Both in the U.S. and Europe, regulatory barriers often restrict supply and the ability of new entrants to bring their consumer products to market. For example, health economists have recently noted that the limited number of U.S. Food and Drug Administration-authorized (“FDA”) over-the-counter (“OTC”) Covid-19 tests has created a supply bottleneck.[1] While the ability to sell Covid-19 tests must be authorized by the FDA, various states, at times through empowerment of healthcare professional organizations, create similar authorization rules that impede competition. These professional organizations often cite quality and safety goals as a justification to limit competition from new or lower cost consumer products. The Federal Trade Commission (“FTC”) and U.S. Department of Justice in the U.S. and European Commission (“EC”) and national authorities in Europe have in recent years actively policed this area—often in response to complaints from the innovators—and used advocacy or enforcement actions to address regulatory barriers they believe unreasonably impede competition.

Antitrust Agencies Free Consumer Goods From Regulatory Distribution Obstacles Without Eliminating All Safety And Quality Regulations

a. United States

The FTC recently took one such action and reinforced the message that it will remain active when it ordered the Board of Dental Examiners of Alabama (“Dental Board”) to back off of the approach it was taking that impeded the efforts of new providers of teeth alignment products and services to bring their products to consumers in Alabama. These new providers offer teeth alignment treatment that is substantially less expensive than traditional braces or clear aligners offered by dentists in their offices. The new treatments are substantially less expensive because tele-dentists (rather than in-person dentists) oversee digital oral scans performed in a store (rather than a dental office) by hygienists or dental assistants (rather than dentists) to fit patients for the clear aligners.

The new service posed a competitive threat to dentists offering traditional alignment products. These dentists complained to the Dental Board, which is made up of six active dentists and one hygienist who license and monitor Alabama dentists for the unauthorized practice of dentistry. In 2017 and 2018, the Dental Board stopped the distribution of clear aligners sold through tele-dentistry by prohibiting non-dentists from performing digital scans without on-site dentist supervision.

The FTC challenged this Dental Board rule and the Board agreed to reform its approach. The agreed-upon order requires the Dental Board to cease and desist from directly or indirectly: 1) requiring any non-dentist provider to have on-site dental supervision when performing intraoral scanning for a clear aligner; and 2) restricting any clear aligner providers from using tele-dentistry. By challenging the Dental Board rules, the FTC sends a broader message over its concern that distribution of some new healthcare products can be held up by professional organizations who implement anticompetitive rules.

Many other consumer products in the healthcare setting may face the same issue where established providers, threatened by a new product or distribution system, use the rules or regulations of professional organizations to prevent that new competition. Or, federal regulatory approval may also restrict new products coming to market. Conversely, telemedicine, online access, and the movement of products from prescription to OTC, opens up new distribution channels, increasing access and reducing costs. Some examples may include:

Hearing Aids: While currently hearing aids are prescription medical devices fitted by audiologists and costing thousands of dollars, the FDA just proposed a rule to allow OTC hearing aids to be sold directly to consumers without a medical exam or audiologist fitting. The proposed rule would preempt state regulation of OTC hearing aids, “including any State or local requirement for the supervision, prescription, or other order, involvement, or intervention of a licensed person for consumers to access OTC hearing aids.” Although the proposed rule does not necessarily preempt state regulation of professional services such as speech pathology, audiology or fitting, it does prevent states from requiring providers to become certified to sell OTC hearing aids.

Contact Lenses: Consumers can now renew contact lens prescriptions online for much lower cost using their phone to take an eye exam and pictures of their eyes. The exam is reviewed by a tele-ophthalmologist who sends the prescription to an online lens provider.

Home Diagnostic Tests: At-home testing is a growing part of health care and a diverse range of tests are offered by numerous companies. OTC tests, such as the Covid-19 test, however, require FDA approval.

On one hand, those who wish to offer new products can take hope: The U.S. antitrust agencies actively push to free consumer products from regulatory impediments to getting to market. On the other hand, regulations meant to ensure safety and quality are not wholesale disbanded. The FTC’s settlement with the Dental Board did not limit the Dental Board’s oversight of the profession in Alabama. For example, the settlement does not prohibit the Dental Board from filing a court action for an alleged violation of the Alabama Dental Practice Act. Nor does it prohibit the Dental Board from pursuing administrative remedies against a provider (dentist or otherwise) in accordance with the Alabama Dental Practice Act.

b. European Union

On the other side of the Atlantic, EU antitrust law may similarly be relied upon to challenge barriers to the marketing of products or services which arise from the anticompetitive conduct of professional bodies or, in certain circumstances, State regulation. Competition law authorities in the EU have intervened in a number of cases through enforcement action or advocacy efforts to advance competition in consumer products.

Regulations adopted by professional bodies can be caught by EU antitrust rules if they restrict competition. The lawfulness of the regulatory practices under competition law depends on whether the regulatory rule can reasonably be considered to be necessary in order to ensure the proper practice of the profession. Competition authorities must conduct a balancing exercise weighing the objectives of the regulation against the restriction of competition. The EC has so far analyzed a number of professional regulations such as minimum/maximum prices set by professional associations (lawyers, architects), qualitative and quantitative restrictions on access to certain professions, as well as restrictions on ownership structures and multidisciplinary practices.

There is also a plethora of enforcement actions by national competition authorities, in particular in the consumer healthcare industry. The anticompetitive conduct targeted by such enforcement often consists of broader exclusionary strategies, rather than one specific regulatory measure adopted by the professional body at issue. For example, in 2019, the Belgian competition authority found that the Belgian national association of pharmacists had infringed EU antitrust rules by implementing an anticompetitive strategy, including disciplinary actions and applications for court injunctions, to hinder a new pharmacist services entrant and exclude its innovative distribution model. Similarly, in 2020, the French competition authority fined professional organizations of dental surgeons for boycotting dental care networks that were recommended by complementary health insurance schemes. The purpose of the affected dental care networks was to facilitate patients’ access to care by reducing their costs.

Moreover, although EU antitrust law as such applies only to economic operators’ conduct, EU Member States are under an obligation not to adopt regulations that render the competition rules ineffective. For instance, in the Anonima Petroli Italiana SpA case, the EU Court of Justice found that minimum tariffs for road haulage services established by a professional organization and subsequently imposed by a government decree were contrary to EU antitrust rules.

Finally, competition law authorities in the EU have in recent years conducted sector inquiries in the consumer healthcare industry and advocated that existing regulatory barriers be relaxed or removed. For example, in an opinion published in 2019, the French competition authority recommended easing the regulatory constraints on online sales and advertising by pharmacies.

Conclusion

In sum, on both sides of the Atlantic, competition enforcement agencies take an active stance against barriers to the marketing of products or services in consumer industries, including healthcare. Whether you are bringing a new consumer product to market or protecting the safety of consumers, in the U.S. or in Europe, Baker Botts can counsel you in this arena.

[1] Brianna Abbott, Biden Administration Aims to Boost Covid-19 Rapid Test Supply, Wall Street J., Oct. 25, 2021 11:08 am ET, available at https://www.wsj.com/articles/biden-administration-aims-to-boost-covid-19-rapid-test-supply-11635174504?page=1.

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