Teladoc, Inc. v. Texas Medical Board, et al.

A temporary injunction issued by U.S. District Judge Robert Pitman poses as one of the first applications of the February 2015 U.S. Supreme Court decision, North Carolina State Board of Dental Examiners v. Federal Trade Commission. In granting the preliminary injunction, Judge Pittman provided an early victory for Dallas-based Teladoc, a company that connects patients and doctors over the telephone and internet, in its anti-trust lawsuit against the Texas Medical Board, which licenses and regulates physicians.
The medical board adopted a new rule earlier this year that would prevent doctors from treating people over the phone — making a diagnosis or prescribing medicine — unless another medical professional was physically present to examine the patient. The rule, which could jeopardize Teladoc’s business model, has the support of the Texas Medical Association, a lobby group for “brick and mortar” physicians who say it would improve patient safety. The rule was scheduled to take effect June 3, 2015.
But Pitman’s ruling effectively told the medical board to hold its horses until the lawsuit is resolved. He said Texas’ physician shortage, particularly in rural areas, lent credence to Teladoc’s argument that the board was behaving anti-competitively.
In February 2015, the Supreme Court decided North Carolina State Board of Dental Examiners v. Federal Trade Commission, a case involving “cease and desist letters” sent to non-dentist teeth whitening businesses. By a 6-3 vote, the Court subjected professional licensing boards with a majority of members from the regulated profession to antitrust lawsuits unless they are “actively supervised” by the state itself.
Here, the medical board sought a more favorable review standard because it included “members of a learned profession.” The Court rejected that approach, by citing National Society of Professional Engineers v. United States and pointing out that “the Supreme Court explicitly rejected the notion that improved public safety was a sufficient justification for a society of professionals to adopt an anti-competitive policy.”
Remember, whenever a state board of professionals wants to exclude competition, it will always cite public health and safety, or consumer protection, in support of their anticompetitive actions. To its credit, the Court here didn’t fall for it.
Rather, the court made it simple: if a group of competitors excludes another class of competitors, the question of whether competition is harmed turns on whether the excluded class offers competitive benefits to the market.