Last week we posted the Federal Trade Commission’s Active Supervision Guidelines for industry boards. The Guidelines set some substantial standards for the independent state agency or attorney general that provides supervision over an industry board. When that agency or attorney fails to satisfy the supervision requirements, the industry members are exposed to personal liability when they pass regulations or pursue litigation that restrains trade regardless of whether the actions are consistent with a statue or a clearly articulated state policy. Until the North Carolina Dental Board decision, states felt that so long as the board action was consistent with restraints authorized by a state law or a clearly articulated state policy, a low level of supervision would suffice to provide their industry members the exemption from anti-trust litigation. In preparing the Guidelines, the FTC staff addressed those ‘low levels of supervision’ as a warning to states of what would fail to constitute active supervision:
The following do not constitute active supervision of a state regulatory board that is controlled by active market participants:
The entity responsible for supervising the regulatory board is itself controlled by active market participants in the occupation that the board regulates. See N.C. Dental, 135 S. Ct. at 1113-14.
A state official monitors the actions of the regulatory board and participates in deliberations, but lacks the authority to disapprove anticompetitive acts that fail to accord with state policy. See Patrick v. Burget, 486 U.S. 94, 101 (1988).
A state official (e.g., the secretary of health) serves ex officio as a member of the regulatory board with full voting rights. However, this state official is one of several members of the regulatory board and lacks the authority to disapprove anticompetitive acts that fail to accord with state policy.
The state attorney general or another state official provides advice to the regulatory board on an ongoing basis.
An independent state agency is staffed, funded, and empowered by law to evaluate, and then to veto or modify, particular recommendations of the regulatory board. However, in practice such recommendations are subject to only cursory review by the independent state agency. The independent state agency perfunctorily approves the recommendations of the regulatory board. See Ticor, 504 U.S. at 638.
An independent state agency reviews the actions of the regulatory board and approves all actions that comply with the procedural requirements of the state administrative procedure act, without undertaking a substantive review of the actions of the regulatory board. See Patrick, 486 U.S. at 104-05.
Ten years ago, the members of the Missouri State Board of Embalmers and Funeral Directors were defendants in anti-trust litigation brought first by the Institute for Justice and then by the Federal Trade Commission. That state board sought to enforce their funeral directing licensure regulation against an individual selling caskets. At that time, the State Board was accountable to the Division of Professional Registration, and was advised by the Missouri Attorney General’s office on an on-going basis. However, the State of Missouri failed the State Board on both prongs of the Active Supervision Guidelines. The Board was allowed to pursue trade restraining actions which were not defined by statute or articulated state policy, and the supervising entity/individual failed to provide, and document, a substantive review.