If Professions are Just ‘Cartels by Another Name,’ What Should We Do About it?

Posted by Social Science Research Network

If Professions are Just ‘Cartels by Another Name,’ What Should We Do About it? – David A. Hyman (University of Illinois College of Law) and Shirley Svorny (California State University, Northridge – College of Business & Economics)

ABSTRACT: The state action doctrine has been a significant impediment in the campaign against anticompetitive conduct by provider-dominated state licensing boards. In Cartels by Another Name: Should Licensed Occupations Face Antitrust Scrutiny?, Professors Edlin and Haw argue that state licensing boards operate as a “massive exception” to the Sherman Act’s ban on cartels, and that the Supreme Court should use a pending case (North Carolina State Board of Dental Examiners v. FTC) to “hold boards composed of competitors to the strictest version of its test for state action immunity, regardless of how the board’s members are appointed.” They also propose the application of a modified rule of reason when deciding similar cases on the merits.

We suggest three modifications to Edlin and Haw’s proposal. These modifications should help limit occupational licensing’s anticompetitive tendencies and licensing boards’ anticompetitive behavior. First, in reviewing the decisions of licensing boards, courts should presume that states were not actively supervising the boards, absent compelling evidence to the contrary. Second, defendant-licensing boards should be required to present persuasive evidence of actual harm that their proposed licensing restrictions or restraints will prevent and should be required to show that private market and non-regulatory forces (including brand names, private certification, credentialing, and liability) are insufficient to ensure that occupations maintain a requisite level of quality. Finally, we argue that legislators should take steps to roll back existing licensing regimes.