Epstein Becker Green (“EBG”) coordinated with the Federal Trade Commission (“FTC”) to help an industry client block anti-competitive state board regulations. The client, a holding company that operates dental service practices, opposed regulations proposed by the Texas State Board of Dental Examiners that would have restricted dentists’ ability to contract with dental service organizations (“DSOs”) and ultimately hamper business competition.
The Texas board, largely composed of individual practitioners appointed by the governor of Texas, attempted to promulgate several regulations that would have imposed new restrictions on a dentist’s ability to enter into arrangements with DSOs for administrative and non-clinical services. This threat engendered a massive DSO industry response, as the regulatory effort imperiled the operations of scores of interstate businesses. EBG was among a number of law firms, lobbying firms, and public relations firms that were commissioned to thwart the effort.
While the Texas board’s proposals were in contention, the Supreme Court of the United States was hearing arguments in a very similar case brought by the FTC against the North Carolina State Board of Dental Examiners. The FTC alleges that the North Carolina board’s exclusive regulation is an anticompetitive effort that violates federal antitrust laws.
Noting this, EBG consulted regularly with North Carolina counsel and the FTC and successfully prompted the FTC to make a submission in the Texas rulemaking proceeding, condemning the proposed regulations there. FTC staff, in response to a notice requesting public comments, urged the Texas board to reject two proposed rules that impose new restrictions on the ability of Texas dentists to enter into contracts with non-dentists, including DSOs, for the provision of nonclinical, administrative services.
The FTC comment, submitted by staff of the FTC’s Office of Policy Planning, Bureau of Competition, and Bureau of Economics, on October 6, 2014, stated that the rules (proposed 22 Tex. Admin. Code § 108.70 and § 108.74) seemed likely to discourage dentists from affiliating with DSOs by mandating that dentists assume responsibility for the types of functions that DSOs typically provide and by expanding the Texas board’s authority to take disciplinary action against dentists who enter into these prohibited agreements. By contrast, under the current regulations, such service agreements for many business functions—such as accounting and bookkeeping—are presumed not to violate the Texas Dental Practice Act. The comment explains that such restrictions may reduce competition, likely resulting in higher prices and reduced access to dental services, especially for underserved populations. The FTC’s comment is part of ongoing efforts to promote competition in the health care sector, which benefits consumers through lower costs, better care, and more innovation. As the FTC stated:
We have consistently maintained that the choice of business model is an important dimension of the competitive process that should not be restricted by regulation or private agreement but based on reliable evidence that regulation is reasonably necessary to achieve an important public purpose.
On November 21, 2014, the Texas board withdrew the regulatory proposals. EBG’s leadership position in this effort ultimately saved the day for its clients and others in the DSO industry.