The Sherman Antitrust Act regarding North Carolina Dental Board - Research Paper Example

The Sherman Antitrust act North Carolina Dental Board “The Sherman Anti-Trust Act” of 1890 is the first most significant of the anti-trust laws of the United States. President Benjamin Harrison signed this Act into law and is named after, Ohio senator, John Sherman who was the primary supporter. The economic theory that supports antitrust laws in U.S describes the fact that free competition best serves the public in industry and trade. When businesses compete fairly for the consumer’s dollar, the price of services and products decreases while the quality increases (Hylton, 2003). However, most businesses prefer dictating the quantity, price and quality of their produce without competing for consumers. Some of the businesses have tried elimination of competition vial illegal means, for instance, assigning territories to varying competitors in an industry, and fixing prices. Antitrust laws, thus seek to eliminate illegal behavior as well as promoting fair and free marketplace competition. The Sherman Act made agreements that were in restraint of trade illegal and also made the crime to monopolize commerce and part of the trade. The Act’s purpose was the maintenance of competition in business. Congress enacted the Sherman Act to regulate interstate commerce (Liuzzo, 2012). The Sherman Antitrust Act contains seven sections. The section one provides the description that any contract, trust combination, trusts or conspiracy towards restraining commerce or trade between several states and with foreign nations are declared illegal. Courts have interpreted the Sherman Act to forbid the unreasonable restraints of trade. There has to be a conspiracy of trade and effect on the interstate commerce. Under the Rule of Reason, courts will look for many factors to decide whether the specific restraint of trade restricts unreasonable competition. To be specific, the court will consider the relevant industry make up, the position of the defendant in the industry as well as the defendant’s competitor’s ability in responding to the practice challenged and the purpose of the defendant in restraint adoption (Worth, 2011). Considering this analysis, courts are forced to consider anti-competitive and pro-competitive effects. For other types of restraints, the courts just have to recognize the restraint type, and the plaintiff has to just show that the restraint occurred. Section one of the Act makes a prohibition towards concerted action. Evidence of this action can be shown through a written or express agreement, or from circumstantial evidence. Antitrust enforcement underwent intensive enforcement during the late 1930’s and was greatly institutionalized into the Antitrust Division of the department of Justice and the commission of Federal trade. Over time, greater authority was granted by congress to conduct the enforcement of the antitrust laws. The following is a recent case of the North Carolina dental board which has applied section one of the Act, coupled with analysis and the verdict of the case (Worth, 2011). On 25th February 2015, the United States Supreme court struck a blow for economic freedom and consumers. The prevailing case involved a statute in North Carolina that prohibited non-dentists, which include dental assistants from performing whitening of teeth for patients, and giving aboard, including self-interested dentists, authority to conduct supervision of the statute’s implementation. The immediate effect of the law of North Carolina was to cause state dentists to get into an authorized oligopoly through a practice that could be done by non-dentists without risk of harm towards patients; the immediate, as well as a long-term effect, was rising of income for the dentists at the public’s expense (Liuzzo, 2012). The details of the case A law in North Carolina subjected dentistry licensing to the State Board of North Carolina Dental Examiners. This board comprised of 8 members, 6 of whom were licensed. After the complaint by dentists that non-dentists were charging lower for teeth whitening, cease and desist letters were sent by the board to non-dentists providing whitening services, warning that it is a crime to conduct unlicensed business. This action led to the ceasing of teeth whitening services by non-dentists in North Carolina. The U.S Federal Trade Commission along with the justice department in U.S enforces federal antitrust laws; learned about the letters and investigated the matter which resulted in the violation of section 5 of the “Federal Trade commission Act,” which prohibits the use of unfair competition methods, and thus section one of the Sherman act, which prohibits concerted action (Liuzzo, 2012). Analysis By the ruling that the dental board of the state wasn’t immune from suit, the decision of the Supreme Court has ramifications that are far-reaching, for the ill-conceived reforms of protectionist state regulations which limit the entry into a myriad of professions, and therefore harm consumers. Considering the holding that the regulatory board of the state that is controlled by participants of the market within the industry being controlled cannot put its anticompetitive rules in antitrust immunity state action unless with active supervision from the state (Worth, 2011). The court then struck a great blow for economic liberty and against the rent-seeking protectionist legislation. This Supreme Court left the responsibility for fleshing out full details of active supervision, to the lower federal courts, and how those lower courts define the term will affect benefits to consumers from the decision of the dental board of North Carolina (Posner, 2001). One of the ways to perform that analysis is the identification of state goals which cannot be justified even with the articulation of the underlying interest as the rationale for a specific regulatory scheme, by the state itself. Particularly, the lower courts may make clear that cronyism isn’t the legitimate interest of the state. That principle is in consistence with free market goals of antitrust laws and in line with expressed concern of the North Carolina dental board to combat special interest rent-seeking. Adopting the core principle would be in consistence with the holdings of the court of appeal which describes that mere protectionism isn’t a sufficient rationale for the upholding of discriminatory economic regulation of the state. Such a step would try to curb harmful occupational overregulation, thus benefiting consumers and improving economic freedom. The judicial review of active supervision requirement can invalidate anticompetitive laws, under antitrust laws, therefore, discourage regulators of state from the adoption of exclusionary regulatory and new costly schemes, that are motivated by protectionism (Hylton, 2003). The issue on the dental board was whether their actions were sheltered from review by virtue of state action doctrine under antitrust laws of the federal state. This doctrine renders antitrust laws inapplicable to state-adopted economic regulation. The court rejected claims that state-action immunity applies to the acceptance of political responsibility by the state through active supervision of the decisions of the private actors. The court applied the 1991 decision in Medical case, which described that in order that state-action doctrine may apply articulation of anticompetitive policy by the state and carry out active supervision of decisions of the non-sovereign actors, must ensue (Posner, 2001). In the issue of the dental board, the court described that entities which are designated as agencies of the state aren’t exempt from the active supervision when controlled by participants of the market since immunizing such entities would pose risk of self-dealing which Midcal sought in fending off. The board did not contend the exercising of anticompetitive conduct by the board, thus proving fatal to its case (Worth, 2011). The constant requirements of active supervision by the court are: reviewing of the anticompetitive decision substance by the state supervisor, who also has the power to modify or vet particular decisions in assuring their accordance with state policy, while it may not be an active participant of the market. Clarence Thomas, Justice Samuel Alito, and Antonin Scalia dissented. Justice Alito reasoned that the precedent ignored by the court was that state agencies created by state literature are shielded by state’s doctrine. The court spawned confusion by assessing whether individual agencies are subjected towards regulatory capture. The dissent reasoned that Midcal was inapposite since it involved a trade association that is private. Justice Alito then feared the majority’s decision which seemed to require states to change the composition of dental, medical and other boards (Hylton, 2003). The court holding in the case reduces the scope of the state-action doctrine, which shielded from antitrust attack on a California producers cartel which is overseen by the state body, with no interference in the prerogatives of the sovereign state (Posner, 2001). State legislatures must make a clear upfront that they allow such bodies to displace competition as well as subject these bodies to third party review. Legitimacy of protectionism The board’s decision will force some of the states to revise and re-examine their licensing schemes in avoiding antitrust scrutiny. In this process, the states can abandon some of the anticompetitive licensing practices due to the risk that they will be held invalid on another ground (Hylton, 2003). Numerous commentators have recently argued that most of the licensing schemes are unwise and unconstitutional, especially under the Clause of equal protection. Various parties that were barred from entering into the licensed profession have tried to challenge the constitutionality of the regulatory practice in many federal circuits. The plaintiffs’ argument was that the state can’t adopt and enforce the occupational licensing laws which benefit selected few licence holders than the public. In resolving those lawsuits, three of federal appeal courts have addressed whether protectionism is the interest of the legitimate state. The answer to that question was disagreed upon. In Gilles vs. Craig miles, the court of appeal of U.S, for the 6th circuit held unconstitutional, a law that limited sale of caskets to funeral directors who were licensed. In Castille vs. St. Joseph Abbey, the agreement of the fifth and sixth circuit’s Craig miles decision while in Powers vs. Harris, the 10th circuit disagreed. The result was that two federal appeal courts have held the fact that cronyism is not a justification for a licensing scheme. A different circuit, however, argued differently (Worth, 2011). In the Dental Board of North Carolina, the Supreme Court stressed the fact that in the case where a state delegates market control to non-sovereign actor, the doctrine of the state-action immunity will apply if only the state accepts the political responsibility through active supervision of private actors’ decisions. Additionally, the active supervision judicial review could invalidate the anticompetitive rules under antitrust laws as well as discourage the adoption of protectionist regulations that are new (Posner, 2001). Three of the state legislatures make a clearer upfront which intends to allow bodies such as the board of North Carolina to displace competition and thus subject them to third party review. Four such changes should make the spotting of harmful regulations and weakening of the ability of rent-seekers to undermine competition through the regulatory processes of the state. Moreover, five of the processes that which re-examine their schemes of licensing and can abandon anticompetitive rules of licensing for the fear that they will become invalid on another ground (Hylton, 2003). In conclusion, the Supreme Court hasn’t decided the referee of this dispute but it may not forever put off the need for resolution of the intercircuit conflict. It may not be necessary for the court to resolve the disagreement since the states can re-examine their statutes of licensing in the light of the decision of the court in the North Carolina Dental Board. If the states decline the revision of regulatory schemes in eliminating exclusionary effect, the federal constitution will face challenges. ` References Hylton, K. N. (2003). Antitrust Law: Economic Theory and Common Law Evolution. New York, NY: Cambridge Univ. Press. Liuzzo, A. (2012). Essentials of Business Law. New York, NY: McGraw-Hill/Irwin Posner, R. A. (2001). Antitrust Law. Chicago: University of Chicago Press. Worth, R. (2011). The Sherman Antitrust act. Saskatoon, SK: Benchmark Books. Read More