by Bridget Fogarty Gramme
In February of this year, Assemblymember Randy Voepel, a Republican from Santee, California, introduced AB 2483, a bill that proposes to require the State of California to indemnify members of its occupational licensing boards for antitrust damages if the alleged conduct took place in their “official” capacity as board members. It also proposes to declare that treble damage awards are not considered “punitive,” thus complying with the state’s indemnification laws.
While the bill may have seemed innocuous to lawmakers at first glance, it has dire implications for the public that must not be overlooked.
In a letter dated June 20, 2018, the Center for Public Interest Law (CPIL), Responsive Law, and CALPIRG joined together to oppose the bill unless it is amended to include important provisions to protect the public from potentially anticompetitive behavior by professional members of regulatory boards, and ensure that taxpayers are not left financially responsible for board members’ violations of federal antitrust laws.
AB 2483 aims to address the U.S. Supreme Court’s landmark decision in North Carolina Board of Dental Examiners v. FTC (“North Carolina”). As I’m sure readers of this blog know well, that decision recognizes the inherent conflict of interest that exists when a state licensing board is controlled by members of the profession regulated by that board. Therefore, it holds that boards are not immune from federal antitrust scrutiny unless 1) they are controlled by public members (and not licensees) or 2) the state has created a mechanism to actively supervise the acts and decisions of these boards to ensure they benefit the public, and not merely the professions themselves. In other words, the state must take appropriate steps to ensure that regulatory boards are, in fact, fulfilling their statutory mandate to prioritize public protection above all other interests.
This is especially poignant in California, where the enabling statutes of each licensing board expressly provides that public protection is the paramount priority of each Board. For example, California Business and Professions Code § 2001.1 says, “Protection of the public shall be the highest priority for the Medical Board of California in exercising its licensing, regulatory, and disciplinary functions. Whenever the protection of the public is inconsistent with other interests sought to be promoted, the protection of the public shall be paramount.”
Today—over three years after the North Carolina decision, and although many of its boards are in fact controlled by members of the regulated profession—California has yet to implement any of the safeguards the Supreme Court prescribed to ensure its boards are in full compliance with the antitrust laws. Indeed, SB 1194, a 2016 bill which CPIL supported, would have codified the absolute minimum action that California must take in order to implement the North Carolina decision, but that bill was defeated in the face of objections from various trade associations.
Now, rather than implement reforms that would obviate the likelihood of antitrust liability in the first place, AB 2483 would instead simply indemnify any Board members who violate the law!
Under this proposal, consumers would be doubly harmed: first, by higher prices due to anticompetitive policies imposed by the offending boards; and, then again, as taxpayers on the hook to pay the bill. As we pointed out in our letter, this is not only unjust, but also unnecessary.
AB 2483’s proposal to deem treble damages in antitrust matters “not punitive” is similarly problematic. California has maintained a longstanding policy that punitive sanctions must NOT be indemnified by the taxpayers. We do not assess the public for the intended punishment of liable individuals. Why, then, would we make an exception for collusive behavior?
The very nature of treble damages is punitive—they are intended to deter what Congress has determined to be egregiously wrongful conduct. For California to declare a policy that they should not be treated as such for state officials is presumptuous and insulting.
Instead, CPIL, Responsive Law, and CALPIRG proposed that the bill be amended to comply with the safeguards prescribed by the Supreme Court, and the Federal Trade Commission’s more specific on this topic. Specifically, because many of California’s occupational licensing boards are still controlled by “active market participants”—licensees who stand to directly benefit from anticompetitive decisions the board makes — California must protect consumers from the harm that flows from such anticompetitive conduct.
If it wishes to also protect boards and their members from antitrust liability, California must ensure that these boards are subject to a state supervision mechanism that “provide[s] ‘realistic assurance’ that a [board’s] anticompetitive conduct ‘promotes state policy, rather than merely the party’s individual interests.'" North Carolina, 135 S. Ct. at 1116 (quoting Patrick v. Burget, 486 U.S. 94, 100-101 (1988)) (emphasis added).
What is “active state supervision?” According to the United States Supreme Court, to qualify as “active state supervision” three elements are required:
Shortly after we sent our opposition letter, the Senate Judiciary Committee cancelled its hearing on this bill at the request of the author. At this writing it is unclear whether the bill will be amended per our recommendations (a sure invitation for heavy opposition by the trade associations), or if the author will simply drop the bill. We are nearing the end of a two-year legislative session in California; the last day for submitting bills to the Governor for signature is August 31, 2018.
Bridget Fogarty Gramme is the Administrative Director and Supervising Attorney at the Center for Public Interest Law at the University of San Diego School of Law.
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