LEGAL
At the end of February, the Supreme Court handed down its decision in North Carolina State Board of Dental Examiners v. F.T.C., to the apparent cheers of alternative legal service providers such as LegalZoom.
The facts of the case begin in 2006, when the North Carolina State Board of Dental Examiners began sending cease-and-desist letters to "nondentist teeth whitening service providers and product manufacturers." Under North Carolina law, the Board is charged as being "the agency of the State for the regulation of the practice of dentistry." As such, it is the Board's responsibility to prevent the unauthorized practice of dentistry. According to the Board, "teeth whitening" falls within the scope of "practice of dentistry," rendering the service by nondentists to be "unauthorized."
The Board was eventually successful in purging the state of nondentist teeth whiteners. In 2010, however, the Federal Trade Commission (FTC) filed an administrative complaint against the Board, charging it with unfair and anticompetitive practices through its actions against the nondentist teeth whiteners.
The Board argued that it was acting under the state's authority in the regulatory activity in question, and, per the 1943 Supreme Court ruling Parker v. Brown, it was therefore immune to antitrust liability. After years of litigation, the Court ruled against the Board last month, assigning antitrust liability to the Board.
If you're familiar with the hurdles faced over the years by alternative legal services such as LegalZoom – specifically, that they've faced regulatory action from state bars across the country for their allegedly unauthorized practice of law for over a decade – you may imagine them celebrating this ruling. But you don't even have to imagine their excitement; it's palpable from just reading a recent article in Forbes written by Ken Friedman, the Vice President of Legal and Government Affairs for LegalZoom.
Friedman makes no effort to hide his glee at Dental Examiners, a decision that he seemingly heralds as marking the beginning of the end of the "monopolies" enforced by market participants – such as, of course, the legal profession.
LegalZoom shouldn't be getting too excited, though, because the Court's Dental Examiners ruling isn't quite as sweeping as Friedman pretends. For example, the Court was quick to note that the actions of the North Carolina Dental Examiners Board were predominantly because of complaints that the nondentists were undercutting the prices of dentists offering the same services. The actions were not taken against the nondentists because of possible harm to consumers.
What's more, the Board didn't even argue that its anticompetitive activity was actively supervised by the state – one of the two explicit requirements to receive immunity as set forth in the Court's 1980 California Retail Liquor Dealers Ass'n v. Midcal Aluminum ruling (the other being that the anticompetitive activity must be "pursuant to a clearly articulated state policy to displace competition").
Let's compare the Board in Dental Examiners to your average state bar, in particular to its regulation of the unauthorized practice of law.
State bars are acting pursuant to direct authorization from either the state legislature or the state supreme court, either of which also directly supervise the bar's activities. In fact, many state bars are directly controlled by their state supreme court.
According to LegalZoom's Friedman, however, state supreme courts can't be trusted to provide adequate oversight since "[s]tate supreme court judges remain market participants...and many will return to active practice upon retirement."
Of course, at the point that one begins to argue that no lawyers can be trusted to regulate the profession – even those at the highest level of the state's judiciary – it sounds less like he or she is truly interested in promoting a healthy marketplace and more like that person is simply trying to sell something.
And taken as a whole, the article does seem more like a call to reform the system to slim down the actual definition of "the practice of law," which would then allow for an expansion of LegalZoom's product offerings.
And LegalZoom has every right to lobby state legislators (many of whom are attorneys and will return to active practice upon retirement) to this end. It just shouldn't pretend that teeth whitening is in any way comparable to drafting individualized legal instruments.
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