Next month the Supreme Court will consider an antitrust case that pits federalism against occupational freedom. Over the last decade, individuals and companies who are not practicing dentists have begun offering teeth whitening services. In North Carolina a state board has told them to desist. What makes the case interesting under antitrust law is that the substantial majority of the board is elected by dentists and dental hygienists—precisely the groups that stand to lose from this competition. The Federal Trade Commission challenged their action as a restraint of trade and the Fourth Circuit Court of Appeals sustained its decision.
Antitrust law seeks a competitive marketplace. There is little doubt that it would condemn a private agreement among dentists to keep out competitors. It would be obviously the case that the potential competitors cannot evaluate health risks dispassionately. But for reasons of federalism antitrust law exempts state action from its strictures even if that action is blatantly skewed to protect producers. Here the question is whether the Court will permit the state to cloak the actions of private competitors in its own authority.
In this area Court has substantial authority to shape doctrine in the public interest. The state action exemption does not appear in the Sherman Act itself but has been read into the Act in order to reflect principles of federalism. For me a key point is that the federalism exemption should require bona fide action of the state, but in this case the decisions are taken not by state officials, but by private actors elected by interested parties. A proper interpretation of federal constitutional law would not allow Congress to delegate its government power to private actors. For instance, Congress should not be permitted delegate its regulatory authority over telecommunications firms to regulators elected by those firms. Analogously, the Supreme Court should say that considerations of state sovereignty recognized as an exception to the scope of antitrust law cannot extend to delegations to private actors.
Subjecting the actions of such self-interested boards to antitrust law will be a boon to occupational freedom. Economists have noted the rise of licensing schemes in the United States that often serve to protect incumbents without offering any substantial public benefits. Excessive occupational licensing may contribute to structural unemployment and certainly raises the cost of services. Consumers of legal services may have particular reason to cheer. In many states bar regulation is run by lawyers and these bars have tried to prevent disruptive competition generated by new computer technology. It is interesting to note that LegalZoom, a company that uses computers to generate consumer legal documents, like wills, filed an amicus brief on the side of the FTC.
Of course, a favorable Supreme Court ruling will not prevent interest groups from influencing state officials to maintain protectionist rules, even if boards of self-interested regulators are disbanded. But state bureaucrats will at least be subject to some countervailing forces, like considerations of their own craft and pressure from consumer groups.
