The Wise Report
Henry M. Wise, P.G.
November 24, 2018
At the Texas Sunset Advisory Commission’s (TSAC’s) decision meeting in November 2018 the TSAC repeatedly expressed concern about a “North Carolina problem”. They didn’t explain what the problem was, but we have found out what it was about.
The North Carolina Board of Dental Examiners is the state entity that oversees licensure and discipline of dentistry and dental hygienists. State law in North Carolina, similar to the practice in other states, requires six of the eight members of the Board to be licensed, practicing dentists. When the Board began issuing cease-and-desist orders to non-dentists offering tooth whitening services, asserting that only licensed dentists could whiten teeth under state law, the Federal Trade Commission brought an administrative complaint against the Board for anticompetitive practices. The FTC eventually held that the Board’s actions are not entitled to immunity from federal antitrust law, as state action typically is, because its operations were not actively supervised by the state of North Carolina. The Board appealed the FTC’s decision, eventually pushing the question to the US Supreme Court.
In an opinion by Justice Anthony Kennedy, the Court upheld the FTC’s decision. Especially important to the Court’s analysis was the fact that dentists, who derive some of their income from teeth whitening services, largely controlled the Board of Dental Examiners. Justice Kennedy stressed this point, finding the need for antitrust law particularly great “in light of the risks licensing boards dominated by market participants may pose to the free market.” The Court declined to exactly fix a line for what constitutes excessive control of a licensing board, saying only that the determination is context-dependent. The Court also agreed with the FTC’s position regarding the lack of state oversight of the Board, reaffirming the requirements of active state supervision: (1) supervision is substantive, not merely procedural; (2) the supervisor may veto or modify decisions of the Board; (3) the mere potential for review is not a substitute for actual supervision; and (4) the supervisor may not itself be a market participant. Since the Board of Dental Examiners was not subject to any state oversight at all and was largely dominated by market participants, it clearly did not meet these requirements.
While the full implications of the case are not yet clear, litigation has begun to proceed under the new precedent and several states have taken steps to shore up their review of state licensing boards in light of the decision.
In Texas, a judge allowed a suit against the Texas Medical Board to proceed after finding that neither the sunset review process nor the administrative review process in §2001.174 of the government code met the requirements of the North Carolina Case. See Teladoc, Inc. v. Texas Med. Bd., No. 1:15-CV-343-RP, 2016 WL 4362208, at *4 (W.D. Tex. Aug. 15, 2016). And though its decision was based on other law, the Texas Supreme Court cited the logic of the North Carolina case favorably in Patel v. Texas Dep't of Licensing & Regulation, 469 S.W.3d 69, 108 (Tex. 2015), explaining that that the law "no longer insulates regulators regulating to anticompetitive effect. Licensing boards comprised of private competitors will face Sherman Act liability if they flex power to smother aspiring entrepreneurs."
The TSAC is discussing an omnibus bill that covers every licensing Board to comply with the ruling – meaning adding additional members to Boards to ensure “licensing boards are not dominated by market participants.”
The State Legislature meets starting January 8, 2019 and bills are already being filed. New information is listed in bold (five new bills listed):
HB 223, by Reynolds, Relating to the funding through greenhouse gas emissions fees of energy efficiency programs administered by certain utilities; authorizing a fee. Filed 11/12/2018. For more information go to: https://capitol.texas.gov/BillLookup/history.aspx?LegSess=86R&Bill=HB223
HB 225, by Reynolds, Relating to the analysis of inspection and maintenance requirements for air quality permits issued by the Texas Commission on Environmental Quality for certain oil and gas facilities. Regulates fugitive emissions from all oil field equipment, the use of venting and flaring, etc. Filed 11/12/2018. https://capitol.texas.gov/BillLookup/history.aspx?LegSess=86R&Bill=HB225
HB 245, by Farrar, Relating to a requirement to make certain environmental and water use permit applications available online. "The applicant shall post a copy of the application on a publicly accessible Internet website and provide to the commission the address of that website." Filed 11/12/2018. https://capitol.texas.gov/BillLookup/history.aspx?LegSess=86R&Bill=HB245
SB 179, by Miles, Relating to the establishment of a task force to conduct a comprehensive study on flood control infrastructure for Harris County. Received by the Secretary of the Senate 11/14/2018. https://capitol.texas.gov/BillLookup/history.aspx?LegSess=86R&Bill=SB179
SB 185, by Miles, Relating to the response to certain oil or gas well accidents by state agencies and responsible parties. An operator of an oil or gas well shall give immediate notice of a fire, leak, spill, or break at the well to the appropriate commission oil and gas division district office and submit to the commision a letter giving a full description of the event, including the volume of crude oil, gas, or other well liquids or gases lost. Received by the Secretary of the Senate 11/14/2018. https://capitol.texas.gov/BillLookup/history.aspx?LegSess=86R&Bill=SB185
Henry M. Wise, P.G.
The Wise Report