Mises Wire

A
A
Home | Blog | Expanded Federal Power May Result in Whiter Teeth

Expanded Federal Power May Result in Whiter Teeth

June 17, 2010

Now this is a headline: “Federal Trade Commission Complaint Charges Conspiracy to Thwart Competition in Teeth-Whitening Services.” It turns out the conspiracy involves a state government agency:

The Federal Trade Commission today initiated an action against the state dental board in North Carolina, alleging that it is harming competition by blocking non-dentists from providing teeth-whitening services in the state. The FTC charged that the North Carolina Board of Dental Examiners (the “Dental Board”) has impermissibly ordered non-dentists to stop providing teeth-whitening services, which has made it harder to obtain these services and more expensive for North Carolina consumers.

According to the FTC’s administrative complaint, teeth-whitening services are much less expensive when performed by non-dentists than when performed by dentists. A non-dentist typically charges between $100 and $150 per whitening session, while a dentist typically charges between $300 and $700, with some dental procedures costing as much as $1,000.

I certainly share the FTC’s opposition to government restrictions on competition. But I don’t support naked FTC power grabs either. As bad as the North Carolina ban is, it shouldn’t be a matter of federal jurisdiction — and certainly not federal regulatory jurisdiction. Indeed, the jurisdictional claims in the FTC’s complaint are weak. It defines the dental board — a state agency chartered by the North Carolina General Assembly — as a “person” under the Federal Trade Commission Act. A state is not a person; rightly or wrongly, sovereign immunity still applies. More laughably, the FTC asserts that a ban on providing services within a single state constitutes interstate commerce, which is also a prerequisite to invoke the FTC Act:

The acts and practices of the Dental Board, including the acts and practices alleged herein, are in commerce or affect commerce, as “commerce” is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 44. In particular, dentists and non-dentist providers of teeth whitening services in North Carolina purchase and receive products and equipment that are shipped across state lines by manufacturers and suppliers located out of state, and transfer money across state lines in payment for these products and equipment. Further, the actions alleged herein deter persons from other states from providing teeth whitening services in North Carolina.

Whether teeth-whitening providers purchase equipment across state lines is irrelevant; the FTC accused the Board of prohibiting teeth-whitening services, not the purchase of supplies. As for deterring out-of-state competition, while possibly true, the FTC obscures the real issue: the state is regulating services in the first place. If it violates the FTC Act to exclude non-dentists from the teeth-whitening market, shouldn’t it also violate the FTC Act to exclude non-dentists from the dental market? Put another way, does the FTC have the authority to overrule all state regulation of professions?

Even the FTC would probably answer “no” to that last question. That’s why the complaint in this case tries to make an important distinction — the Board exceeded its legislative authority:

[T]he Dental Board has engaged in extra-judicial activities aimed at preventing non-dentists from providing teeth whitening services in North Carolina.
These activities are not authorized by statute and circumvent any review or oversight by the State.

On 42 occasions, the Dental Board transmitted letters to non-dentist teeth whitening providers, communicating to the recipients that they were illegally practicing dentistry without a license and ordering the recipients to cease and desist from providing teeth whitening services.

On at least six occasions, agents of the Dental Board also threatened and discouraged non-dentists who were considering opening teeth whitening businesses by
communicating to them that teeth whitening services could be provided only under the direct supervision of a dentist.

Furthermore, the Dental Board issued at least 11 letters to third parties, including mall owners and property management companies, with interests in approximately 27 malls, stating that teeth whitening services offered at mall kiosks are illegal. The purpose of these letters was to block the expansion of teeth whitening kiosks in shopping malls.

The Dental Board’s exclusion of the provision of teeth whitening services by non-dentists does not qualify for a state action defense nor is it reasonably related to any efficiencies or other benefits sufficient to justify its harmful effect on competition.

I can’t challenge the FTC’s expertise here. If there’s any group that understands the use of “extra-judicial activities” designed to bully competitors disfavored by the government, it’s the Federal Trade Commission. What the FTC describes above eerily mimics the Commission’s own efforts to purge the Internet of small herbal-supplement retailers; the Commission used similar letters and threats to censor small businesses because, allegedly, some of the claims about their supplements weren’t verified by the federal government’s own drug monopoly, the Food and Drug Administration.

Returning to the core issue, I can understand why some will sympathize with the FTC’s position here. The North Carolina rule violates economic liberty and, if the FTC’s legal analysis is correct, exceeds the state board’s lawful authority. But the FTC is not the Institute for Justice. This is not a civil constitutional-rights lawsuit before a federal district court. It is an administrative action that will be heard by a FTC administrative law judge (the FTC did not announce a consent order, so the assumption is the state board will contest the charges). The FTC’s charges and jurisdiction do not rely on the Bill of Rights or the 14th amendment, but on the FTC’s (unconstitutional) statutory power to prohibit “unfair methods of competition.” A victory here means a vast expansion of FTC power to regulate the acts of state governments and interpret state laws. That’s not a positive forward for limited government and individual rights.

As a postscript, I’d note the FTC vote to issue this complaint was 4-0. Recently appointed Commissioner Julie Brill recused herself without official explanation. This isn’t exactly a Sherlock Holmes mystery: Until taking her FTC seat a few months ago, Brill was the deputy attorney general of North Carolina in charge of that state’s antitrust and consumer protection division. Which certainly makes the FTC’s decision to target the North Carolina board curious; even if Brill recused herself, it’s worth asking if she had any role in bringing this matter to her colleagues’ attention.

Follow Mises Institute

Add Comment