Antitrust News: FTC Issues Significant State Action Immunity Decision in Louisiana Real Estate Appraisers Case
On April 10, 2018—the eve of my panel on state action immunity issues at the ABA Antitrust Spring Meetingin DC, the FTC granted, in essence, partial summary judgment against the Louisiana Real Estate Appraisers Board on state action immunity. You can read the FTC decision—hot off the press—right here.
I won’t go into a lot of detail here as you can read the decision, but here is short summary:
In May of 2017, the FTC filed a complaint against the Louisiana Real Estate Appraisers Boardbecause the board required appraisal management companies (AMCs) to pay appraisers a “customary and reasonable” fee for real estate appraisal services. That, of course, is price-fixing.
There is a back story involving federal legislation and regulations, but the bottom line is that a group of appraisers—who make up a controlling majority of the Louisiana Real Estate Appraisers Board—got together and fixed prices for appraisal services. That’s not allowed under the antitrust laws, including Section 5 of the FTC Act.
This case is currently within the FTC’s administrative process, which can eventually be appealed to a federal court of appeals.
The FTC’s opinion by Commissioner Ohlhausen is well-reasoned and thorough. The primary substantive issue involves one of two requirements for state action immunity: Active Supervision. Indeed, this case presents a straightforward question of active supervision and the Commission’s opinion provides excellent guidance on how the FTC will actually apply the standards.
You might recall that the FTC issued specific guidance on active supervision following the Supreme Court’s NC Dental decision. You can read my analysis of the FTC’s guidance here.
In the Appraisers Board decision, however, you can see how the FTC will actually apply that active supervision in a real case. There is a practical leap from guidance in the abstract to application to a specific fact pattern, so the decision is worth reviewing if you have interest in this area.
I don’t have time to do a complete analysis right now, but here are a few items of interest:
- We learn from the decision that between the time the FTC filed its complaint and now, the Louisiana executive branch tried to jury-rig active supervision into the administrative structure to avoid the FTC enforcement action. Spoiler alert: It was a nice try, but it didn’t work.
- As expected, the FTC describes and applies the limited guidance on active supervision from the NC Dental case (case summary here). But the FTC also describes and applies three additional specific elements that it believes form part of the law on active supervision: “(1) the development of an adequate factual record, including notice and the opportunity to be heard; (2) a written decision on the merits; and (3) a specific assessment—both quantitative and qualitative—of how the private action comports with the substantive standard established by the legislature.” I think that Commissioner Ohlhausen does a great job applying these three elements in detail in this decision.
- It is clear that the FTC is keeping teeth in the active supervision requirement: It is not a rubber stamp. This is consistent with the Supreme Court’s NC Dental decision.
- The Supreme Court in NC Dental held that when a controlling number of decisionmakers are active market participants in the occupation the board regulates, they must show active supervision—in addition to clear articulation—to avail themselves of state action immunity. The state board argued that this required a detailed factual inquiry into the particular subspecialties and individual practices of board members. The FTC sensibly rejected this interpretation and instead held—consistent with its prior guidance—that the board members need only be licensed to practice the profession that the board regulates.
Anyway, it is an important opinion for state action immunity. I recommend that you read it.
Posted in: Antitrust News, FTC and State-Action Immunity