Implications for Regulators

From SCOTUS Anti-Trust Ruling

Presentation by David A. SwankinPresident and CEOCitizen Advocacy Center

September 18, 2015

Summary of the Supreme Court Decision

• Majority opinion: Kennedy (author), Roberts, Ginsburg, Breyer, Sotomayor, and Kagan

• Holding: State board on which controlling number of decision-makers are active market participants in the occupation the board regulates must be actively supervised to enjoy antitrust immunity

• State’s “supervision need not entail day-to-day involvement in agency’s operation or micromanagement of its every decision.”

What is Active Supervision• Test is “flexible and context-dependent”

• State’s “supervision need not entail day-to-day involvement in agency’s operation or micromanagement of its every decision.”

– Instead, critical inquiry is whether state’s review mechanisms provide “realistic assurance” that anticompetitive conduct by non-sovereign actor promotes state policy – not just the private actor’s individual interests

• Court identified “a few constant requirements of active supervision.”

– Review of substance, not just procedures, of anticompetitive decision

– Supervisory power to veto or modify particular decisions to ensure they accord with state policy

– Mere potential for state supervision is insufficient

– The state supervisor may not itself be an active market participant

Dissenting Opinion

• Dissenting opinion: Alito (author), Scalia, and Thomas

• Dissent identified several questions left unanswered by the majority:– What is a “controlling number” of decision

makers?

– Who is an “active market participant?”

– What is the scope of the market in which a member may not participate while serving on a board?

Implications for State Boards

• Options for State Boards going forward• Refrain from violating the Federal antitrust laws in the first

instance

• Minimize/be more cognizant of competitive effects of decisions

• Avoid the need for supervision by limiting active market participants to minority of board (for example, through the use of retired professionals)

• Meet active supervision through use of legislative committees, umbrella state agencies (such as rules review commissions), and other disinterest state officials

• Have states indemnify board members in case of antitrust damages

Examples of Board Rules or Policies that Could Be Scrutinized Under Antitrust Laws

• Rules regulating Scope of Practice– Rules restricting what services particular

types of licensees may offer.– Rules regulating supervision of one type of

licensee by another.– Rules restricting how many subordinates a

licensee may employ.

Examples of Board Rules or Policies that Could Be Scrutinized Under Antitrust Laws

(continued)• Restrictions on advertising or solicitations

– Rules prohibiting disparagement of competitors.

– Rules against “poaching” customers.– Rules restricting truthful advertising.– Rules restricting solicitation.– Rules regulating use of specific terms or

phrases in advertising.

Examples of Board Rules or Policies that Could Be Scrutinized Under Antitrust Laws

(continued)

• Price regulation– Price floors or caps.– Fee schedules.– Restrictions on discounting.

Examples of Board Rules or Policies that Could Be Scrutinized Under Antitrust Laws

(continued)• Restrictions on market participation

– Rules restricting competitive bidding by licensees.

– Rules regulating commercial dealings with non-licensees (e.g. suppliers, third-party payers, etc.)

• Licensing requirements– Apprenticeship requirements.

– Other licensing requirements imposing high burdens on applicants.

Three Approaches for Addressing “a controlling number of [a board’s] decision-makers are active

participants in the occupation the board regulates.”

Approach #1

Majority of public members (for example, California non-health boards).

Approach #2

Mandate “Positive Qualification Criteria” for public members.

Approach #3

Multi-party board membership (all stakeholders, for example community hospitals).

Addressing “Active Supervision by the State” Standards identified by the

court- State overseer must review SUBSTANCE of anti-

competitive decision, not merely the PROCEDURE followed.

- Must have the power to VETO or MODIFY a particular decision to assure in accord with state policy.

- “Mere potential” is not enough; must be active oversight.

- Overseer must NOT ITSELF be an active market participant.

Approach #4, #5 and #6

Approach #4

Umbrella Board with Policy Oversight (for example, Washington State).

Approach #5

For Rulemaking, an independent review board (for example, North Carolina).

Approach #6

For Scope of Practice, all or majority public review body (for example, Ontario, Canada).

Approach #7 and #8

Approach #7

Make boards ADVISORY only (for instance Nebraska) – authority to act on board recommendations is vested in a broad based state health committee appointed by the Governor.

Approach #8

For rulemaking and Scope of Practice, expand the responsibilities of an established sunset review committee to approve or reject proposed board rules.

Approach #9 and #10

Approach #9

Require all proposed rules be approved by the state legislature.

Approach #10

Give additional oversight authority to State Attorney General

Speaker Contact Information

Citizen Advocacy CenterDavid A. Swankin, President and CEO1400 16th Street NWSuite #101Washington, DC 20036202-462-1174DavidSwankin@cacenter.org