Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Occupational licensing review, sharing economy endorsed by Commissioner Ohlhausen, (Apr 29, 2016)

By Edward L. Puzzo, J.D.

Whether the state picks winners and losers in the marketplace itself, or delegates that role to incumbents, consumers pay the price for actions that favor narrow special interests over the broader public good, according to FTC Commissioner Maureen Ohlhausen. Ohlhausen spoke on April 28, 2016 at the Institute for Justice's National Economic Liberty Forum on the subject of occupational licensing and the sharing economy.

Occupational licensing. In many cases, occupational licensing serves as a state-sponsored prohibition on competition, Ohlhausen stated. Licensing requirements, which often contain educational requirements, tend to exclude lower-income individuals who cannot afford the cost of further education. Competitive markets, complemented by sound antitrust enforcement, are what promote entrepreneurship—not excessively licensing, Ohlhausen stated.

The Commissioner noted that the FTC has devoted significant resources over the last 40 years to opposing state laws that unnecessarily restrict competition, including occupational licensing. The FTC's view is that many licensing requirements impede competition without providing significant consumer benefits.

The agency's efforts to address anti-competitive practices, including that of state-appointed boards, has been limited by the state action antitrust doctrine, which limits the practices that the federal government can challenge, Ohlhausen noted. But the FTC's State Action Task Force has been working since 2001 to clarify that the state action antitrust doctrine should only provide immunity to state action that restricts competition, but should not provide immunity to private interests.

She viewed the FTC's success in North Carolina State Board of Dental Examiners v. FTC (2015-1 Trade Cases ¶79,072, 135 S. Ct. 1101 (2015)) as the result of the Task Force's efforts. That decision upheld an FTC ruling that a state regulatory body controlled by participants in the industry it purported to regulate must show a clearly articulated state policy in favor of regulation and active supervision by the state itself in order to be exempted from antitrust scrutiny under the state action doctrine.

The North Carolina Dental decision continues to reverberate, according to Ohlhausen. In some states, active participants control more than 90 percent of licensing boards. Many state agencies will need to examine and revise their policies. Ohlhausen believes the decision will cause policy changes that will ultimately benefit consumers. She expressed her hope that North Carolina Dental will cause states to reevaluate occupational licensing regimes more generally. Licensing reform should have broad bipartisan support, appealing to those who wish to expand economic opportunity for low- and middle-income workers and keep prices more affordable for low- and middle-income consumers. Such reform should also appeal to those who wish to promote entrepreneurship.

The sharing economy. Ohlhausen lauded the sharing economy—in which entrepreneurs are using technology to develop new peer-to-peer business models—as an example of "creative destruction" and the transformative power of free markets. Even the most benign evolutions, beneficial in the long term for consumers, can dislocate those deeply invested in the old order.

"There has been a consistent drumbeat for increased regulation of sharing economy platforms,” said Ohlhausen. “These calls have generally come from companies with traditional business models and their sympathizers, who are threatened by competition from new models."

Whether through effective control of state regulatory boards, as in North Carolina Dental, or by obtaining protectionist legislation, incumbent firms can place themselves in a position to determine their competitors. The sharing economy, which pits long-established business models against aggressive new entrants, appears to be particularly fertile ground for such mischief, Ohlhausen argued. Misguided government regulation can be the barrier to innovation that never falls, so regulators should tread carefully, particularly when considering hypothetical rather than demonstrated consumer harm, she continued.

The FTC has actively weighed in on various proposals to regulate car sharing around the country. State and local governments have been cautioned to refrain from imposing legacy regulations on new business models simply because they happen to fall outside of existing regulatory schemes. Experience tells us that consumers generally benefit from the competition that arises between traditional and new business models, Ohlhausen stated.

News: Antitrust FederalTradeCommissionNews