Opinion: Daily Journal

Overdue Checkup for Anti-Competitive Licensing

The Supreme Court has taken up a North Carolina case that could have far-reaching impacts on state licensure. Given that occupational licensing is a modern-day guild system making it harder for people to find work — or find workers — that would be an effect greatly to be wished.

The case stems from a Federal Trade Commission action to prevent the N.C. Board of Dental Examiners from excluding nondentists from offering cosmetic teeth-whitening services. As reported by Carolina Journal in 2012:

Over the past decade, cosmetic teeth whitening has become increasingly popular and more widely available at day spas, mall kiosks, salons, and other nondental office settings. State regulators have stepped up enforcement actions against nondentists for what regulators consider practicing dentistry without a license.

The FTC took a dim view of the notion that cosmetic teeth whitening should be the exclusive province of licensed dentists:

The FTC’s complaint against the N.C. dental board is the first of its kind in the nation. It contends that the practice of allowing professions and occupations to be regulated solely by state occupational licensing boards comprised of a majority of the licensees of the profession is anti-competitive and exclusionary because those members have a financial conflict of interest. When members of such a licensing board enforce the state’s Dental Practice Act, they are engaging in a conspiracy that violates federal antitrust laws.

As is the case with other state-licensed activities, financial benefits accrue only to those providers who have cleared the hurdles of licensure, which include fulfilling costly (in time as well as money) education requirements, testing requirements, fees, etc. They not only prevent others from entering the labor market, they also make consumers suffer from higher prices.

NPR noted that while teeth whitening at dentist’s offices ranges from $400 to $1,300, at spas, salons, kiosks, etc., it costs only $75 to $125. (Or you could buy do-it-yourself kits at the local grocery store for much, much less.)

George Leef wrote of the importance of this case for Forbes readers. The entire piece is worth the read, as it goes through some of the legal briefs and also discusses the dental board’s defense:
The defense raised by North Carolina was that such regulation is immune from federal attack on the grounds that state governments and private parties acting under state directives are not subject to federal antitrust law. That idea goes back to a 1943 case, Parker v. Brown, in which the Supreme Court held that California’s anti-competitive agricultural regulations were not subject to antitrust attack.

In this case, however, the Fourth Circuit Court of Appeals distinguished Parker v. Brown, holding that the actions of the Dental Board were not really actions of the state government because North Carolina neither actively supervised the Board nor directed it to pursue any particular policy. Instead, the judges saw this clearly as an instance of private individuals using state authority as cover for competition-suppressing orders that only benefited themselves and others in their field.

The Supreme Court will now have the opportunity to rule. We should hope for a broad decision that will apply against the many instances similar to this where government empowers private parties to exploit licensing laws “to advance their own interests in restricting competition at the expense of the public interest.”

Those many instances are especially many in North Carolina, one of the more aggressive states in licensing job categories. Just crossing the border into South Carolina cuts the number of job categories subject to state licensure by over two-thirds:

Regardless of how the Supreme Court rules, the General Assembly ought to take serious steps to de-guild the North Carolina labor market by culling licensing boards and licensed job categories, putting in sunset provisions with periodic review on the remaining boards, and resisting the self-interested pleas from other industries for new occupational licenses.

Jon Sanders (@jonpsanders) is Director of Regulatory Studies for the John Locke Foundation.