity, there are instances in which an actor can be
`excused from Midcal’s active supervision requirement. In
`Hallie v. Eau Claire, 471 U. S. 34, 45 (1985), the Court
`
`held municipalities are subject exclusively to Midcal’s
`“‘clear articulation’” requirement. That rule, the Court
`
`observed, is consistent with the objective of ensuring that
`the policy at issue be one enacted by the State itself.
`Hallie explained that “[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
`
`
`
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`
`
`
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`
`

`
`
`
` Cite as: 574 U.

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