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Proposed law would vet business regulations for anticompetitiveness

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The ripple effect from a U.S. Supreme Court ruling on anticompetitive business practices by North Carolina dentists is reaching Arizona, aided by Gov. Doug Ducey.

In February 2015, the high court ruled against the North Carolina Board of Dental Examiners, which had issued cease-and-desist letters to teeth-whitening businesses, insisting that they needed to be licensed dentists to practice their craft. The court said that the board, largely comprised of dentists, was simply trying to shut out competition from teeth whiteners.

To avoid such anticompetitive regulations in the future, the board said rules must be subject to “active supervision” from the state, and that the person providing the supervision cannot be an “active market participant.” The court said the North Carolina board erred by acting without the supervision of officials who were “politically accountable.”

Anticomptetitiveness ruling boxDucey is moving to put Arizona in compliance with that ruling. A provision of HB2501, a bill pushed by the Governor’s Office to streamline a handful of health industry regulatory boards, seeks to make sure that future regulations implemented by those entities complies with the ruling in North Carolina Board of Dental Examiners v FTC. Under the bill, the director of the Arizona Department of Health Services will be tasked with reviewing regulations to ensure they do not have a “material anticompetitive effect.”

“We’re not talking about doctors and lawyers and the high-paying jobs,” said Gretchen Martinez, Ducey’s legislative affairs director. “A lot of these are sort of minimum- to medium-wage jobs. These are real people who have barriers to entry. And oftentimes these boards are designed to keep people out of the industry, which we fundamentally do not believe that’s the role of government.”

During a February hearing in the House Health Committee, Christina Corieri, the governor’s health policy adviser, said the state hasn’t yet faced any lawsuits alleging anticompetitiveness under the new parameters set by the Supreme Court.

“But that doesn’t mean we shouldn’t have a compliance regime in place,” Corieri said.

The health-related boards affected by HB2501 may not have faced allegations of anticompetitive regulations, but other regulatory entities have become embroiled in lawsuits in recent years accusing them of stifling competition. Martinez pointed to cases against the Arizona State Board of Cosmetology’s attempts to shut down a business that used fish to give a type of pedicure and businesses that practiced “threading,” in which a thin thread is used to remove unwanted eyebrow hair.

A more recent example is a lawsuit filed against the Arizona State Veterinary Medical Examiners Board by animal massage therapists who work with horses. The board argues that the animal massage practitioners must be licensed veterinarians in order to practice their craft.

Attorney Paul Avelar of the Institute for Justice, which represents the plaintiffs in the animal massage case — the institute also sued the cosmetology board on behalf of natural hair-braiding and threading practitioners — told the House Health Committee that every regulatory board in Arizona is the source of a potential antitrust lawsuit. Thanks to the North Carolina ruling, he said, Arizona now knows that its regulatory boards are only immune from antitrust lawsuits if their policies are actively supervised by the state.

“Boards themselves are not sovereign actors,” Avelar said. “So now we know we’re in that world.”

The House passed HB2501 on a party-line vote, but some Republicans have reservations. In committee, Rep. Regina Cobb, R-Lake Havasu City, said the bill was being rushed through too quickly, while Rep. Paul Boyer, R-Phoenix, had reservations about concentrating more power in the hands of the state health director. Boyer also questioned the lack of a concrete definition of “anticompetitive.”

Legislative Democrats took issue with several provisions of HB2501, including the anticompetitiveness review. Some, such as House Minority Leader Eric Meyer, suggested that the oversight and advice of the boards’ legal counsel, which is provided by the Attorney General’s Office, should be sufficient in helping them determine whether a regulation is anticompetitive.

Cynthia Driskell, who testified to the committee on behalf the Arizona Physical Therapy Association, shared Meyer’s concern, questioning the need for a massive restructuring of the way the state’s health regulatory boards operate.

“We feel like the oversight by the Attorney General’s Office has been adequate in dealing with things that may be of an anticompetitive nature,” Driskell said.

Avelar said the Attorney General’s Office is not an adequate check on regulations because its attorneys do not have veto power over proposed regulations.

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