Contact: Barbara Arango                                                                                                                   
Phone: (847) 559-3272                                                                                                                                            

October 16, 2015

The Federation of Associations of Regulatory Boards Responds to FTC Staff Guidance on Active Supervision


Northbrook, IL - On October 14, 2015, the Staff of the Bureau of Competition of the Federal Trade Commission (FTC) issued its Guidance on Active Supervision of State Regulatory Boards Controlled by Active Market Participants.   The views of the Staff do not constitute regulations and they are not legally binding on the FTC.  This Guidance document is subject to continued interpretation and modification; however, this Guidance document will likely be afforded weight in interpreting the requirements imposed by the recent United States Supreme Court case of North Carolina State Board of Dental Examiners v. FTC, 135 S. Ct. 1101 (2015). 

The Guidance document reiterates the ruling of the Supreme Court, provides an overview of the state action defense and, of substance, sets forth guidance on the state oversight requirement imposed upon state boards seeking to assert a state action defense in response to claims under the antitrust laws.  As a precursor to any analysis, the actions of the state board must first involve activities that initiate an application of the antitrust laws.  Further, the Guidance document notes the need for a clearly articulated state policy, the first prong of an analysis of the state actor defense to antitrust allegations.

In particular, the Guidance document addresses and attempts to provide clarity as to the second prong of the state actor defense, that being the active state oversight requirement.  Pursuant to the Supreme Court decision, active state oversight is required when a controlling number of decision makers on a state board are active market participants.  The Guidance document concludes that active market participants are an encompassing group.  All licensees serving on boards, whether currently practicing and/or participating in a sub-specialty, are deemed to be active market participants.  Thus, the Guidance document does not distinguish between professionals that may or may not "compete" in the market. 

The method of selection is irrelevant as to whether or not such board member is an active market participant.  Gubernatorial appointment will not relieve the active oversight requirement where a board is "controlled" by active market participants.  Finally, a controlling number on the state board need not be a majority of decision makers.  The number of active market participants constituting a controlling number will be determined on a case by case basis and mere numbers will not be determinative. 

Addressing what constitutes "active supervision", the Guidance document emphasizes the need for accountability on the part of the state.  After noting the four elements to the test set forth by the Court, the Guidance document addresses presence or absence of various factors to consider when determining what constitutes active supervision.    It is clear that the expected "supervisor" (person or agency) must have substantive authority to review the basis for the board decision and an obligation to issue a written decision to approve/modify/disapprove such decision.  The supervisor cannot be an active market participant.  The Guidance document provides examples of both acceptable and non-acceptable active supervision. 

The Guidance document addresses the necessity of active supervision in individual disciplinary cases.  It suggests examples of oversight include an administrator, state attorney general, or other state official who reviews the evidence, supplements as appropriate, undertakes a de novo review, and issues a written decision that approves/modifies/disapproves the intended action.  As referenced above, the proposed action of the board must first be determined to initiate an application of the antitrust laws and a single disciplinary action likely has a de minimis effect on competition.

FARB has already modified its Uniform Model Practice Act to begin to address the statutory perspective of active oversight.  Further, recent and upcoming FARB conferences continue to focus on this important topic.  FARB would like to emphasize that the state actor doctrine is a defense to antitrust allegations.  State boards are encouraged to continue to educate their members on the important role they play as public protectors.  As it becomes available, FARB will disseminate additional information to our membership.   

About FARB

FARB is a not for profit, 501(c)(3) organization incorporated in 1974 to promote public protection and provide a forum for information exchange for associations of regulatory boards and their stakeholders with interests in professional regulation. The mission of FARB is to promote excellence in regulation for public protection by providing expertise and innovation from a multi-professional perspective.