FTC Testifies on How Professional Licensing and Regulation Can Affect Competition Before House Committee on Small Business

Washington, DC - In testimony before Congress today, the Federal Trade Commission described how it evaluates the potential competitive effects of regulating occupations, trades, and professions, and the agency’s efforts to promote competition among professionals.

Testifying on behalf of the Commission before the House Committee on Small Business, Andrew I. Gavil, Director of the FTC’s Office of Policy Planning, discussed the impact of licensure on occupations from nursing to accounting. For some occupations, licensure may be an appropriate policy response to identified consumer protection or safety concerns. Some licensure regulations, however, can impede competition while offering few, if any, significant consumer benefits, the testimony stated.

“In the long term,” the testimony stated, some licensure regulations “can cause lasting damage to competition and the competitive process by rendering markets less responsive to consumer demand and by dampening incentives for innovation in products, services, and business models. Occupational regulation can be especially problematic when regulatory authority is delegated to a nominally ‘independent’ board comprising members of the very occupation it regulates. When the proverbial fox is put in charge of the henhouse, board members’ financial incentives may lead the board to make regulatory choices that favor incumbents at the expense of competition and the public.”

To address these concerns, the FTC selectively responds to calls for public comment and invitations from legislators and regulators to identify and analyze specific licensure restrictions that can harm competition without offering significant consumer benefits, the testimony stated.

The agency urges federal, state and local policy makers, as well as private, self-regulatory authorities, to consider whether a particular licensure regulation is likely to have a significant and adverse effect on competition, is targeted to address actual risks of harm to consumers, and is tailored to minimize any burden on competition, or whether less restrictive alternatives are available.

For example, FTC staff advocacy comments have addressed the physician supervision requirements some states impose on advanced practice registered nurses (APRNs), because they enable some health care professionals to restrict access to the market by other health care professionals, potentially raising prices and reducing access to some primary health care services. The staff have suggested that mandatory supervision of APRNs may not be a justified form of occupational regulation.

Since the 1970s, the testimony noted, the Commission staff has submitted hundreds of comments and amicus briefs to state and self-regulatory entities on competition policy and antitrust law issues regarding real estate brokers, electricians, accountants, lawyers, dentists and dental hygienists, nurses, eye doctors and opticians, and veterinarians. In recent years its competition advocacy efforts have also addressed advertising restrictions, automobile distribution, nursing scope of practice restrictions, accreditation standards, taxicabs and related forms of passenger vehicle transportation, casket sales, and real estate brokerage.

The FTC also has used its enforcement authority to challenge anticompetitive behavior by independent boards of occupational regulators, as well as private actors who restrain competition, the testimony noted. Its actions have included challenges to agreements among competitors that restrained advertising and solicitation, price competition, and contract or commercial practices, as well as direct efforts to prohibit competition from new rivals, without any significant justification.

The Commission vote approving the testimony and its inclusion in the formal record was 5-0.

For information about the benefits of competition, read Competition Counts.

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