The Teladoc decision reinforces that condition boards which are made up of market participants have to reflect on the way they are supervised when they seek shelter from antitrust scrutiny underneath the condition action doctrine.
Judge Robert Pitman from the U.S. District Court for that Western District of Texas lately rejected an invocation from the condition action antitrust immunity, adding his opinion to a set of U.S. Top Court decisions restricting the immunity’s scope. In the December 14, 2015 opinion, Judge Pitman declined to dismiss an antitrust claim filed by Teladoc, a telemedicine provider, against people from the Texas Medical Board (TMB). By denying condition action protection, this situation stands as the second warning that condition medical boards will need to take heed from the “active supervision” requirement.
This Client Alert analyzes the Western District of Texas opinion and follows on our prior Client Alerts regarding condition action antitrust immunity.
To savor condition action immunity towards the antitrust laws and regulations, a “nonsovereign actor controlled by active market participants” must satisfy a 2-pronged test: “first the challenged restraint . . . be one clearly articulated and affirmatively expressed as condition policy, and 2nd the policy . . . be positively supervised through the Condition.” N.C. Condition Bd. of Dental Exam’rs v. Federal trade commission, 135 S. Ct. 1101, 1110 (2015) (internal quotes overlooked). In 2013, the final Court addressed the very first prong of the immunity in Federal trade commission v. Phoebe Putney Health System, Corporation., 133 S. Ct. 1003 (2013). A Legal Court held that condition action immunity applies only if the condition legislature has “clearly articulated and affirmatively expressed” an insurance policy displacing competition along with a state’s grant of general corporate forces isn’t enough to satisfy the “obvious articulation” standard. Id. at 1007.
In Board of Dental Examiners, the final Court addressed the 2nd prong from the condition action immunity. It held the New York Board of Dental Examiners’ actions weren’t immune since the board – that was almost entirely made up of “market participants” (i.e., active dentists) – didn’t receive active supervision through the condition if this issued cease-and-desist letters to nondentist teeth whiteners. Bd. of Dental Exam’rs, 135 S. Ct. at 1110. The board didn’t reason that the condition had, actually, positively supervised its conduct rather, it contended (unsuccessfully) that entities that were designated as “agencies” through the condition were exempt out of this requirement. Nevertheless, a legal court observed the “inquiry regarding active supervision is flexible and context-dependent.” Id. at 1116. “[T]he real question is if the State’s review mechanisms provide ‘realistic assurance’ that the nonsovereign actor’s anticompetitive conduct ‘promotes condition policy, instead of just the party’s individual interests.'” Id. A Legal Court noted that the condition supervisor, which might not be an energetic market participant, must evaluate the substance of anticompetitive decisions and “possess the capacity to veto or modify particular decisions to make sure they accord with condition policy.” Id. at 1116-17. Also, a legal court emphasized the “mere possibility of condition supervision isn’t . . . sufficient.” Id. at 1116.
The Teladoc Decision
Teladoc alleged the TMB adopted rules requiring that the physician do an in-person examination before treating someone, which stifled competition by prohibiting Teladoc from offering phone-based treatment. Judge Pitman’s decision that condition action immunity cannot shield the TMB keeps Teladoc’s antitrust claim alive, letting it continue its bid to permanently enjoin enforcement from the TMB’s new rules. See Teladoc, Corporation. v. Tex. Mediterranean. Bd., No. 1-15-CV-343, 2015 U.S. Dist. LEXIS 166754 (W.D. Tex. 12 ,. 14, 2015).
To be eligible for a condition action immunity, the TMB needed to reveal that it received active condition supervision because – such as the New York Board of Dental Examiners – it had been composed largely of market participants. Therefore, Judge Pitman’s decision selected up where Board of Dental Examiners ended: If “active supervision” is required, exactly what does that need?
Judge Pitman held the supervision mechanisms reported through the TMB – potential judicial review and review through the Texas legislature – didn’t fulfill the active supervision requirement as articulated in Board of Dental Examiners. First, the accessible avenues for judicial overview of the TMB’s decisions didn’t match the Supreme Court’s requirement the supervisor “possess the capacity to veto or modify particular decisions to make sure they accord with condition policy” because they didn’t permit a court to judge the insurance policy underlying the TMB’s actions in order to modify (instead of invalidate) a TMB decision. Second, the Texas legislature’s oversight authority was restricted to a “sunset review” process, which permitted the legislature to election on whether or not to continue the company, along with a provision requiring the legislature to become notified of suggested rule changes. Judge Pitman held that neither of those oversight mechanisms permitted the legislature to veto or modify a TMB rule which the sunset review process wasn’t effective since the last sunset overview of the TMB required devote 2005.
Closing his research into the active supervision requirement, Judge Pitman emphasized the final Court’s holding within the 1988 situation Patrick v. Burget the “mere existence of some condition participation or monitoring doesn’t suffice.” 486 U.S. 94, 101 (1988). His opinion unconditionally rejected the TMB’s proposal that the system of supervision provides “realistic assurance” that market participants’ rules don’t subordinate condition policy to self-interest when “the company is on observe that all its rules, policies, actions, and interpretations are susceptible to thorough scrutiny.” (TMB Opening Brief at 19.) Likewise, he wasn’t convinced through the TMB’s argument it needed less active supervision compared to New York Board of Dental Examiners because, for instance, (1) its people counseled me hired through the governor and confirmed through the condition senate instead of elected by market participants (2) no physician people from the TMB, all specialists, were in direct competition using the Teladoc physicians (3) the TMB was susceptible to several obligations and limitations (such as the condition “open records” act) that applied simply to governmental physiques and (4) the contested rules paralleled some condition and federal statutes.
Somewhat, Judge Pitman’s decision doesn’t break substantial new ground. Neither from the parties reported any situation where the possibility of judicial review was discovered to constitute active condition supervision, and Teladoc reported several cases in the late 1980s that held the alternative. Likewise, neither party reported any situation where a sunset provision or perhaps a legislative notice provision satisfied the active supervision requirement. However, within the wake of Phoebe Putney and Board of Dental Examiners, it’s abundantly obvious that condition medical boards are susceptible to more scrutiny than in the past, and practices that formerly will not have been challenged are prompting serious antitrust exposure. Teladoc reinforces that condition boards which are made up of market participants have to reflect on the way they are supervised when they seek shelter from antitrust scrutiny underneath the condition action doctrine.