High court considers if state boards serve public or limit competition

States have the power to license doctors and lawyers, and prevent others from offering consumers medical or legal services at a lower cost. But what about the licensing of floral designers, cosmetologists, hair braiders, interior designers or casket makers?

The Supreme Court heard a major challenge Tuesday to the growing number of state licensing boards that critics say serve mostly to limit competition and raise prices for consumers.

At issue is the North Carolina Board of Dental Examiners, which took legal action against shopping-mall kiosks that offered teeth whitening. Dentists offer the same service but charge more.

The state dental board, which is made up of dentists who are elected by other dentists, declared the kiosks were engaged in the unlawful practice of dentistry.

The Federal Trade Commission, which enforces antitrust laws, brought a complaint against the North Carolina state board. It said the board was acting to protect dentists from competition. A U.S. appeals court agreed, saying the board was not acting in the public interest.

During arguments Tuesday, some justices sounded as though they were inclined to rule against the North Carolina board but others were troubled about the effect of such action on other medical boards.

In the North Carolina case, the members of the board are elected and are “a group of private actors who have a self-interest,” said Justice Sonia Sotomayor.

Justices Elena Kagan and Anthony M. Kennedy agreed, saying the dental board seemed more like a trade industry association than a state regulatory body.

But Justice Stephen G. Breyer said that when a state board is regulating brain surgery, he wants the decisions to be made by practicing brain surgeons. “I don’t want bureaucrats to decide,” he said.

Malcolm Stewart, a Justice Department lawyer, urged the court to rein in state licensing boards whose members have an economic self-interest in preventing competition.

A University of Pennsylvania Law Review article published this summer highlighted the growth of these boards and described them as “cartels by another name.”

Federal antitrust laws are supposed to protect competition, but these state boards act to limit competition, experts say.

“The Sherman Act’s greatest accomplishment has been to make cartels per se illegal and relatively scarce, unless the cartel is managed by a professional licensing board,” wrote UC Berkeley law professor Aaron Edlin and Vanderbilt University law professor Rebecca Haw.

The Supreme Court said it took up the case to try to decide when a state licensing board is regulating to serve the public interest and when it is acting to protect the private interests of its licensed members.

Twitter: @DavidGSavage