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U.S. high court: Who best judges fair competition?

October 13, 2014

The U.S. Supreme Court is set to hear a North Carolina case over whether U.S. states can delegate the regulation of professions such as dentistry, plumbing, cosmetology and more to boards of practitioners drawn from those occupations.

The issue set for a hearing before the justices Tuesday is whether state-established boards such as those for dentists, veterinarians, doctors and cosmetologists can regulate their occupations without fear of running afoul of federal antitrust laws.

The specific case before the court involves a 2007 decision by the North Carolina Board of Dental Examiners warning operators of teeth-whitening kiosks in malls and tanning salons that they were practicing dentistry without a license. The Federal Trade Commission has said that state's dental board engaged in unfair competition in the market for teeth-whitening services.

"Almost everyone from a plumber to the best heart surgeon in the country is affected by one of these boards. Anyone who uses their services is affected by these boards," said Lisa Soronen, executive director of the State & Local Legal Center. That group represents public officials from governors to city council members.

The number of occupations that set educational requirements and other qualifications for work in a field ranges from dozens to hundreds, depending on the state. The issue is becoming increasingly important as more jobs in the growing service sector require licenses.

Americans required to have a government-issued license to work has grown from about 5 percent in the 1950s and 15 percent in the 1970s to about 30 percent today, according to a study co-authored by Princeton economist Alan Krueger, former chairman of President Obama's Council of Economic Advisers.

In 2007, the North Carolina Board of Dental Examiners to warn operators of teeth-whitening kiosks in malls and tanning salons that they were practicing dentistry without a license. The board also sent cease-and-desist letters to malls where the kiosks operated.

The teeth-whitening businesses were pressured into closing and customers turned instead to higher-priced dentists who generally charged $300 to $700 for over-the-counter kits. The state dental board sued the FTC in 2011, saying the agency overstepped its authority in claiming the board had engaged in unfair competition.

Kiosk operators did not return several messages from The Associated Press seeking comment.

The question before the Supreme Court is whether a regulatory board created by state law is exempt from federal antitrust law even if most of the board's members earn their livings from the profession they're overseeing.

A lower appeals court sided with the FTC in the most recent verdict in a case that has been working through the courts since 2011. One judge said the North Carolina board would have had a stronger case if its members were elected or appointed by state government officials rather than by other dentists.

Similar court battles have been fought from Connecticut to Wyoming as regulators argue they are protecting the public's health. An Alabama judge ruled this month that teeth-whitening products containing up to 16 percent hydrogen peroxide pose health risks and should be left to dentists.

The Supreme Court has heard from nearly two dozen states from Hawaii to Virginia who argued the lower court ruling favoring the FTC "punishes states for their sovereign choices as to how to staff and supervise their regulatory boards."

States have chosen to staff occupational oversight boards with members from the same field because their professional knowledge provides the best insights, a brief filed on behalf of the group said.

Soronen said that with thousands of these occupational boards operating from coast to coast, adding a layer of appeals to their decisions would be unwieldy. She outlined for the court the position of the National Governors Association, the National League of Cities and other groups.

"It's hard to actively supervise all these boards when there are so many of them. I think it's also not realistic to get rid of them. We live in a society that's largely safe and where things are looked at twice because we have these boards and commissions that are making decisions that keep professions on the right track," she said.

Having disinterested hearing examiners and an appropriate review process isn't too much to ask of states, said University of Wisconsin law professor Peter Carstensen.

Carstensen, a senior fellow of the liberal American Antitrust Institute, has sided with the FTC's position.

"Frankly, doctors, dentists, lawyers, beauticians, barbers, they have obvious incentives to exclude competition, to restrict entry beyond anything that is reasonably necessary," he said. "We have a real problem in this country with more and more trades trying to get some form of regulatory system and exclusion of competitors."

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