South Carolina State Board of Dentistry

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IN THE MATTER OF SOUTH CAROLINA STATE BOARD OF DENTISTRY OPINION OF THE COMMISSION AND ORDER IN REGARD TO ALLEGED VIOLATIONS OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket 9311; File No. 0210128 Complaint, September 12, 2003--Opinion and Order, July 28, 2004 In a unanimous Opinion, the Commission addressed a motion filed by Respondent South Carolina State Board of Dentistry to dismiss the administrative complaint in this matter on the ground that its actions were protected by the state action doctrine. The Commission concluded that an emergency regulation issued by the Board – which required dental preexaminations in school settings – appeared to contravene state law, and therefore determined that dismissing the complaint on state action grounds would be inappropriate. In particular, the Commission concluded that – as a subordinate state regulatory entity – the Board was not automatically entitled to protection from antitrust liability because its actions were not those of the state as sovereign. The Commission also determined that the Board had failed to show that its emergency rule was issued pursuant to a clearly articulated state policy. In the accompanying Order, the Commission retained jurisdiction over the matter, and remanded it to an administrative law judge for further findings concerning whether the Board is likely to reimpose the dental preexamination requirement, in order to address the Board’s separate argument that the complaint should be dismissed on grounds of mootness. Participants For the Commission: Michael B. Kades, Andrew S. Ginsburg, Garth W. Huston, K. Shane Woods, John T. Delacourt, Jeffrey Brennan, Robert J. Schroeder, Charles A. Harwood, D. Bruce Hoffman, Mark N. Hertzendorf, and Charissa P. Wellford. For the Respondent: Lynne W. Rogers, General Counsel, South Carolina Department of Labor, Licensing & Regulation, and William H. Davidson, II, Andrew F. Lindemann, and Kenneth P. Woodington, Davidson, Morrison and Lindemann P.A. VOLUME 138 Commission Opinion OPINION AND ORDER OF THE COMMISSION By Thompson, Commissioner, For A Unanimous Commission: I. INTRODUCTION This case presents the important question of whether the South Carolina State Board of Dentistry (“Respondent” or “the Board”) violated federal antitrust law by enacting a regulation that contravened legislation designed to improve access to dental care for South Carolina’s most vulnerable citizens -- children of lowincome families. The Board is the regulatory authority for dentists and dental hygienists in South Carolina and this case is before the Federal Trade Commission on the Board’s Motion to Dismiss the Complaint. As required by law, we accept the factual allegations in the Complaint as true for purposes of ruling on the Board’s motion. Unless otherwise noted, all statements of fact in this opinion are based directly on the Complaint. More than 40 percent of children in South Carolina are Medicaid-eligible and, in the early 1990s, only 12 percent of those received preventive dental care. According to the South Carolina Administrative Law Judge’s Report, this problem is especially acute in rural areas. In 1988, the South Carolina legislature sought to remedy this problem by amending the state dental law to permit dental hygienists to provide preventive dental care to children in schools. However, the amended law did not significantly improve preventive dental care in schools, principally because it required a dentist to examine each student before performing the services. In 2000, the state legislature again amended its law to make it easier for dental hygienists to provide oral health care in schools. The amendments removed the requirement that “a supervising dentist [examine] the patient no more than 45 days before the [hygienist’s] treatment,” and added the requirement that the hygienist work “under general supervision.” The Governor of South Carolina stated that the 2000 law “remove[d] a regulation that hindered access to dental care.”

VOLUME 138 Commission Opinion Following the 2000 amendments, in July 2001, the Board enacted an emergency temporary regulation that reinstated the preexamination requirement. As a result, thousands fewer children in South Carolina received preventive dental care in the latter half of 2001 than in the first half of that year. In 2003, the South Carolina legislature amended the law to state expressly that the dental examination requirements applicable in some settings do not apply to hygienists’ work in public health settings. In March 2003, the Board restated its position that a dentist must see a patient and provide a treatment plan before a hygienist provides care. Thereafter, the Commission issued a complaint to enjoin the Board from requiring a dental preexamination in school settings. The Board asserts two arguments in support of its Motion to Dismiss. The first raises the legal issue of whether the state action doctrine protects the Board’s conduct from antitrust liability. We cannot conclude that the state action doctrine protects the Board’s reinstatement of the preexamination requirement because the Board’s actions appear to directly conflict with a specific legislative mandate. Accordingly, we deny Respondent’s Motion to Dismiss the Complaint on this ground. The Board’s second argument, that changes to South Carolina law have rendered the case moot, raises a question of disputed fact that we cannot resolve given the record at this early stage of the proceedings. In light of the narrow scope of this factual question, however, the Commission has decided to retain jurisdiction at this time and to refer this matter to the administrative law judge for a limited inquiry on the issue of whether there is a reasonable likelihood that the challenged conduct will recur. If, after this inquiry, we decide that the case is moot, the Commission can dismiss the Complaint. Absent such a determination, this matter will proceed to an administrative trial on the merits. VOLUME 138 Commission Opinion II. PROCEDURAL BACKGROUND On September 12, 2003, the Commission issued an administrative complaint against the Board, alleging that the Board violated Section 5 of the Federal Trade Commission Act by “restrain[ing] competition in the provision of preventive dental care services by unreasonably restricting the delivery of dental cleanings, sealants, and topical fluoride treatments in school settings by licensed dental hygienists.” Compl. ¶ 1. Specifically, the Complaint points to the Board’s July 2001 adoption of an “emergency regulation” that allegedly reimposed a requirement that dentists preexamine patients before dental hygienists provide treatment in school settings. Id. ¶ 25. The Complaint asserts that the Board’s action “deprive[d] thousands of school children -particularly economically disadvantaged children -- of the benefits of preventive oral health care services.” Id. ¶ 1. The Complaint also alleges that, despite subsequent actions by the state legislature, the Board presents a current threat to the delivery of preventive dental services in South Carolina. Id. ¶ 38. The Commission has retained adjudicative responsibility for this matter pursuant to Rule 3.42 of the Commission’s Rules of Practice, 16 C.F.R. § 3.42 (2004). The Board filed its Motion to Dismiss the Complaint on October 21, 2003, and the Commission heard oral argument on the motion on January 13, 2004. III. STANDARD OF REVIEW For purposes of this review, the Commission regards the Board’s motion as a motion to dismiss for failure to state a claim and applies the standard used by federal courts under Fed. R. Civ. P. 12(b)(6). See, e.g., Schering-Plough Corp., 2001 FTC LEXIS 198, at *10-13 (Oct. 31, 2001). This is a high standard that requires the Respondent to show that Complaint Counsel can prove no set of facts that would entitle them to relief. Id. at *12 (citing McLain v. Real Estate Bd. of New Orleans, Inc., 444 U.S. 232, 246 (1980)). In evaluating whether a complaint withstands a motion to dismiss, the Commission must accept as true all of the VOLUME 138 Commission Opinion complaint’s well-pled factual allegations and must construe all inferences in the light most favorable to Complaint Counsel. See, e.g., Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); TK-7 Corp. and Moshe Tal, 1989 FTC LEXIS 32, at *3 (May 3, 1989). Moreover, the Commission should not dismiss the complaint if the motion, or Complaint Counsel’s opposition to the same, raises disputed issues of material fact. Schering-Plough Corp., 2001 FTC LEXIS 198, at *12.

IV. FACTUAL ALLEGATIONS AND STATUTORY FRAMEWORK Set forth below are the relevant facts alleged in the Complaint, together with the pertinent South Carolina statutes, regulations and any additional material properly presented for our consideration.

A. Dental Hygienists and the Board In South Carolina, dental hygienists are “licensed health care professionals who specialize in providing preventive oral health services . . . includ[ing] cleaning teeth, taking x-rays, . . . providing fluoride treatments, and applying dental sealants.” Compl. ¶ 11; see also S.C. Code Ann. § 40-15-80 (2003). Dental hygienists “practice in collaboration with a supervising dentist or under the direction of the South Carolina Department of Health and Environmental Control’s public health dentist.” Compl. ¶ 12; see also S.C. Code Ann. §§ 40-15-85; 40-15-102 ; 40-15-110. The Board is South Carolina’s regulatory authority for dentists and dental hygienists, Compl. ¶¶ 7, 9; S.C. Code Ann. § 40-15-10, and “is composed of seven dentists, one dental hygienist, and one public member.” Compl. ¶ 5; see also S.C. Code Ann. § 40-15- 20. Licensed dentists elect six of the Board’s dentists, while licensed hygienists elect the Board’s sole hygienist. § 40-15-20. The Governor appoints one dentist member and the public “lay” member and may “reject” any elected members based on their “unfitness,” in which case additional nominees may be elected in VOLUME 138 Commission Opinion the same manner. Id. Dentists that serve as members of the Board “continue to engage in the business of providing dental services for a fee.” Compl. ¶ 6.

B. Statutory Framework 1. 1988 to 2000 Children in South Carolina, especially those from low-income families, have suffered from oral health problems due to inadequate access to preventive dental care. Compl. ¶ 14. The need for preventive dental care for underprivileged children is partly due to the unavailability of dentists and is especially acute in rural areas. Pub. Hr’g Report of the Admin. Law Judge, In re: Proposed Regulation, Doc. No. 2644, Docket No. 01-ALJ-11- 0348-RH, at 17-18 (S.C. A.L.J. Feb. 11, 2002) (RX-10) (“ALJ Report”). In 1988, the South Carolina General Assembly amended the state law relating to dentists, dental hygienists and dental technicians (referred to herein as the “Dental Practice Act” or the “DPA”) to authorize, subject to certain restrictions, dental hygienists to provide various oral health services in public settings, including schools. Compl. ¶ 15; 1988 S.C. Act No. 439. Section § 40-15-80 of this legislation authorized hygienists to apply topical fluoride and to perform oral screenings in a school setting “without the presence of a dentist on the premises.” S.C. Code Ann. § 40-15-80(B)(1999).

Additionally, this law permitted dental hygienists to apply sealants and oral prophylaxis in a school setting upon satisfaction of the following conditions: (1) the student had written permission from a parent or guardian; (2) the treatments were authorized by a licensed dentist; (3) the student was not an active patient of another dentist; and (4) the authorizing dentist had examined the student and given written authorization within 45 days before application of the sealant or oral prophylaxis. Compl. ¶ 18; § 40- 15-80(C)(1)-(3) (1999). The Complaint alleges that, despite this authorization, the 1988 law “did not significantly increase the VOLUME 138 Commission Opinion delivery of dental hygienists’ services in school settings.” Compl. ¶ 15.

2. The 2000 Dental Practice Act Amendments In 2000, South Carolina increased Medicaid reimbursement for dental services. Compl. ¶ 16. The legislature also “amended its statutes to make it easier for dental hygienists to deliver preventive dental care services in school settings.” Compl. ¶ 18; see also 2000 S.C. Act No. 298. For example, Section 40-15- 80(B) of the DPA, as amended in 2000, permitted dental hygienists to apply sealants, topical fluoride, and oral prophylaxis1 in a school setting, provided they had “written permission” from the student’s parent or guardian and that such treatment by the dental hygienist was done “under general supervision.” See also Compl. ¶ 19. The amended DPA defined “general supervision” to require that either a licensed dentist or a state public health dentist “has authorized the procedures to be performed but does not require that a dentist be present when the procedures are performed.” S.C. Code Ann. § 40-15-85(B) (2000).2 The 1 Oral prophylaxis is defined as “the removal of any and all hard and soft deposits, accretions, toxins, and stain from any natural or restored surfaces of teeth or prosthetic devices by scaling and polishing as a preventive measure for the control of local irritational factors.” § 40-15-85(3) (2003). 2 In contrast, a hygienist in a private office setting required “direct supervision” by a dentist that included that the dentist “personally diagnoses the condition to be treated . . . .” § 40-15-85(A) (2000). The 2000 amendments also clarified that the DPA was “not intended to establish independent dental hygiene practice,” § 40-15-80(F) (2000), and required dental hygienists in public health settings to have professional liability insurance, § 40-15-80(G) (2000). Further, the 2000 law permitted dental hygienists “employed within the public health system” to provide “primary preventive care” services “under the direction and VOLUME 138 Commission Opinion amended statute did not include, or indeed make any reference to, the 45-day dentist preexamination requirement set forth in the prior version of § 40-15-80(C)(3). Compl. ¶ 19; see S.C. Code Ann.§ 40-15-80(B) (2000).

The Complaint asserts that the 2000 amendments prevented the Board from requiring “a dentist examination as a condition of a dental hygienist’s providing preventive services in a school setting.” Compl. ¶ 19; see also infra at 24-27. In signing the 2000 amendments, the South Carolina Governor’s office stated that the “new law removes a regulation that hindered access to dental care” and noted that doing so would “allow[] dental hygienists to offer preventive dental care in places such as schools . . . [where] [d]entists rarely practice full-time.” Compl. ¶ 20; State of S.C., Office of the Governor, New Law Makes Children’s Dental Care More Accessible (May 26, 2000) (press release) (cited in Resp. Ex. (“RX”)-4 (ex. 7)).

Following enactment of the 2000 amendments, Health Promotion Specialists (“HPS”), an organization composed of dental hygienists that contracted with supervising dentists, began using dental hygienists to provide preventive dental care on-site to children in South Carolina schools. Compl. ¶ 22. By July 2001, HPS had screened over 19,000 children and had provided services to over 4,000, of whom almost 3,000 were Medicaid-eligible. Compl. ¶ 23.

3. The Board’s 2001 Emergency Regulation and Subsequent Actions control of the State Director of Public Health Dentistry but [did] not require that the director be present when authorized services are provided. If a licensed dentist is available, an examination and diagnosis must be made by him before a sealant is placed on a tooth.” § 40-15-110 (2000).

VOLUME 138 Commission Opinion On July 13, 2001, the Board promulgated emergency regulation 39-18 (the “Emergency Regulation”) to “clarify the type of authorization” required for dental hygienists to administer care in school settings under Section 40-15-85(B) of the amended DPA. 25-7 S.C. Reg. 79; Compl. ¶ 25. The Emergency Regulation needed only the approval of the Board, a majority of whose members were dentists with a financial interest in reimposing the preexamination requirement. Compl. ¶ 26; § 40-15-20. Through the Emergency Regulation, the Board interpreted the general supervision standard of Section 40-15-85(B) as it applied to dental hygienists and specified that this standard required a licensed dentist to examine clinically each patient and actually determine the need for any treatment “not more than forty-five (45) days prior to the date the dental hygienist is to perform the procedure for the patient.” 25-7 S.C. Reg. 79, 39-18(A); Compl. ¶ 25. The Complaint alleges that the Board’s Emergency Regulation “re-imposed the same examination requirement that the General Assembly removed in 2000: that a supervising dentist had to examine the patient no more than 45 days prior to treatment.” Compl. ¶ 25. The Complaint further alleges that this action “reduce[d] substantially the number of children (particularly economically disadvantaged children) who received preventive dental care.” Compl. ¶ 28.

In 2001, HPS challenged the Emergency Regulation in state court. The state court denied HPS’s motion for a temporary restraining order because HPS had not exhausted its administrative remedies, and because the court agreed with the Board that the Emergency Regulation reasonably clarified the term “general supervision” in the 2000 amendments to include dental preexaminations. Health Promotion Specialists, LLC v. South Carolina Bd. of Dentistry, No. 01-CP-40-3148 (S.C.C.P. County of Richland Aug. 24, 2001). However, the state appellate court affirmed the decision solely on the exhaustion grounds. Health Promotion Specialists, LLC v. South Carolina Bd. of Dentistry, No. 2003-UP-232 (S.C. Ct. App. Mar. 26, 2003). VOLUME 138 Commission Opinion In August 2001, the Board published a proposed permanent regulation that was substantially identical to the Emergency Regulation. Compl. ¶ 30; ALJ Report at 2-4. As required by state law, a South Carolina administrative law judge (“ALJ”) held a public hearing to determine whether the proposed permanent regulation was “a reasonable exercise of the Board’s authority.” Compl. ¶ 31; ALJ Report at 2, 17. The state ALJ’s determination would guide the General Assembly in determining whether to effectuate the proposed permanent regulation. Id. In February 2002, the ALJ issued his conclusion that “the Board’s proposed permanent regulation was unreasonable and contravened state policy to the extent it reinstated the dentist preexamination requirement that the legislature had eliminated in 2000.” Compl. ¶ 32; see also ALJ Report at 17-18. The ALJ held that the state legislature intended through the 2000 amendments to delete the preexamination requirement in order “to increase access to preventive oral health care for low-income children.” Compl. ¶ 33; see also ALJ Report at 17-18.

The Board did not submit the proposed permanent regulation to the General Assembly for review, and the permanent regulation did not take effect. Compl. ¶ 34. In accordance with South Carolina state law, the Emergency Regulation terminated in January 2002, 180 days after adoption. Compl. ¶ 26. Following the Emergency Regulation’s termination, several firms, including HPS, resumed providing preventive dental care to thousands of school children in South Carolina. Compl. ¶¶ 35-36. 4. 2003 DPA Amendments In May 2003, the General Assembly again amended the DPA, altering the supervision requirements for dental hygienists operating in certain settings and specifically referencing their authority to provide preventive dental care in certain public health settings without a requirement for preexamination by a dentist. The new S.C. Code Ann. § 40-15-110 (A)(10) (2003), expressly provides that “[n]othing in this chapter may be construed to prevent . . . a licensed dental hygienist employed within or VOLUME 138 Commission Opinion contracted through the public health system from providing . . . primary preventive care that is reversible.” This section further states that the services that may be provided in a public health setting include “oral prophylaxis, application of topical fluoride including varnish, and the application of dental sealants.” Id. Although such services “are to be performed under the direction of” a specified state official or his designee, the new section does not require a dentist’s presence and there is no reference to a preexamination requirement. Id.3 5. The Board’s March 2003 Meeting and the October 2003 Resolution In March 2003, two months before the General Assembly enacted the 2003 amendments, the Board met to consider the statutory revisions. The Complaint alleges that at this meeting, the Board “maintained that in all settings where a dental hygienist provides treatment -- whether public health or private practice -a licensed dentist has to see the patient and provide a treatment plan.” Compl. ¶ 38 (emphasis added); see also S.C. Bd. of Dentistry, Mins. from Conference Call, 4 (Mar. 6, 2003) (RX-13 (attach. B)).

3 The 2003 statute retains the basic definition of “general supervision” (§ 40-15-85(2)), but expands the range of settings in which it may apply -- including, e.g., private office settings. Another new provision, § 40-15-102, further defines the services that may be performed under “general supervision” in a private office and in some school settings and imposes further “restrictions” on the provision of those services in those settings. §§ 40-15-102(B)-(D). Such restrictions relate principally to examination by a dentist. § 40-15-102(C). Nevertheless, consistent with § 40-15-110’s express allowance of hygienist services in public health settings, such settings are specifically exempted from the additional restrictions of § 40-15-102. See § 40-15-102(D).

VOLUME 138 Commission Opinion On October 16, 2003, following the Commission’s issuance of the Complaint in this matter, the Board issued a resolution (the “Resolution”) stating that preexaminations of a patient were not required as a precondition to a dental hygienist’s working in a public health setting, and that the Board would not seek any change to that policy. See RX-13 (attach. A). V. MATERIALS BEFORE THE COMMISSION The Commission is limited in what it may consider to resolve a motion to dismiss for failure to state a claim. In addition to the complaint, the Commission may consider documents attached to or referenced in the complaint whose authenticity is unchallenged, as well as matters of official or judicial notice that are “not subject to reasonable dispute,” without converting the motion to one for summary judgment. United States v. Ritchie, 342 F.3d 903, 908- 09 (9th Cir. 2003) (citing Fed. R. Evid. 201(b)); In re K-Tel Intl, Inc. Secs. Litig., 300 F.3d 881, 889 (8th Cir. 2002) (in addition to pleadings, the court may consider “materials ‘embraced by the pleadings’ and materials that are part of the public record”) (citation omitted); Pryor v. NCAA, 288 F.3d 548, 559-60 (3d Cir. 2002). Matters of official notice include those contained in public records, such as judicial decisions, statutes, regulations, and “records and reports of administrative bodies.” Ritchie, 342 F.3d at 909 (citation omitted).

Here, state statutes, regulations, court decisions, and other official government records material to the issues are properly referenced in the Complaint and/or are properly the subject of judicial notice.4 The Commission may also consider material 4 These materials include: the 2000 amendments to the South Carolina DPA (RX-2); the 2003 amendments to the DPA (RX-12); the Board’s Emergency Regulation 39-18 and proposed permanent regulation 39-18 (RX-3 (ex. B)); the Office of the Governor’s 2000 press release (RX-4 (ex. 7)); the order in Health Promotion Specialists, LLC v. South Carolina Bd. of VOLUME 138 Commission Opinion reflecting an industry’s understanding or definition of technical or scientific terms at the time legislation is enacted as possible indicia of the legislature’s understanding of the term. See Order of Ry. Conductors of America v. Swan, 329 U.S. 520, 525 (1947). Thus, we may consider the American Dental Association’s (“ADA”) Comprehensive Policy Statement on Dental Auxiliaries in effect in 2000, RX-3 (ex. C, attach.), which includes the ADA’s various standards for supervision of dental auxiliaries. In addition to these submissions, the Board has made a number of factual assertions in its briefs and has referenced several documents, including affidavits, letters, brochures, and Internet websites, that discuss factual issues that the Complaint does not reference and that are not appropriate subjects of judicial notice.5 The Board explains that it submitted some of these materials to provide “background information,” while the rest were “submitted not for the truth of the matters asserted therein,” but for some Dentistry, supra (RX-8); the ALJ Report (RX-10); and the minutes of the Board’s March 6, 2003, conference call (RX-13 (attach. B)). Additionally, the Board has proffered its October 16, 2003 Resolution (RX-13 (attach. A)). This post-complaint document relates to the Board’s mootness defense, and the Commission can judicially notice such a document as an official government record. However, we will not give the document any particular weight at this time, much less resolve the Board’s mootness defense on the basis of this one submission. We consider this document only in the context of our discussion in Part VI.B., infra, referring the case to the FTC administrative law judge for more complete discovery relating to the mootness issue. 5 Complaint Counsel specifically object to the following documents attached to the Board’s motion to dismiss: RX-1 (and attachments A, B and C); RX-3 (and attached exhibit A and a portion of exhibit C); RX-4 (and attached exhibits 2 and 6); and RX-5, RX-6 and RX-7. Compl. Counsel’s Opp’n to Respt Mot. to Dismiss, App. A.

VOLUME 138 Commission Opinion other undisclosed purpose. See Resp.’s Reply Mem. in Support of Mot. to Dismiss (“Reply”), Appendix A. Although the Commission always has discretion to consider extra-pleading material and to convert a motion to dismiss to one for summary judgment, see, e.g., Poole v. County of Otero, 271 F.3d 955, 957 n.2 (10th Cir. 2001); 5A Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1366 (2d ed. 1990 & Supp. 2004), we decline to do so here. We believe that it would be inappropriate to consider the Board’s proffered limited evidence at this stage. The Board’s factual material is not comprehensive and can best be described as “scanty, incomplete, or inconclusive” and unlikely “to facilitate the disposition of the action” at this stage. Wright & Miller, § 1366, at 493 and 676 n.16.1. Permitting selective evidence at this stage would also unfairly prejudice Complaint Counsel, who have not yet had an opportunity to conduct discovery or respond to the proffered evidence. The Board may instead submit any relevant material -whether it relates to the case’s general “background,” the Board’s mootness defense, or some other relevant issue -- following discovery at the summary judgment stage or at trial.6 VI. CONCLUSIONS OF LAW A. Whether the State Action Doctrine Applies to the Board’s Actions The Board asserts that the challenged acts were those of the State of South Carolina and, as such, are exempt from federal antitrust liability under the state action doctrine. First, the Board claims that its status as an agency of the state of South Carolina necessarily or “ipso facto” makes its actions those of the state. 6 The mere fact that the Commission perused the materials submitted by the Board to determine whether to consider them does not automatically convert the Board’s Motion to Dismiss into one for summary judgment. See Homart Dev. Co. v. Sigman, 868 F.2d 1556, 1561-62 (11th Cir. 1989). VOLUME 138 Commission Opinion Alternatively, the Board argues that it is covered by the state action doctrine because it acted pursuant to a “clearly articulated” state policy to displace competition. The Board also argues that, even if it erred by adopting the Emergency Regulation, such error did not deprive it of state action protection. We are unpersuaded by these arguments and therefore deny the Motion to Dismiss on this ground.

1. The State Action Doctrine It is well-settled that the state action doctrine protects a state government, acting as sovereign, from liability under the federal antitrust laws. The Supreme Court first articulated this doctrine in Parker v. Brown, 317 U.S. 341 (1943), where the Court upheld California’s Agricultural Prorate Act against a Sherman Act challenge. Although the legislation at issue clearly restricted competition among California’s agricultural commodities growers, the Court concluded that the Sherman Act did not restrain the state, acting through its legislature, from undertaking anticompetitive actions. The Court based its holding on the recognition that, under a dual system of government, the state is “sovereign, save only as Congress may constitutionally subtract from [its] authority,” and the Court would not lightly infer Congressional intention to “nullify a state’s control over its officers and agents.” Id. at 351. Where the Sherman Act was silent and gave “no hint that it was intended to restrain state action or official action directed by a state,” the Court refused to read such intent into the act. Id.

Subsequent Supreme Court case law has confirmed and elaborated on the state’s ability to restrain competition. In Hoover v. Ronwin, the Supreme Court explained that Parker imparts automatic, or ipso facto, protection from antitrust liability to state legislative acts. Hoover v. Ronwin, 466 U.S. 558, 567-68 (1984) (“when a state legislature adopts legislation, its actions constitute those of the State . . . and ipso facto are exempt from the operation of the antitrust laws”) (citation omitted). The Court has also extended this ipso facto treatment to a state’s supreme VOLUME 138 Commission Opinion court when the court acts in a legislative, rather than in a judicial, capacity. Id. at 568 (citing Bates v. State Bar of Arizona, 433 U.S. 350, 360 (1977)). See also Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 63 (1985) (“Parker immunity is available only when the challenged activity is undertaken pursuant to a clearly articulated policy of the State itself, such as a policy approved by a state legislature . . . or a State Supreme Court . . . .”) (citations omitted). Where the actor is neither the state legislature nor the supreme court, but is instead a political subdivision of a state or a private party ostensibly acting pursuant to state authorization, the Court has applied a more rigorous analysis to determine whether the entity is excluded from the federal antitrust laws. In such cases, the Court has held that the party is not ipso facto entitled to state action protection; rather, the party must demonstrate that it acted pursuant to a “clearly articulated and affirmatively expressed” state policy to displace competition in favor of regulation and that the state actively supervised the actions. Cal. Retail Liquor Dealers Assn v. Midcal Alum., Inc., 445 U.S. 97, 105 (1980) (citations omitted). Midcal’s analytical framework provides guidance as to when state action protection is applicable to private parties as well as to nonsovereign state entities regulating private parties. See, e.g., Southern Motor Carriers, 471 U.S. at 57-66 (applying standard); FTC v. Ticor Title Ins. Co., 504 U.S. 621, 631-40 (1992) (applying Midcal analysis to state-licensed title insurance rate bureaus).

2. The Board Is Not Ipso Facto Protected by Parker and Its Progeny The Board is undoubtedly a state regulatory agency with broad powers to supervise the fields of dentistry and dental hygiene in South Carolina.7 As discussed above, however, the Supreme 7 “The practice of dentistry and dental hygiene . . . shall be under the supervision of [the Board].” S.C. Code Ann.§ VOLUME 138 Commission Opinion Court has accorded ipso facto state action status only to state legislatures or supreme courts. The Court has not decided whether a state Governor may ever be sovereign for state action purposes. See Hoover, 466 U.S. at 568 n.17. However, it has indicated that “state agencies” regulating private parties are not ipso facto excluded from antitrust scrutiny. See Southern Motor Carriers, 471 U.S. at 57 (“[t]he circumstances in which Parker immunity is available to private parties, and to state agencies or officials regulating the conduct of private parties, are defined most specifically by our decision in [Midcal],” applying its twopart test) (emphasis added). For those “nonsovereign state representative[s],” [c]loser analysis is required . . . to ensure that the anticompetitive conduct of the State’s representative was contemplated by the State.” Hoover, 466 U.S. at 568-69. Despite this clear precedent limiting the application of ipso facto state action coverage, the Board maintains that its actions are automatically exempt from federal antitrust law because of its status as a state agency. The Board points to the fact that it is a body created by state statute, S.C. Code Ann. § 40-15-10 et seq., whose members are appointed and removed by the Governor, § 40-15-20, and are required by state law to hold regular meetings, and whose financial and employment matters are regulated by the Director of the Department of Labor, Licensing and Regulation. § 40-1-50(D). Mem. in Support of Mot. to Dismiss at 24-25. The Commission, however, concludes that the Board is not sufficiently sovereign to be necessarily exempt from the antitrust laws. The Board relies on several cases holding that state executive departments may be entitled to ipso facto protection in the same 40-15-10. Section 40-15-40 authorizes the Board to “adopt rules and regulations not inconsistent with this chapter for its own organization and for the practice of dentistry and dental hygiene . . . and for carrying out the provisions of this chapter, and [to] amend, modify and repeal any rules and regulations from time to time.”

VOLUME 138 Commission Opinion manner as a state legislature or supreme court. See, e.g., Neo Gen Screening, Inc. v. New England Newborn Screening Program, 187 F.3d 24, 28-29 (1st Cir. 1999) (regarding “full fledged” state executive departments); Charley’s Taxi Radio Dispatch Corp. v. SIDA of Hawaii, Inc., 810 F.2d 869, 875-76 (9th Cir. 1987) (state executive agency ipso facto exempt); Deak-Perera Hawaii, Inc. v. Dept. of Transp., 745 F.2d 1281 (9th Cir. 1984) (same). Some courts and commentators would limit this exception to the Governor’s office, 1 Phillip E. Areeda and Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and their Application ¶ 224, at 405 (2d ed. 2000), or to the Governor himself and not other executive branch agencies. See, e.g., William H. Page, Interest Groups, Antitrust, and State Regulation: Parker v. Brown in the Economic Theory of Legislation, 1987 Duke L.J. 618, 637 n.113 (1987). We need not, however, determine whether state executives or departments are ever ipso facto covered by the state action doctrine because that issue is not before us. Instead, the Board is best characterized as a “subordinate” state special purpose instrumentality or industry regulatory body.

Further, courts have long rejected extending ipso facto state action treatment to such governmental entities because they lack sufficient attributes of state sovereignty. See, e.g., Southern Motor Carriers, 471 U.S. at 62-63 (state Public Service Commissions that set intrastate motor common carriers’ rates, “[a]acting alone,” are not sovereign and cannot immunize private anticompetitive conduct); Goldfarb v. Virginia State Bar, 421 U.S. 773, 790-92 (1975) (state bar association, which was a state agency for certain purposes, was not the “State” under the Parker doctrine); Cine 42nd Street Theater Corp. v. Nederlander Org., Inc., 790 F.2d 1032, 1044 (2d Cir. 1986) (state Urban Development Corporation, created by statute and designated a “governmental agency” and a “political subdivision,” was not “sovereign” for Parker purposes). Declining to treat such nonelected governmental entities as equivalent to the state itself comports fully with the policies of the state action doctrine because such entities lack the political accountability to formulate VOLUME 138 Commission Opinion state competition policy. See, e.g., William H. Page & John E. Lopatka, State Regulation in the Shadow of Antitrust: FTC v. Ticor Title Insurance Co., 3 Sup. Ct. Econ. Rev. 189, 205-07 (1993) (state action protection based on “political legitimacy” of state entity).

Courts have also consistently declined to afford ipso facto state action status to state licensing or regulatory boards that are composed at least in part of members of the regulated industry. See Earles v. State Bd. of Certified Pub. Accountants of Louisiana, 139 F.3d 1033, 1040-41 (5th Cir. 1998) (state licensing board consisting of private accountants not the “state,” and its actions “subjected to greater scrutiny” under the Midcal clear articulation analysis); FTC v. Monahan, 832 F.2d 688, 689-90 (1st Cir. 1987) (Breyer, J.) (state pharmacy board, consisting of private pharmacists, is a “subordinate governmental unit” and therefore undeserving of ipso facto state action status); Massachusetts Bd. of Registration in Optometry, 110 F.T.C. 549, 612-13 (1988) (state optometric licensing board not entitled to ipso facto state action treatment). In fact, the Supreme Court has noted that, other than the legal profession, it was unaware of “any trade or other profession in which the licensing of its members is determined directly by the sovereign itself . . . .” Hoover, 466 U.S. at 580 n.34.8 For these reasons, we reject the Board’s contention that it is entitled to ipso facto state action treatment and turn to whether the Board’s challenged action -- enacting the Emergency Regulation that required dental preexaminations -- was taken pursuant to a “clearly articulated” state legislative policy. 8 Moreover, the Board’s reliance on other cases, see, e.g., Neuwirth v. Louisiana State Bd. of Dentistry, 845 F.2d 553, 556 (5th Cir. 1988), is misplaced because state action treatment is not dependent on Eleventh Amendment standards, and, in any event, the Eleventh Amendment is not a bar to suit such as this one brought by the federal government.

VOLUME 138 Commission Opinion 3. The Board’s Emergency Regulation Does Not Satisfy the Clear Articulation Test As discussed above, the Supreme Court in Midcal articulated the test for determining whether the actions of a private party or a nonsovereign state entity like the Board are exempt from antitrust law under the state action doctrine. This test requires, first, that the challenged conduct proceed from a “clearly articulated and affirmatively expressed” state policy to displace competition and, second, that the state “actively supervise[ ]” the conduct. Midcal, 445 U.S. at 105 (citations omitted). These two elements together address the economic and federalism concerns underlying the state action doctrine by “reconcil[ing] the interests of the states in adopting noncompetitive policies with the strong national policy favoring competition,” Areeda & Hovenkamp, supra, ¶ 221, at 374, and by ensuring that the antitrust laws will be displaced only where there is a “a deliberate and intended state policy.” Ticor Title Ins. Co., 504 U.S. at 636. This principle also ensures that the state entity is held politically accountable for its anticompetitive policies.

In Midcal, the Court reviewed a California wine pricing system that required all wine producers and wholesalers in the state to file fair trade contracts or price schedules with the state. Midcal, 445 U.S. at 99. The California system specifically barred any statelicensed wine merchant from selling wine to a retailer at a price below the scheduled price. Because the “legislative policy is forthrightly stated and clear in its purpose to permit resale price maintenance,” id. at 105, the Court held that the pricing system satisfied the clear articulation test.9 9 The Midcal Court held, however, that the state pricing scheme did not satisfy the “active supervision” requirement and affirmed the California state court ruling that the scheme violated the Sherman Act. Id. The “active supervision” test requires that “the State has exercised sufficient independent judgment and control so that the details of the [restraint] have VOLUME 138 Commission Opinion A line of post-Midcal cases more fully defines the parameters of the clear articulation standard. In Community Communications Co., Inc. v. City of Boulder, 455 U.S. 40 (1982), the Court held that the City of Boulder’s moratorium on cable television expansions did not meet the clear articulation standard, even though Colorado’s constitution vested municipalities with extensive powers of selfgovernment in local and municipal matters. The Court found that despite the state’s broad grant of power to localities, Colorado’s position was “one of mere neutrality” with respect to the challenged conduct. Boulder, 455 U.S. at 55 (emphasis in the original). Consequently, the Court refused to find that “the general grant of power to enact ordinances necessarily implies been established as a product of deliberate state intervention, not simply by agreement among private parties.” Ticor Title Ins. Co., 504 U.S. at 634-35.

The Board argues that the active supervision test does not apply to any governmental entity. The Supreme Court has held that municipalities, unlike private parties, are not subject to the active supervision requirement and are protected by the state action doctrine if they are acting pursuant to a clearly articulated state policy. Town of Hallie v. City of Eau Claire, 471 U.S. 34, 46-47 (1985). The Court indicated in dicta that “it is likely that active state supervision would also not be required” when the relevant actor is a “state agency,” but declined to resolve the issue. Id. at 46 n.10. Thus, the role of active supervision for the myriad varieties of governmental and quasi-governmental entities, including state regulatory boards, remains unclear. See FTC, Office of Policy Planning, Report of the State Action Task Force 15-19, 37-40, 55-56 (Sept. 2003) (“FTC Staff Report”). Because our analysis of the clear articulation requirement provides sufficient reason to deny the Board's motion to dismiss, we need not address whether active supervision is required under these circumstances.

VOLUME 138 Commission Opinion state authorization to enact specific anticompetitive ordinances.” Id. at 56.

By contrast, the Court in Southern Motor Carriers analyzed a Mississippi statute that authorized a state commission to regulate common carriers. In directing the commission to establish “just and reasonable” rates for intrastate transportation of commodities, the legislature clearly articulated “that intrastate rates would be determined by a regulatory agency, rather than by the market.” Southern Motor Carriers, 471 U.S. at 63-64 (citation omitted). The Court found that the challenged rate-setting program followed a clearly articulated policy to displace competition, even though the details of the rate-setting were under the agency’s discretion. In doing so, the Court stated that the clear articulation test does not require “express authorization for every action that an agency might find necessary to effectuate state policy.” Id. at 64. Within the clear articulation parameters set forth in Boulder and Southern Motor Carriers, the Court has described factors relevant to determining whether a nonsovereign entity’s anticompetitive conduct follows a clear state policy. In City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 370- 73 (1991), for example, the Court held that a city council’s ordinance restricting “the size, location, and spacing of billboards” met the clear articulation standard because the anticompetitive effects of such zoning restrictions were a “foreseeable result” of the statutes authorizing the city to regulate the use and construction of structures on city land. This test was satisfied because “[t]he very purpose of zoning regulation is to displace unfettered business freedom in a manner that regularly has the effect of preventing normal acts of competition, particularly on the part of new entrants.” 499 U.S. at 373. The Court also found foreseeability a useful tool in determining clear articulation in Town of Hallie, 471 U.S. at 41-42, where state law specifically authorized Wisconsin cities to delineate the area VOLUME 138 Commission Opinion within which they would provide certain sewage services.10 Unincorporated townships located next to the City of Eau Claire alleged that the city had “used its monopoly over sewage treatment to gain an unlawful monopoly over the provision of sewage collection and transportation services.” Id. at 37. The Court rejected this contention and concluded that “the statutes clearly contemplate that a city may engage in anticompetitive conduct. Such conduct is a foreseeable result of empowering the City to refuse to serve unannexed areas.” Id. at 42.11 Based on these post-Midcal cases, we can conclude that, while clear articulation does not require a state entity to show “express authorization” for every specific anticompetitive act, Southern Motors Carriers, 471 U.S. at 64, it does anticipate that the anticompetitive action will have a significant nexus to, or degree of “foreseeability” stemming from, an identifiable state policy. City of Columbia, 499 U.S. at 373. “Foreseeability” in this context, however, must be restricted to only those regulatory schemes in which the anticompetitive conduct would “ordinarily 10 Southern Motor Carriers -- decided the same day as Town of Hallie -- did not apply the foreseeability analysis, indicating that such analysis, while relevant, is not always necessary to determine clear articulation. 11 Two pre-Midcal cases that denied state action treatment also provide insight into the clear articulation analysis. See Goldfarb, 421 U.S. at 790-92 (denying state action exemption because, although lawyers were subject to ethical codes issued by the state Supreme Court, the state court did not require or approve of state bar opinions placing minimum fee schedules for title searches); Cantor v. Detroit Edison Co., 428 U.S. 579, 584-85 (1976) (denying state action exemption for a public utility that distributed free light bulbs as part of a light bulb exchange program, despite state’s approval of utility’s tariff that included the exchange program, where, at most, state policy was “neutral” with respect to the program).

VOLUME 138 Commission Opinion or routinely result” from the authorizing legislation in order to ensure that there was a deliberate and intended state policy. See FTC Staff Report 33-34. In any event, a state’s “general grant of power” to a political subdivision, without more, is insufficient for purposes of clear articulation under the state action doctrine. Boulder, 455 U.S. at 56.12 Here, the Board contends that its enactment of the Emergency Regulation satisfies the Midcal test, arguing that “[w]hen a state regulatory board has been given comprehensive authority to regulate a profession, such broad grant of authority has been held sufficient to satisfy the ‘clear articulation’ requirement for state action immunity.” Mem. in Support of Mot. to Dismiss at 33 (citing Earles, supra). The Board further asserts that its enactment of the Emergency Regulation was the “foreseeable result” of South Carolina’s grant of “comprehensive power to regulate both the practice of dentistry and the auxiliary practice of dental hygiene.” Id. We do not agree that the Board has established grounds for dismissal based on these assertions. It is undisputed that South Carolina’s statutory regime gives the Board broad general authority to regulate the fields of dentistry and dental hygiene. See, e.g., S.C. Code Ann.§§ 40-15-10; 40-15- 40 (2003). South Carolina law also vests the Board with authority to regulate many specific aspects of dentistry and dental hygiene 12 Certain lower courts have confused general authority to regulate with a state policy to displace competition. See, e.g., Earles, 139 F.3d at 1042; Sandy River Nursing Care v. Aetna Casualty, 985 F.2d 1138 (1st Cir. 1993). Other courts have made this distinction, analyzing whether the state intended to displace competition concerning the particular conduct at issue in addition to whether the governmental body was provided regulatory authority. See, e.g., Cost Management Servs., Inc. v. Washington Natural Gas Co., 99 F.3d 937 (9th Cir. 1996); Yeager’s Fuel, Inc. v. Pennsylvania Power & Light Co., 22 F.3d 1260, 1267-68 (3d Cir. 1994); see also Areeda & Hovenkamp, supra, ¶ 225, at 437. VOLUME 138 Commission Opinion in the state, including licensing, specialization, advertising, and disciplining improper conduct.13 This comprehensive legislative scheme necessarily allows the Board to displace competition in the provision of dentistry and dental hygiene services. For example, it is certainly an ordinary and foreseeable consequence of such a scheme that the Board will limit those practices to persons with adequate training and upon successful examination and will bar lay persons from such practices, even though doing so clearly limits in some sense “competition” for dental services. Nevertheless, it cannot similarly be shown that the particular conduct alleged to be improper here -- imposition of the preexamination requirement by the Board in its Emergency Regulation -- was the foreseeable result of the DPA as amended in 2000. Prior to 2000, dental hygienists in South Carolina could apply sealants and oral prophylaxis in school settings only if four specific requirements were met: written parental permission; authorization from a licensed dentist; that the student not be the active patient of another dentist; and preexamination by the authorizing dentist within 45 days of treatment. S.C. Code Ann. § 40-15-80(C) (1999); Compl. ¶ 18. In 2000, the General Assembly amended the law to permit such treatment only with written parental permission and under the “general supervision” of a dentist. S.C. Code Ann. § 40-15-80(B) (2000); Compl. ¶ 19. “General supervision,” in turn, required only that a dentist “has authorized the procedures to be performed but [did] not require 13 For example, the DPA requires that a license can be issued only after examination, §§ 40-15-100, 40-15-140; provides various grounds to discipline dentists and dental hygienists, §§ 40-15-190(A), 40-15-140; regulates the manner in which dentists may advertise, § 40-15-130; imposes additional requirements on dentists who want to specialize in areas of practice, § 40-15-220; and requires that only dentists may control the use of dental equipment in a dental office and that dentists retain control over the selection of a course of treatment of a patient. § 40-15-135.

VOLUME 138 Commission Opinion that a dentist be present when the procedures are performed.” S.C. Code Ann. § 40-15-85(B)(2000). Whatever room these amendments left for regulation by the Board, the one thing that is clear is that the General Assembly sought “to make it easier for dental hygienists to deliver preventive dental care services in school settings,” Compl. ¶ 18, by deleting the 45-day preexamination requirement.

By removing this specific impediment to the ability of dental hygienists to provide preventive treatment in schools, South Carolina’s legislature has recast the boundaries between two sets of regulated professionals -- the dentists and the hygienists -- in order to promote rather than displace competition between them in the provision of these services. This result is evidenced by the statement of the South Carolina’s Governor’s Office that the 2000 amendments “remove[d] a regulation that hindered access to dental care” and would “allow[] dental hygienists to offer preventive dental care in places such as schools . . . [where] [d]entists rarely practice full-time.” State of S.C., Office of the Governor, New Law Makes Children’s Dental Care More Accessible, RX-4 (ex.7).

The Board’s primary basis for asserting that it reimposed the 45-day preexamination requirement pursuant to a “clearly articulated” state policy is the statute’s “general supervision” standard that requires a dentist’s authorization, § 40-15-85(B) (2000). As noted above, however, the “general supervision” provision does not, on its face, impose a requirement of prior examination by a dentist, much less “clearly articulate” a state policy that hygienists’ ability to offer preventive dental services in school settings was to be subject to such a restriction. In parsing the General Assembly’s 2000 enactment, we of course read the statute as “a symmetrical and coherent regulatory scheme” and “an harmonious whole.” See, e.g., FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000) (citations omitted). We find it relevant that while the 2000 enactment added the “general supervision” requirement, it simultaneously and expressly eliminated the preexamination requirement that existed VOLUME 138 Commission Opinion previously. Applying the “commonplace of statutory construction that the specific governs the general,” Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384 (1992), we can only conclude that the “general supervision” requirement does not authorize reimposition of the preexamination requirement that the Assembly had just eliminated.14 The Board attempts to bolster its argument by referring to widely-available industry standards issued by the ADA as they existed in 2000, on the apparent supposition that the South Carolina legislature intended to use the term “general supervision” in conformity with those standards. As a general matter, the courts have recognized that the state action doctrine “involves a question of law, generally an issue of statutory construction.” 14 Moreover, any consideration of the 2003 amendments -- although of minimal value in interpreting the prior enactment, see 2A Norman J. Singer, Statutes and Statutory Construction § 48:20, at 488-89 (6th ed. 2000) -- would only reinforce our view of the meaning of “general supervision” in both versions of the statute. While the legislature essentially left the definition of “general supervision” unchanged in 2003 (§ 40-15- 85(2)), it addressed the issue of the need for dentist examination by imposing additional requirements for the provision of services under “general supervision” in certain settings. See § 40-15- 102(C). Such additional requirements would be unnecessary if, as the Board supposed, the “general supervision” requirement itself mandated prior examination by a dentist. Moreover, the 2003 statute also specifically provided for the provision of certain hygienist services in public health settings without any preexamination requirement, see §§ 40-15-102(D), 40-15- 110(10), while leaving in place the overall requirement that services provided in school settings be subject to “general supervision” (§ 40-15-80(B)). Again, the clear inference to be drawn from this combination of provisions is that the South Carolina legislature has not understood “general supervision” to encompass a prior examination requirement. VOLUME 138 Commission Opinion Euster v. Eagle Downs Racing Assn, 677 F.2d 992, 997 (3d Cir. 1982); see Telecor Communs., Inc. v. Southwestern Bell Tel. Co., 305 F.3d 1124, 1139 (10th Cir. 2002), cert. denied, 538 U.S. 1031 (2003); Trigen-Oklahoma City Energy Corp. v. Okla. Gas & Elec. Co., 244 F.3d 1220, 1225 (10th Cir.), cert. denied, 534 U.S. 993 (2001). Nevertheless, as discussed above, in limited circumstances it is appropriate, even in addressing the meaning of a statutory enactment, to look to extrinsic sources that may have a bearing on the way in which the legislature used a particular term. See pp. 11-12, supra. The Board’s reliance on the ADA’s use of the term “general supervision,” however, cannot overcome the statutory analysis set forth above, because there is no reason to conclude that the South Carolina legislature adopted the ADA’s “general supervision” standard. Indeed, all indications are to the contrary. While the ADA’s definition of that term specifically requires that the dentist “has personally diagnosed the condition to be treated,” ADA Comprehensive Policy on Dental Auxiliaries (attached to RX-3 (ex. C)), S.C. Code Ann.§ 40-15-85(B) (2000) strikingly omits this language from its provision defining “general supervision.” By contrast, when the South Carolina legislature has intended to adopt an ADA definition in toto, it has done so expressly, as in its nearly verbatim incorporation of the ADA’s definition of “direct supervision.” Compare, e.g., S.C. Code Ann. § 40-15-85(A) (2000) with RX-3 (ex. C at 8).15 The Board has not shown that its enactment of the Emergency Regulation reimposing the 45-day preexamination requirement was the foreseeable result of the 2000 amendments. See Telecor Communs., 305 F.3d at 1139-40 (state action protection did not apply to private party defendant because its activities, rather than expressly permitted by a state policy, were contrary to the state’s policy of fostering competition in the pay phone market). On the 15 Indeed, certain provisions in the DPA (concerning the licensing of dental specialties) specifically refer to ADA standards or requirements. See, e.g., S.C. Code Ann. §§ 40-15- 220, 40-15-250, 40-15-260 (2003).

VOLUME 138 Commission Opinion contrary, the Board’s regulation appears to be in direct conflict with the South Carolina statute and inconsistent with the policy ideals behind the state action doctrine: that federalism permits the state as sovereign to displace the national policy of open competition with regulation, but only if such anticompetitive intent is clearly shown. In this way, federal antitrust policy will not be “unnecessarily and inappropriately subordinated to state policy.” Bates, 433 U.S. at 362.

The Board’s reliance on case law concluding that a state licensing board’s broad grant of regulatory power necessarily contemplates certain anticompetitive conduct, see, e.g, Earles, 139 F.3d at 1042, is misplaced and does not cure the basic defect in its argument. Although the Board continued to have general authority over the practice of dentistry and dental hygiene, the 2000 amendments facially eliminated the preexamination requirement. We therefore cannot conclude that the Board’s Emergency Regulation reinstituting such a requirement was an action pursuant to a clearly articulated state policy to displace competition. Instead, the South Carolina legislature’s specific direction to permit dental hygienists to provide preventive dental care in schools without preexaminations represents a discrete, procompetitive “carve-out” from the Board’s general authority over the practice of dentistry and dental hygiene. See, e.g., Cost Management Servs., 99 F.3d at 942-43 (fact that state had displaced competition in the market for sale of natural gas with a regulatory structure did not provide a state action exemption for off-tariff pricing).

Finally, we also disagree with the Board’s argument that the 2000 amendments maintained the state’s “clearly articulated” policy to require dental preexaminations because the 2000 law removed only the requirement that a dentist be physically present when a hygienist performs certain services in schools. Mem. in Support of Mot. to Dismiss at 27-28. It is far from clear, however, whether a dentist was required to be physically present in school settings prior to 2000: the pre-2000 law made no reference to a physical presence requirement in the provision specifically VOLUME 138 Commission Opinion governing the application of sealants and oral prophylaxis in school settings, § 40-15-80(C) (1999), and the law expressly permitted oral screenings and the application of topical fluoride “without the presence of a dentist on the premises.” § 40-15- 80(B) (1999). If the aim of the 2000 statute was to delete the physical presence requirement, one would have expected such a requirement to be clearly shown in the pre-2000 law, such as by including it in its list of other requirements for the application of sealants and oral prophylaxis -- e.g., parental consent, dentist preexamination -- set forth in Section 40-15-80(C). Further, the Board’s interpretation of the 2000 law would create anomalous conditions, such as requiring preexaminations under the “general supervision” provision for fluoride treatments in school settings even though no such requirement existed before 2000. Contrary to the Board’s arguments, the plain language of the 2000 amendments indicates that the state General Assembly intended to allow dental hygienists to perform certain preventive dental treatments in schools without a prior dental examination. After all, the Assembly deleted specific language that had imposed a preexamination requirement. Moreover, as shown above, the Board has failed to show that the “general supervision” language provides a basis for its actions. In light of the 2000 statutory amendments, we cannot agree with the Board’s argument that its Emergency Regulation was “clearly articulated” by state policy.16 16 The Board asserts that the state court finding that the 2000 amendments required a dental preexamination, see Health Promotion Specialists, supra, constitutes an interpretation of state law that binds the Commission. We reject this argument. Although the Commission may consider state trial court interpretations of state law, we -- like federal courts -- are not bound by such interpretations. See, e.g., King v. Order of United Commercial Travelers, 333 U.S. 153, 159-62 (1948). This rule is particularly applicable where the state decision was based, in part, on the argument (now abandoned by the Board) that the 2000 law VOLUME 138 Commission Opinion 4. The Board’s 2001 Emergency Regulation That Contravened South Carolina’s Legislative Policy Was More Than a Mere “Error” of State Administrative Law The Board also argues that, even if it erred in interpreting the 2000 amendments, its promulgation of the Emergency Regulation did not so far exceed the bounds of its statutory authority to regulate as to constitute the kind of “egregious level of error” necessary to lose its state action protection. Mem. in Support of Mot. to Dismiss at 28-31; Reply at 12-19. To support its argument, the Board relies on a statement in City of Columbia that, under the state action doctrine, “it is necessary to adopt a concept of authority broader than what is applied to determine the legality of the [political subdivision’s] action under state law.” City of Columbia, 499 U.S. at 372. Thus, a political subdivision would still be entitled to state action protection if it “possess[ed] the power to engage in the challenged conduct” through delegated statutory authority, even if its actual implementation of this authority were substantively or procedurally defective. Id. (citation omitted).

This argument is based upon a fundamental misreading of the cited City of Columbia passage. There the Court distinguished carefully between, on the one hand, the basic “authority to regulate” and, on the other hand, the specific authority “to suppress competition.” Id. With respect to the former, the Court recognized that the authority of state bodies had to be read broadly, lest any state law error in the defendant’s actions render those actions “unauthorized,” and thus subject to antitrust attack. The Court rejected a rule that would thus “‘transform[] . . . state administrative review into a federal antitrust job.’” Id. (quoting Areeda & Hovemkamp, Antitrust Law ¶ 212.3b (Supp. 1989)). With respect to the authority to suppress competition, however, the Court emphasized the necessity of a clearly articulated state effected no substantive change in the law. VOLUME 138 Commission Opinion policy that authorizes the political subdivision to engage in anticompetitive conduct.

The Board’s argument in the present case ignores this distinction and would eviscerate the “clear articulation” standard. Complaint Counsel have not argued that the 2001 Emergency Regulation was simply “unauthorized” under state law, in the sense of being procedurally defective or substantively incorrect in a manner that is not directly related to competitive concerns. Rather, Complaint Counsel challenge the Emergency Regulation because it is contrary to a specific directive of the state legislature -- one that placed an express limitation on how far the Board was permitted to go in suppressing competition. If an action of this sort could be written off as a “mere error” of state law, such a theory would swallow the clear articulation rule. An action of a subordinate state entity that ignores an express legislative limitation of this sort must fall outside the state action exemption. 5. State Action Holding Based on the above analysis, we cannot conclude that the Board’s enactment of the 2001 Emergency Regulation was protected state action. We have no reason to conclude that the Board’s actions are those of the state as sovereign, so as to be ipso facto exempt state action. Nor can we conclude that the Board acted pursuant to a clearly articulated policy of the South Carolina legislature to displace competition. On the contrary, its actions appear to have contravened the clear legislative intent in the 2000 amendments to eliminate the preexamination requirement. Finally, the apparent flaw in the Board’s actions is not a mere error of state administrative law, but relates directly to the limitations the state legislature has imposed on the Board’s authority to restrict competition.

For all these reasons, we deny the Board’s Motion to Dismiss on state action grounds. In so doing, we do not foreclose entirely further proceedings on the state action issue. Although the fundamental principles of statutory construction discussed above VOLUME 138 Commission Opinion negate rather than support the defense in this situation, it remains conceivable, for reasons discussed previously, that the Board could adduce additional materials relevant to the interpretation of the 2000 statute. See pp. 11-12, 26-27, supra.17 We leave any further consideration of this issue, along with other issues on the merits, to be addressed in such future administrative proceedings as may be necessary in the event we find a live controversy, after the limited inquiry described below regarding possible mootness. B. Whether This Case Is Moot The issue of whether this case is moot raises a question of disputed fact that the Commission cannot properly resolve on Respondent’s Motion to Dismiss. For the reasons set forth below, however, we refer this matter to the administrative law judge for limited discovery on the issue of whether the challenged conduct is likely to recur.

1. Respondent’s Mootness Claim The Board asserts that the Commission should dismiss this case as moot because the 2003 amendments to the DPA, combined with the Emergency Regulation’s expiration and the Board’s actions since 2002, now ensure that hygienists are not subject to the dentist preexamination requirement and preclude the Board from engaging in the challenged conduct. In addition, the Board argues that, even if the matter is not technically moot, the 17 As emphasized above, any such inquiry must be narrow, in light of the legal nature of the issues of statutory interpretation to be addressed. In particular, post-enactment statements, particularly those from nonofficial sources (such as from the South Carolina Dental Hygiene Association website, RX-5), are not to be considered in the course of interpreting a statute. Singer, supra note 14, §§ 48:11, 48:20, at 456-62, 488- 89.

VOLUME 138 Commission Opinion Commission should still dismiss the Complaint because there is no need for the relief contemplated by the Complaint.

2. Mootness Claims and Analysis To prove that a case is moot, the moving party must show more than just that the challenged conduct has ceased; rather, the movant must establish that there is no reasonable expectation that the conduct could recur. See United States v. W.T. Grant Co., 345 U.S. 629, 632 (1953) (“voluntary cessation of allegedly illegal conduct does not deprive the tribunal of power to hear and determine the case, i.e., does not make the case moot”). Where the respondent contends that it will not repeat prior conduct, it bears a heavy burden to establish that a proceeding is moot. See The Coca-Cola Co., 117 F.T.C. 795, 917 (1994). In order to meet this burden, the Board primarily relies upon the changes to the statutory framework in South Carolina. The Board specifically cites the 2003 amendments to the DPA, which it contends now prevent it from imposing a dentist preexamination requirement on hygienists offering treatment in public settings. It also cites the expiration of the Emergency Regulation, which the Board has not attempted to revive. The Board relies on several cases, e.g., Native Village of Noatak v. Blatchford, 38 F.3d 1505, 1510 (9th Cir. 1994), finding cases moot where allegedly discriminatory or unconstitutional state statutes were repealed. However, this case does not involve the repeal of a challenged law and the 2003 amendments did not change some area of the 2000 law that formed the basis of the Complaint. Instead, the Complaint alleges violative conduct by the Board under the 2000 law -- conduct that would similarly violate the 2003 law. Moreover, the Complaint alleges facts that suggest that the Board may again engage in the type of conduct the Complaint challenges. See Compl. ¶ 38. Accordingly, we cannot find this action moot at this time.

VOLUME 138 Commission Opinion The Complaint alleges that the Board met in March 2003 and considered the proposed revisions to the DPA that the General Assembly thereafter enacted. Under the heading “The Current Threat to the Delivery of Preventive Dental Services in South Carolina,” Paragraph 38 of the Complaint alleges that the Board “maintained that in all settings where a dental hygienist provides treatment -- whether public health or private practice -- a licensed dentist has to see the patient and provide a treatment plan” (emphasis added). See also S.C. Bd. of Dentistry, Mins. From Conference Call (RX-13 (attach. B at 4)). In ruling on a motion to dismiss, the Commission must accept all well-pled factual allegations as true and must construe all inferences in Complaint Counsel’s favor. See supra Section III. We therefore accept as true that the Board met to discuss what would become the 2003 amendments and interpreted these statutory revisions to require a preexamination by a dentist in all settings before a dental hygienist can provide treatment. The Board similarly found a preexamination requirement in the 2000 amendments, which led it to enact the Emergency Regulation. Paragraph 38 thus raises the inference that the Board will once again restrict, through some emergency enactment or other action, the ability of dental hygienists to provide treatment in school settings. In other words, the Complaint alleges facts that would clearly justify the Commission in ordering relief. The Board’s October 16, 2003, Resolution (RX-13 (attach. A)) does not alter the inference that the Board may engage in the challenged conduct in the future. First, we note that the Board did not adopt the Resolution until after the Commission had issued the Complaint, and the Board could abandon the Resolution at any time. More important, to the extent that the Resolution offers an explanation or context for Paragraph 38 of the Complaint, we find that it simply raises a question of disputed fact that the Commission cannot resolve in a motion to dismiss. See, e.g., Schering-Plough Corp., 2001 FTC LEXIS 198 (Oct. 31, 2001). VOLUME 138 Commission Opinion Finally, the Board argues that there is no need for relief even if the matter is not “technically” moot. Motion to Dismiss at 22. We reject this argument. Because Paragraph 38 of the Complaint suggests that the Board will again engage in actions similar to those challenged, we find that the Complaint sets forth grounds for injunctive relief to address such actions. We thus decline to dismiss the Complaint on such grounds at this stage of these proceedings. See FTC v. Citigroup Inc., 239 F. Supp. 2d 1302, 1306 (N.D. Ga. 2001) (denying Rule 12(b)(6) motion to dismiss and stating that an injunction may be issued if a violation is ongoing or likely to recur).

3. Mootness Holding Accepting, as we must, all of the Complaint’s factual allegations and construing all inferences in the light most favorable to Complaint Counsel, we find that the Board has not met its burden of establishing that Complaint Counsel can prove no set of facts that would entitle them to relief. Accordingly, this case does not appear to be moot or otherwise subject to dismissal for failure to state a claim. However, our conclusion regarding mootness is based primarily on the factual allegations and inferences raised by Paragraph 38 of the Complaint, which raises the relatively narrow issue of whether there is a meaningful chance for recurrence of the challenged conduct. During oral argument on this Motion, Respondent’s counsel agreed to engage in limited discovery to assist the Commission in resolving the mootness issue. South Carolina State Bd. of Dentistry, Oral Argument on Mot. to Dismiss, Hr’g Tr. 71, 75-76 (Jan. 13, 2004). We find this suggestion helpful. Thus, based upon each party’s interest in avoiding a potentially unnecessary trial, we exercise our discretion to refer this matter to the administrative law judge for limited discovery for ninety (90) days and an initial assessment of the likelihood that the Board may engage in future unlawful conduct under the 2003 statute. In particular, the Commission requests that the administrative law judge make findings of fact and resolve the context and VOLUME 138 Commission Opinion significance of the Board’s March 2003 meeting and the Board’s October 2003 Resolution. We leave to the administrative law judge’s discretion whether to hold a hearing or to request a briefing to assist the Commission in resolving the Board’s mootness defense. Apart from this limited referral, we retain jurisdiction over this matter.

VII. CONCLUSION For all the reasons stated above, the Commission denies the Board’s Motion to Dismiss on state action grounds. Further, we will retain jurisdiction over this case and hold in abeyance the Board’s Motion to Dismiss on mootness grounds. We refer the matter to the administrative law judge to conduct limited discovery and to make findings of fact and an initial decision regarding the Board’s mootness defense.

VOLUME 138 Order ORDER DENYING MOTION TO DISMISS ON STATE ACTION GROUNDS, HOLDING IN ABEYANCE MOTION TO DISMISS ON MOOTNESS GROUNDS, RETAINING JURISDICTION, AND REFERRING MOOTNESS ISSUES TO AN ADMINISTRATIVE LAW JUDGE Respondent South Carolina State Board of Dentistry has filed a Motion to Dismiss the Complaint in this matter, based on two grounds. First, Respondent argues that the acts that are the subject of the Complaint are exempt from federal antitrust liability under the state action doctrine. Second, Respondent argues that this case is moot because it has discontinued the challenged acts and because those acts are now barred by the 2003 amendments to state law.

The Commission has considered the Motion to Dismiss, as well as Respondent’s and Complaint Counsel’s briefs and oral arguments in support of and in opposition to the Motion to Dismiss. For the reasons stated in the accompanying Opinion, the Commission has determined: to deny Respondent’s Motion to Dismiss on state action grounds; to hold in abeyance Respondent’s Motion to Dismiss on mootness grounds; to retain jurisdiction; and to refer the mootness issues raised by Respondent’s Motion to Dismiss to Chief Administrative Law Judge Stephen J. McGuire or his designee to conduct a limited inquiry and the preparation of an initial decision on the issue of whether there is a reasonable likelihood that the conduct challenged by the Complaint will recur. Accordingly, IT IS ORDERED THAT Respondent’s Motion to Dismiss on state action grounds be, and it hereby is, denied; IT IS FURTHER ORDERED THAT Respondent’s Motion to Dismiss on mootness grounds be, and it hereby is, held in abeyance;

VOLUME 138 Order IT IS FURTHER ORDERED THAT the Commission shall retain jurisdiction of this matter, pursuant to Commission Rule 3.42(a), 16 C.F.R. § 3.42(a); and IT IS FURTHER ORDERED THAT the mootness issues raised by Respondent’s Motion to Dismiss be, and they hereby are, referred to Chief Administrative Law Judge Stephen J. McGuire or his designee for further proceedings in accordance with the accompanying Opinion, including in particular (1) the conduct of limited discovery, for a period not to exceed ninety (90) days from the date of issuance of this Order; and (2) the preparation of findings of fact and an initial decision addressing the likelihood that the Respondent may engage in future unlawful conduct under the 2003 South Carolina statute. For purposes of this proceeding, the deadline for filing the initial decision shall be determined and if necessary extended as prescribed by Commission Rule 3.51(a), 16 C.F.R. § 3.51(a), except that the deadline shall in no event be any earlier than January 31, 2005. VOLUME 138 Complaint COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act, as amended, 15 U.S.C. § 41, et seq., and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that the South Carolina State Board of Dentistry violated Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues this Complaint stating its charges in that respect as follows:

STATEMENT OF THE CASE 1. Respondent South Carolina State Board of Dentistry (“the Board”), which consists almost entirely of practicing dentists, restrained competition in the provision of preventive dental care services by unreasonably restricting the delivery of dental cleanings, sealants, and topical fluoride treatments in school settings by licensed dental hygienists. Although the South Carolina General Assembly passed legislation in 2000 eliminating a statutory requirement that a dentist examine each child before a hygienist may perform cleanings or apply sealants in school settings, the Board in 2001 re-imposed the very examination requirement that the legislature had eliminated, and extended it to the application of topical fluoride in school settings as well. The effect of the Board’s action was to deprive thousands of school children—particularly economically disadvantaged children—of the benefits of preventive oral health care services. The Board’s anticompetitive action, undertaken by self-interested industry participants with economic interests at stake, was contrary to state policy and was not reasonably related to any countervailing efficiencies or other benefits sufficient to justify its harmful effects on competition and consumers.

VOLUME 138 Complaint RESPONDENT 2. The Board is organized, exists, and transacts business under and by virtue of the laws of South Carolina, with its principal office at Synergy Business Park, Kingstree Building, 110 Centerview Dr., Columbia, South Carolina 29210. 3. The Board was created by the South Carolina legislature to supervise the practice of dentistry and dental hygiene. 4. By virtue of the Board’s make-up, the licensed dentists of South Carolina regulate both themselves and dental hygienists. 5. The Board is composed of seven dentists, one dental hygienist, and one public member. The licensed dentists in South Carolina elect six of the dentist members for approval by the governor, and the dental-hygienist member is elected by licensed dental hygienists in South Carolina for approval by the governor. The governor of South Carolina appoints one of the dentist members and the public member.

6. While serving their membership terms, dentist members of the Board may, and do, continue to engage in the business of providing dental services for a fee. Except to the extent that competition has been restrained as alleged below, and depending on their geographic location, licensed dentists in South Carolina compete with each other and with dentist members of the Board. 7. The Board is the sole licensing authority for dentists and dental hygienists in South Carolina. It is generally unlawful for an individual to practice or to offer to practice dentistry or dental hygiene in South Carolina unless he or she holds a current license to practice.

8. The Board is authorized by South Carolina law to take disciplinary action against any licensee who violates any rule or regulation promulgated by the Board. Disciplinary action by the VOLUME 138 Complaint Board may include the suspension or revocation of a license, or other limitations or restrictions on a licensee. JURISDICTION 9. The Board is a state regulatory body and is a “person” within the meaning of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45.

10. Substantial sums of money flow into South Carolina from the federal government and other out-of-state payers for the purchase of preventive dental care services. The acts and practices of the Board, including the acts and practices alleged herein, have been or are in or affecting “commerce” within the meaning of Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 44.

PREVENTIVE DENTAL SERVICES IN SOUTH CAROLINA 11. Dental hygienists are licensed health care professionals who specialize in providing preventive oral health services. Such services include cleaning teeth, taking x-rays, providing nutrition and dietary counseling, providing fluoride treatments, and applying dental sealants. Dental hygienists are also trained to detect signs of oral disease and to educate patients on maintaining optimal oral health.

12. There are over 2,200 dental hygienists licensed to practice in South Carolina. Dental hygienists in South Carolina practice in collaboration with a supervising dentist or under the direction of the South Carolina Department of Health and Environmental Control’s public health dentist.

13. Firms owned by dental hygienists working in collaboration with a dentist (either supervised by a private dentist or working at the direction of South Carolina’s public health dentist) can VOLUME 138 Complaint compete with dentists for the provision of preventive dental care services.

14. Many children in South Carolina suffer from oral health problems because they do not receive preventive dental care, particularly children in low-income families. Over 400,000 children – more than 40 percent of children in South Carolina – are Medicaid-eligible. In the early 1990s, only 12 percent of Medicaid-eligible children received preventive dental care services.

15. In 1988, the South Carolina General Assembly enacted a law specifically authorizing dental hygienists to provide preventive services in schools. That law, however, required that hygienists could provide cleanings and apply dental sealants only if a dentist had examined the child’s teeth within the previous 45 days. The 1988 law did not significantly increase the delivery of dental hygienists’ services in school settings. 16. In 2000, South Carolina substantially increased Medicaid reimbursement for dental services. With federal matching funds, about $79 million became available annually for Medicaideligible dental services.

17. After Medicaid payment levels for dental care services increased, the number of South Carolina dentists participating in South Carolina’s Medicaid-Dental program increased about onethird. More than 900 of the over 1,500 licensed dentists licensed in South Carolina now participate in the state’s Medicaid-Dental program.

VOLUME 138 Complaint SOUTH CAROLINA GENERAL ASSEMBLY REMOVES A BARRIER TO THE PROVISION OF PREVENTIVE DENTAL CARE IN SCHOOLS 18. In 2000, the South Carolina General Assembly amended its statutes to make it easier for dental hygienists to deliver preventive dental care services in school settings. Prior to the 2000 amendments, South Carolina statutes provided that a dental hygienist could provide cleanings and sealants in a school setting only if:

(1) a supervising dentist examined the patient no more than 45 days before the treatment;

(2) a supervising dentist provided written authorization for the procedures;

(3) the patient was not an active patient of another dentist; and (4) the patient’s parents provided written permission for the treatment.

19. The 2000 amendments removed these requirements, except the requirement for parental consent. The 2000 amendments provided instead that a dental hygienist could apply topical fluoride and perform the application of sealants and oral prophylaxis “under general supervision.” S.C. Acts § 40-15- 80(B) (2000). General supervision “means that a licensed dentist or the South Carolina Department of Health and Environmental Control’s public health dentist has authorized the procedures to be performed but does not require that a dentist be present when the procedures are performed.” S.C. Acts § 40-15-85 (2000). By virtue of the 2000 amendments, the Board could not require a dentist examination as a condition of a dental hygienist’s providing preventive services in a school setting. VOLUME 138 Complaint 20. Upon signing the 2000 amendments, South Carolina’s governor announced: “This new law removes a regulation that hindered access to dental care.”

21. The 2000 amendments embodied a policy to remove artificial barriers to the provision of oral preventive health care by dental hygienists to school children.

22. Health Promotion Specialists (“HPS”) is a firm owned by a dental hygienist that provides preventive dental services to South Carolina children. HPS employs dental hygienists to provide those services and contracts with dentists to supervise the hygienists.

23. In January 2001, HPS began providing cleanings, sealants, topical fluoride treatments, and other preventive dental services on-site to children in South Carolina schools. By July 2001, HPS had screened over 19,000 children, and provided preventive services (cleanings, sealants, and topical fluoride treatments) to over 4,000 children, including nearly 3,000 Medicaid-eligible children. Because HPS’s services were provided in schools, they were more convenient for the families of the children served. Dentists in traditional office practices risked losing patients to HPS.

24. Because a tremendous unmet need for preventive dental care remained, HPS expected to treat more than twice as many students in the fall semester of 2001 as it had in the spring semester. Relying on this forecast, HPS more than doubled the number of hygienists it employed.

BOARD CONDUCT 25. The Board has restrained competition in the provision of preventive dental care services by combining or conspiring with its members or others, or by acting as a combination of its members or others, to restrict unreasonably the ability of dental hygienists to deliver preventive services in school settings. In VOLUME 138 Complaint particular, on July 12, 2001, the Board adopted an emergency regulation governing dental hygienist practice in school settings that re-imposed the same examination requirement that the General Assembly removed in 2000: that a supervising dentist had to examine the patient no more than 45 days prior to treatment.

26. For the regulation to become effective, it required the approval only of the Board, a majority of which consists of practicing dentists elected by the licensed dentists of South Carolina. No financially disinterested state actor approved the regulation before or while it was in effect. Under state law, the regulation terminated after 180 days.

27. The emergency regulation conflicted directly with the policy articulated by the General Assembly, by re-imposing the precise barriers to dental hygienists’ providing preventive services to school children that the legislature had just removed. 28. The effect of the emergency regulation was to reduce substantially the number of children (particularly economically disadvantaged children) who received preventive dental care. During the latter half of 2001, the period when the emergency regulation was in effect, HPS screened fewer than 6,000 children, about 13,000 fewer than it had screened during the first half of 2001. The emergency regulation also limited HPS’s ability to provide preventive dental care; as a result, the regulation deprived thousands of South Carolina children of preventive dental care. 29. The Board’s requirement that a dentist examine each child before a dental hygienist provides a cleaning, sealant, or fluoride treatment in school settings was not reasonably related to any efficiencies or other benefits sufficient to justify its harmful effect on competition and consumers.

VOLUME 138 Complaint STATE ADMINISTRATIVE REVIEW FINDS IMPOSITION OF THE DENTIST PRE-EXAMINATION REQUIREMENT IN SCHOOL SETTINGS CONTRARY TO THE 2000 AMENDMENTS 30. In August 2001, the Board published a proposed permanent regulation substantially identical to the emergency regulation, which by law would lapse in January 2002. 31. Pursuant to South Carolina law, an administrative law judge was required, after a public hearing, to determine whether the proposed permanent regulation was a reasonable exercise of the Board’s authority. The administrative law judge’s report, along with the proposed regulation, had to be forwarded to the General Assembly for review in order for the permanent regulation to become effective.

32. In February 2002, the presiding administrative law judge issued a report that concluded that the Board’s proposed permanent regulation was unreasonable and contravened state policy to the extent it reinstated the dentist pre-examination requirement that the legislature had eliminated in 2000. 33. The administrative law judge found that deletion of the statutory pre-examination requirement reflected a state policy adopted by the South Carolina legislature during its 2000 session to increase access to preventive oral health care for low-income children. The administrative law judge recommended that the Board delete the pre-examination requirement from its proposal before forwarding it to the legislature. 34. After issuance of the administrative law judge’s report, the Board did not submit its proposed permanent regulation to the General Assembly for review. As a result, the proposed regulation did not take effect.

VOLUME 138 Complaint THE CURRENT THREAT TO THE DELIVERY OF PREVENTIVE DENTAL SERVICES IN SOUTH CAROLINA 35. After the emergency regulation lapsed, at least three firms, including HPS, provided preventive dental care in schools pursuant to contracts with the Department of Health and Environmental Control. Under the contracts, these firms provided cleanings, fluoride treatments, and sealants, under standing orders, without a mandatory pre-examination by a dentist. 36. During the latter part of 2002, HPS provided preventive dental care treatments to nearly 10,700 school children, 6,000 more than during the same period in 2001, when the Board’s emergency regulation was in effect.

37. In May 2003, the South Carolina General Assembly enacted legislation that expressly provides that dentist examination requirements applicable in some settings do not apply to dental hygienists’ provision of preventive oral health care services, including cleanings, sealants and topical fluoride, when they are working in public health settings under the direction of the Department of Health and Environmental Control. 38. Nonetheless, when the Board in March 2003 considered the statutory revisions that the General Assembly later enacted, it maintained that in all settings where a dental hygienist provides treatment – whether public health or private practice – a licensed dentist has to see the patient and provide a treatment plan. ANTICOMPETITIVE EFFECTS 39. The Board’s acts and practices have had the effect of restraining competition unreasonably and injuring consumers in the following ways, among others:

VOLUME 138 Complaint A. hindering competition in the delivery of cleaning, sealant, topical fluoride, and other preventive dental services to school-aged children in South Carolina; and B. depriving thousands of school children—particularly economically disadvantaged school children—of the benefits of preventive oral health care. VIOLATION 40. The combination, conspiracy, acts and practices described above constitute unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. Such combination, conspiracy, acts, and practices, or the effects thereof, are continuing and will continue or recur in the absence of the relief herein requested.

NOTICE Notice is hereby given to the Respondent that the fourteenth day of January, 2004, at 10:00 a.m., or such later date as determined by the Commission or by an Administrative Law Judge of the Commission, is hereby fixed as the time and Federal Trade Commission offices, 600 Pennsylvania Ave., N.W., Washington, D.C. 20580, as the place when and where a hearing will be had on the charges set forth in this Complaint, at which time and place you will have the right under the FTC Act to appear and show cause why an order should not be entered requiring you to cease and desist from the violations of law charged in the Complaint.

Pending further order of the Commission, the Commission will retain adjudicative responsibility for this matter. See § 3.42(a) of the Commission’s Rules of Practice for Adjudicative Proceedings. Pursuant to § 3.12 of those Rules, the Commission hereby allows you until 30 days from the date of service of this Complaint upon you to file either an answer or a dispositive motion. If you file a dispositive motion within that time, your time for filing an answer VOLUME 138 Complaint is extended until 10 days after service of the Commission’s order on such motion. If you do not file a dispositive motion within that time, you must file an answer.

An answer in which the allegations of the Complaint are contested shall contain a concise statement of the facts constituting each ground of defense; and specific admission, denial, or explanation of each fact alleged in the Complaint or, if you are without knowledge thereof, a statement to that effect. Allegations of the Complaint not thus answered shall be deemed to have been admitted.

If you elect not to contest the allegations of fact set forth in the Complaint, the answer shall consist of a statement that you admit all of the material facts to be true. Such an answer shall constitute a waiver of hearings as to the facts alleged in the Complaint and, together with the Complaint, will provide a record basis on which the Administrative Law Judge shall file an initial decision containing appropriate findings and conclusions and an appropriate order disposing of the proceeding. In such answer, you may, however, reserve the right to submit proposed findings and conclusions under § 3.46 of the Commission's Rules of Practice for Adjudicative Proceedings and the right to appeal the initial decision to the Commission under §3.52 of said Rules. Failure to answer within the time above provided shall be deemed to constitute a waiver of your right to appear and contest the allegations of the Complaint and shall authorize the Administrative Law Judge, without further notice to you, to find the facts to be as alleged in the Complaint and to enter an initial decision containing such findings, appropriate conclusions, and order.

The Commission or the Administrative Law Judge will schedule an initial prehearing scheduling conference to be held not later than 14 days after an answer is filed by Respondent. Unless otherwise directed by the Commission or the Administrative Law Judge, the scheduling conference and further VOLUME 138 Complaint proceedings will take place at the Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Room 532, Washington, D.C. 20580. Rule 3.21(a) requires a meeting of the parties' counsel as early as practicable before the prehearing scheduling conference, and Rule 3.31(b) obligates counsel for each party, within 5 days of receiving a respondent's answer, to make certain initial disclosures without awaiting a formal discovery request. NOTICE OF CONTEMPLATED RELIEF Should the Commission conclude from the record developed in an adjudicative proceeding in this matter that the Board is in violation of Section 5 of the Federal Trade Commission Act, as alleged in the Complaint, the Commission may order such relief as is supported by the record and is necessary and appropriate, including, but not limited to, an order that requires the following: 1. The Board shall cease and desist from, either directly or indirectly, requiring that a dentist conduct an examination of a patient as a condition of a dental hygienist who is working in a public health setting pursuant to S.C. Code Ann. § 40-15- 110(A)(10), or any recodification thereof, performing oral prophylaxis or applying sealants or topical fluoride to that patient, unless the examination requirement is adopted by the South Carolina General Assembly after the date that the order becomes final.

2. The Board shall mail a copy of the Complaint, order, and an explanatory notice to each Board member; each officer, director, representative, agent, and employee of the Board; each person licensed to practice dentistry or dental hygiene in South Carolina; and the superintendent of each school district in South Carolina. 3. The Board shall take such other measures that are appropriate to correct or remedy, or prevent the recurrence of, the anticompetitive practices in which it engaged. VOLUME 138 Complaint WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on this twelfth day of September, 2003, issues its Complaint against Respondent South Carolina State Board of Dentistry.

By the Commission.

Donald S. Clark Secretary SEAL VOLUME 138 Complaint