Last summer the Federal Trade Commission launched a curious attack on the State of North Carolina, alleging a state regulatory agency had exceeded its legislative mandate. The FTC claims, in essence, that it has an unqualified right to nullify state government policies it disagrees with. Unlike the typical FTC defendant that settles without a contest, the state has opted to fight back, and in doing so may instigate an important showdown over the role of federalism.
The subject of the dispute is fairly straightforward. The North Carolina State Board of Dentistry, which is charged by the North Carolina General Assembly with regulating and licensing the practice of “dentistry,” previously held the definition of “dentistry” included any business that provided teeth-whitening services. The FTC’s position is that one should not have to be a dentist to merely whiten teeth; the Commission says the Board is simply trying to maintain and expand the state’s dental monopoly, as highlighted by the fact the Board is composed of licensed dentists.
Since the FTC lacks self-awareness or humility, it can make arguments that are self-serving and hypocritical. There’s no question the North Carolina policy is monopolistic and violates the basic tenets of free markets. But North Carolina has done nothing that the FTC hasn’t done a thousand times itself. The FTC — often in conjunction with its sister agency, the Food and Drug Administration — routinely pushes the outer boundaries of the federal monopoly over all sorts of so-called medical devices, to the point where it violates FTC regulations to merely speak of the potential medicinal benefits of any substance without pre-approval from the FTC or FDA.
In its pretrial brief to the FTC, the State Board applied exactly the same standards that the Commission uses when deciding to restrict competition in the name of “protecting consumers,” namely that the FDA and related government agencies hold a lawful monopoly over scientific truth:
[T]here is a plethora of scientific evidence available to support the state’s requirement that teeth whitening service providers have a dental license. Scientific journals, the Food and Drug Administration (FDA), and numerous reports by investigative journalists all express concern about the dangers of teeth whitening by unlicensed, unsupervised non-dentists. See, e.g. an FDA report regarding the concentrations of the chemicals commonly used in teeth whitening. Dept. of Health and Human Services, Food and Drug Administration, Oral Health Care Drug Products for Over-the-Counter Human Use; 21 CFR Part 356; see also Michel Goldberg, M. Grootveld, and E. Lynch, Undesirable and Adverse Effects ofTooth-Whitening Products: A Review, CLINICAL ORAL INVESTIGATIONS (Feb. 6,2009).
Other U.S. states, as well as the United Kingdom and the rest of the European Union, have similar laws and rules requiring teeth whitening services to be supervised by licensed dentists. See Okla. Op. Att’y Gen. No. 03-13 (Mar. 26, 2003), 2003 Okla. AG LEXIS 13, at *7-8; Kan. Op. Att’y Gen. No. 2008-13 (June 3, 2008), 2008 Kan. AG LEXIS 13, at 8; Mo. Ann. Stat. § 332.366 (all defining teeth whitening services as the practice of dentistry); see also White Smile USA, Inc. v. Bd. of Dental Exam’rs of Alabama, 36 So. 3d 9, 13 (Ala. 2009) (affirming a lower court’s holding that teeth whitening should be regulated as the practice of dentistry because of safety concerns); see also Scientific Committee on Consumer Products, European Commission Health & Consumer Protection Directorate-General, Doc. No. SCC0/1129/07, OPINION ON HYDROGEN PEROXIDE, IN ITS FREE FORM OR WHEN RELEASED, IN ORAL HYGIENE PRODUCTS AND TOOTH WHITENING PRODUCTS (European Commission 2007).
In its own pretrial brief, the Commission maintains its “experts” believe non-dentist tooth whitening is perfectly safe. The FTC is probably right, but that’s not the point. In other cases where the FTC decided more government and less competition was beneficial to “the public,” the Commission disregarded any expert opinion that is not its own. Just recently, the Third Circuit Court of Appeals held that individuals and businesses could not make their own determinations of what constituted “reliable and competent scientific evidence” — only the FTC and FDA could make such determinations. The State Board here is guilty of refusing to respect the federal monopoly over science, not, as the FTC claims, restricting competition based on non-scientific claims.
The second major prong of the FTC’s attack is the composition of the State Board itself. Normally federal antitrust law does not apply to the acts of state governments. To get around this problem, the FTC claims the State Board is really a “private actor” because, “The Board and its constituents (licensed dentists) have a financial incentive to exclude non-dentists and in restrain competition.” Again, this is probably true. And again, the FTC is a pot calling the kettle black. The Commission is composed entirely of professional antitrust lawyers. Its constituents are professional antitrust lawyers. Every FTC act is designed to expand the Commission’s authority — its regulatory monopoly — and by direct extension, increase the demand for, and fortunes of, its constituents in the antitrust bar.
This case is no different. If the FTC prevails, it will have every incentive to attack other state regulatory decisions it claims violate federal antitrust law. It will create a boom market for the lawyers these states will retain to deal with the Commission.
Of course, there’s that minor issue of “federalism.” First, it’s not really clear how a state decision to exclude competition within the state triggers the federal government’s authority over interstate commerce. The FTC barely addresses this. Basically, its position seems to be that since some of the teeth-whitening chemicals are purchased from out-of-state vendors, that creates enough of an “effect” on interstate commerce to justify the Commission’s action against the State Board. Yet this entire case is premised on restrictions for the provision of services, not the sale or trade of supplies across state lines.
Second, while nobody should shed a tear for unelected state regulators, one should not rush to embrace unelected federal regulators in response. As the State Board concluded in its pretrial brief:
In the Commission’s proposed relief, it seeks to force the State Board to ignore its own common-sense understanding of the plain language in statutory definition of the practice of dentistry, and forces the state of North Carolina to redraft its laws regarding majority licensee board composition or oversight. The Commission seeks this relief without any statutory authorization, or legislative intent hinting at such authorization, and in defiance of decades of contrary case law. This breathtaking assertion of jurisdiction where none exists defies the rule of law at every level. State statutes, federal laws, and the U.S. Constitution are all put aside, just so the Commission can achieve its lobbied-for goal: jurisdiction over majority licensee state agencies where both the federal legislative and judicial branches have denied it.
There’s a clear Tenth Amendment conflict. Congress — acting through its abusive child, the FTC — does not have plenary “police power,” which includes occupational licensing. The Tenth Amendment states, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Whether one agrees with the State Board’s actions or not, it’s an internal matter to be dealt with by the people and government of North Carolina. It is not a federal question.
Now if the FTC wants to argue that any state regulatory action that hurts competition violates federal antitrust law, that’s different. But then the FTC should be prepared to take down entire regulatory schemes, not just token scalps. In other words, if the State Board can’t restrict the practice of teeth whitening to licensed dentists, it shouldn’t be allowed to restrict the practice of dentistry to licensed dentists either. But the FTC would never go that far.
There is a side argument in this case that’s worth mentioning briefly. The first is the State Board’s motion to move the administrative trial from the FTC offices in Washington DC to a site in Raleigh, North Carolina. In addition to appointing the judge and the prosecutors, the FTC always insists on home-field advantage. It rarely allows trial of any cases outside its own building. This goes against one of the basics of common law, which is that cases should be tried in the place where the offense occurred. As the State Board noted, most of the FTC’s witnesses live in North Carolina and none live in DC. It’s a hardship to the witnesses and the Board to try the case in DC.
The FTC, of course, was not sympathetic. D. Michael Chappell, the FTC-appointed judge overseeing the case, denied the request to change location, citing primarily the burden it would place upon him. He claims he has to try three other FTC cases in May, so even though the State Board case is scheduled for this month, he just can’t move things around to permit this case to be held in a locale that’s more convenient for the parties and witnesses. Chappell also groused that he’d received “insufficient” assurances from the State Board that Raleigh even had courtroom facilities adequate enough to His Honor’s liking. (Incidentally, Chappell also denied a change-of-venue motion in one of his other cases — this one seeking to relocate to southern California — again claiming it was more efficient if everyone came to him.)
In a sense, Chappell is in a bad position. His bosses, the commissioners, have determined to increase the amount of litigated cases as a matter of policy — Commissioner John Thomas Rosch has come out and said so. The commissioners also declined to appoint a second administrative law judge, which there was until a couple years ago, to share the workload with Chappell. And of course outside judges or — heaven forbid — impartial juries are out of the question. The FTC only intends to provide the appearance of due process, not the real thing.
Still, this is a risky case for the Commission because it’s fighting an opponent that is essentially a mirror for themselves. This is bureaucrat-on-bureaucrat crime. The State Board has no compunction about spending whatever it takes to beat the FTC; they’re financed by taxpayers just like the Commission. And the FTC, I strongly suspect, is just itching to get through the administrative process and into the court of appeals, where it’s hoping for an expansive mandate to act as a “super-regulator” over the states.
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What was it Stalin said, “How many divisions does the Pope have?” What can the FTC do to NC if the state basically says “go to hell”? It’s kind of a hypothetical, rhetorical, and speculative question. I mean, if the state basically refuses to accept the FTC’s suzerainty, what actions would the FTC take?
A final FTC order is the same as any other court order. If the State Board ignored it, the FTC could seek a contempt citation in federal court and fine and/or imprison the Board members if they refused to comply. Of course, it would be interesting to see if North Carolina officials resisted that.
Such a confrontation is the only way that state nullification will ever get any legitimacy. The day the state’s enforcement thugs physically stand in the way of the Federal enforcement thugs is the day that nullification becomes reality. Until then, it’s only so much talk.
It’s like the mob telling a local gang, “Hey, it’s not nice to shake down these poor little Mom & Pop stores… besides, that’s our job!”
I’ve been reading a lot of medieval history lately – the Pageant of England series of popular histories by Thomas B. Costain.
I can therefore instantly recognize this battle between regulatory agencies for what it is – a struggle between royal (national) and baronial (regional) factions over who will control and tax the various types of commerce taking place in the realm.
Although Costain does not make this point explicitly – having far too much of the usual mainstream historian’s awe and respect for so-called majesty and for what he evidently believes is the natural duty of people to be governed – it is obvious that this struggle is nothing but a fight between violent gangs over loot and power. It does not matter how “kingly” or “democratic” is the process of government, or whether the factions pretend to be limited by the rule of law. Whenever there is an attempt to control society by violence then there will inevitably be desperate factional struggles in which logic, humility and decency are the first casualties.
Basically this was Dracula vs Godzilla. Whoever won, we all lose.
The only difference is the degree loss. While Dracula is most certainly bad, the level of damage he can do is much less than Godzilla.
That’s right, assuming you associate the FTC with Godzilla. The minor, regional tyrants have a narrow scope in which to rob and plunder, and they have less recourse to armed backup if they encounter serious resistance. In order to avoid driving all wealth and commerce out of their jurisdiction they must limit their stealing to approximately the level of the neighboring gangs. Godzilla on the other hand, as long as it can print the World Reserve Currency and thus maintain its world-beating military strength, has essentially no limits on the amount of wealth it can appropriate, either domestically or internationally.
“[T]here is a plethora of scientific evidence available to support the state’s requirement that teeth whitening service providers have a dental license. Scientific journals, the Food and Drug Administration (FDA), and numerous reports by investigative journalists all express concern about the dangers of teeth whitening by unlicensed, unsupervised non-dentists”
O_O wait… does this mean that government can one day prevent me from whitening my own teeth via a toothbrush and toothpaste? I really hope things don’t get this absurd that I will need a dental license to brush my teeth due to some made up harmful effect. lol
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