In this past week’s Memorial Business Journal, the NFDA’s general counsel offered insight on the FTC’s guidelines to state supervision of industry regulatory boards.  In a decision that rocked state boards comprised of industry members, the United States Supreme Court affirmed a decision that had held members of the North Carolina Dental Board subject to antitrust liability.  The eventual impact of that decision was difficult to predict because the North Carolina Dental Board argued that it had sovereign immunity without addressing the supervision provided by the State of North Carolina.  In response to requests from states, the Federal Trade Commission issued supervision guidelines last October (FTC Staff Guidelines on Active Supervision of State Regulatory Boards Controlled by Market Participants).

The NFDA general counsel suggests that the FTC Active Supervision guidelines would leave states three courses of action to protect industry boards from antitrust liability: 1) change the composition of the industry board; 2) convert the regulatory board to an advisory board; or 3) create a regulatory oversight body or person.  But, an attorney for a regulatory watchdog organization recently provided our office suggestions and information that shed light on how industry boards already have ‘supervisory bodies’ that are simply failing to meet the FTC’s guidelines.  A board’s supervisory body need not satisfy the guidelines with regard to each regulation or decision, but rather with regard to actions that involve credible assertions of anti-competitive or antitrust consequences.  Taking the Missouri State Board of Embalmers and Funeral Directors as an example, the Board is staffed and ‘supervised’ by the Division of Professional Registration.   The Division personnel would not have to ‘rise’ to the FTC Active Supervision guidelines on every rule proposed or discipline proceeding instituted, but rather only on actions where there has been a credible assertion of antitrust implications.

To illustrate that suggestion, we wrote last year regarding the Missouri Funeral Directors Association raising the North Carolina Dental Board decision in the context of the State Board’s examination procedures.  It was never explained how the examination procedures or the proposals for future audits suppress competition in favor of all or part of the funeral industry.  Assume instead that the Association made a credible claim that the exam procedures had antitrust implications.   If the State Board then proceeded to promulgate the examination rule without the Division staff satisfying the FTC Active Supervision guidelines, the State Board members would then open themselves up to personal liability for an antitrust violation.

If there is a current context that may be ripe for the application of the FTC Active Supervision guidelines, it may be the restriction of insurance funded products by state funeral boards.  We will explore that issue in further detail in a future post.

*”Reprinted with permission from the February 4, 2016 issue of the Memorial Business Journal. To subscribe please call 609-815-8145.”