I saw a very interesting decision in a case called North Carolina Board of Dental Examiners v. FTC the other day. It should make some of us worry.
What happened is that the NC Board, which is made up of six dentists, one dental hygienist and one consumer member, issued cease and desist letters to 47 non-dentist, teeth-whitening providers, many of whom practiced their art in kiosks at malls and other high-traffic places. The board also asked the malls not to lease these non-professionals space in the future. The complaints which prompted the investigation and orders came from dentists who rightly believed that they were losing market share to the mall operations. The dentist members of the board voted unanimously to drive these competing businesses out.
So the professionals won! Well, not exactly. Not long after the dentists’ celebration ended, the Federal Trade Commission served them with an administrative complaint alleging that they had violated the Sherman Antitrust Act. An administrative law judge agreed and enjoined them from issuing such orders to teeth whiteners in the future.
On appeal, the dental board claimed that it was a state actor and immune from federal prosecution. This made some sense, as the board was appointed by the governor and was seemingly carrying out state policy related to the regulation of dentistry. Unfortunately, both arguments fell flat, as the court found that the make-up of the board and the cursory level of state supervision led to the conclusion that the dentists were advancing their own private interests instead of state policy.
The amici on the appellate brief tell quite a story, as the dentists were joined by podiatrists, veterinarians, doctors, pharmacists, chiropractors and others, including funeral directors. The state bar of North Carolina is now circulating the decision looking for state bars to join in a brief supporting the dentists’ cert petition to the U.S. Supreme Court. It looks like a lot of professionals are reading bad things in the tea leaves of this decision, and not without a good reason.
As more and more “professional” activity becomes commoditized, new entrants to these markets are increasingly grabbing the low-hanging fruit. I read that LegalZoom filed something like 20 percent of the incorporations in California last year. When I started practicing, incorporations were a nice bread-and-butter part of our business. Now you can get one online for a small fraction of what it would cost me to speak to you for the hour I would need to get your information and make sure you knew what you were buying, let alone the time to do the docs and get them executed and filed. There is really no way I can compete with these services.
Some bar groups have tried to take back this work by seeking stricter enforcement of unauthorized practice of law rules. Unfortunately, as the Tarheel dentists have learned, these licensing laws exist to protect consumers, not to protect turf for professionals.
A few years ago, Connecticut bar officials had a grievance complaint about a Hartford lawyer who had helped a medical group collude in an illegal boycott against a medical insurer which wanted to come into Connecticut. The insurer was offering very low reimbursement rates, and as a result, was able to price its product quite competitively. By refusing to sign on, the doctors kept it out of the market. There was a videotape of a meeting (also called a confession) where one of the ringleaders crowed about getting 100 percent cooperation from the professional members. That was an important exhibit in the attorney general’s enforcement proceeding.
The legislature recently upped the penalties for non-lawyers ripping off the public with phony legal services to a felony. They also raised the penalty on out-of-state lawyers to a Class A misdemeanor. Good! But we should be very careful not to use these gains to stifle legal competition. •