Occupational Licensing, Antitrust, and Innovation
Articles,  Blog

Occupational Licensing, Antitrust, and Innovation

Thank you, uh, everyone and to the Federalist
Society and to Crowell & Moring for hosting, hosting us today. Um, this is one of my favorite topics. It’s something that’s very near and dear to
my heart. I spent a lot of my career focusing on this. Uh, but it’s no accident that, uh, it’s something
that the FTC has focused quite a bit on, because we are an agency that does consumer protection
and antitrust. And the occupational licensing, uh, kind of
is at the intersection of those two issues where very often these kind of restraints
on entry to a profession, uh, are put forth as, uh, necessary for consumer protection
reasons. So I think we are particularly well-placed
as an agency to, to think about that and to say, you know, does that, does that make sense,
uh, to, to us. Uh, so, so the issue with occupational licensing
I think has really come to the forefront because occupational licensing, uh, has exploded. So going back, uh, to the 1950s, a study suggests
that about, uh, fewer than 5% of occupations required a license, and today that number
is approaching 30%. So what’s changed in that time period? Um, and the, the number of occupations and
the types of occupations that licensing has extended to has gotten, I think, you know,
beyond where we can say well, you know, of course you want your doctor to be licensed. You want your, you know, um, you know, someone
who is doing a health and safety-related thing to be, to be licensed. But we have cases now where, um, florists
are licensed, where interior designers are licensed, where hair braiders are, are licensed. Uh, and so that’s … You start to say, “Well,
uh, what is the rationale for them? Why is this happening?” Uh, and that is sort of where the antitrust
side of the analysis comes into play. And I have, uh, one way I have kinda characterized
this is we … As antitrust enforcers, we need to be alert certainly to private anti-competitive
conduct, but the actions of the government can also be anti-competitive. And in a way, that is, uh, a lot, uh, less
likely to be eroded by market dynamics. So, um, I often call the bro- … What I call
the “Brother, may I?” problem, and it’s where, uh, you need your
competitors’ permission to enter the market. So that’s one of the issues that we’ve seen
we have, um, uh, boards of active market participants saying, you know, well you need this license
or, you know, uh, the practice of … For our North Carolina Dental case that we won
in the Supreme Court, they had said well the practice of, uh, dentistry now includes tooth
whitening in the state, in the state of North, North Carolina. Um, so what are, what are some of the problems
here? I think the problems are, are manifold. One, one of them certainly is, uh, anti-competitive
problem where you say well, consumers may be paying more for a service or have fewer
choices, or there may be less innovation happening because of these onerous licensing requirements. But there is also an impact on, on workers,
where workers have lost, um, you know, the ability to, to enter a field more freely. Um, I see Clark, Clark Neily back there. Clark has paid wonderful attention to this
issue, and Institute for Justice has just done fantastic work in this area. Uh, but I think that’s one, one of the, the
issues here is what about, what about the, the individual worker and their ability? Um, even if they have a skill that we all
agree requires a license, if they are moving from state to state, they have to undergo
that licensing all, all over again. Now certainly that, that isn’t necessarily
an FTC antitrust issue. You know, we have focused more on where you’ve
got an active market participant saying, you know, “You, you can’t compete with, with me.” Um, but, um, uh, on our advocacy role at the
FTC, that’s where we’ve tried to talk to states and really even other parts of the federal
government about some of, some of these issues, because they are hitting certain populations
quite a bit, uh, more, um, onerously than others. And so one is, uh, believe it or not, military
spouses. Members of the military move a lot. They get deployed around, you know, different
places around the country. And a lot of times the trailing spouse has
a licensed, um, a job that requires a license, and they, um, have to get re-licensed, re-certified,
pay these fees, undergo tons of training even if they have been active in the, in the field
already. And it has led to, um … Uh, I think it’s
one of the contributors to the fact that you’ve got, um, an unemployment rate of almost 20%
in, in that, in that population. Um, so that’s why I launched my Economic Liberty
Taskforce at the FTC. I, I see it as a, um, an attempt to shine
a real spotlight on this issue. Um, certainly we can continue to bring enforcement
actions where, where appropriate, but it’s mainly an advocacy role. Uh, then I talk often about it being a coalition
of the willing, because I think a lot of groups, uh, consumer organizations, you mentioned
the bipartisan appeal of this, uh, has, um, you know, extended to, to a lot of … You
know, the, the interest in this topic to, to a lot of different areas. And I’ve worked with, uh, states. Um, Governor Scott Walker and I did a joint
op ed, uh, on this issue so I, I think we’re a particular good time to, to make progress,
uh, on this issue. But, but the, the problem is, um, you know,
the lack of competition, the higher prices, lower innovation, uh, but also the effects,
uh, on the, on the workers. Thanks. Thank you, uh, uh, uh, acting chairman. Um, Sarah we, we’re really interested to hear
from the state’s perspective on the occupational licensing issues that the acting chairman,
um … Okay. Well, thank you, um, to the Federalist Society
and Crowell & Moring and George Mason for inviting me to be on this panel today, to
be the spoiler on the panel. Um, I’d like to start with a disclaimer that
the opinions I express today are only mine. They don’t reflect necessarily the opinions
of General Mark Herring or the Virginia AG’s office, or any of the other participants in
the National Association of Attorneys General. Um, and it is a little odd for me, um, because
at 95% of the time, I and my an- antitrust counterparts in the other state AG’s offices,
are antitrust enforcers like the federal agencies that we work with quite often, the FTC and
DOJ, but in this one little area we flip and we become defense attorneys for state boards
and state agencies that are accused of anti-competitive behavior because we are the antitrust experts
in the state. And, um … So being the state apologist on
this panel is a little backwards to me, but so is the position of, uh, otherwise, uh,
staunch state rights advocates like Senator Mike Lee and Senator Ted Cruz, um, but we
will talk about their occupational licensing bill in a minute. So my personal perspective from the state’s
side is that I see a lot of value to this wider philosophical discussion about whether
too many occupations require licenses. I also basically agree with the Supreme Court’s
decision in NC dental. But at the end of the day, it should be left
up to the states to decide how to structure their economies, how to structure their governments,
and how to provide for the health, safety, and welfare of their citizens. I applaud the FTC’s efforts to educate state
legislatures and others about the dangers to the national economy of too much licensing,
and I support their enforcement efforts. However, I do not support the federal government’s
attempts to preempt states’ abilities to decide these issues for themselves, or to dangle
state action immunity as a carrot in order to coerce states into providing active supervision
in the manner it sees fit, or into adopting its philosophy about the appropriate professions
to license. Under current case law, principles of federalism
allow states to decide which occupations they will license, as opposed to professions that
only require certification, registration, or have no restrictions at all. And once a state legislature has authorized
a licensing scheme with the board of active market participants as board members, the
only question that remains in order for the board and its members to receive state action
immunity are whether they meet the two prongs of Midcal, which is … One, was the board
following a clearly articulated and affirmatively expressed state policy to displace competition,
and two, whether the board was actively supervised by a disinterested state official, to ensure
the board’s actions were consistent with that policy. There is some ang- ambiguity in the incidental
opinion about whether the active supervisor only has to determine that the board’s actions
were consistent with state policy, or whether they have to go beyond that to look to see
whether it was unduly burdensome. But there is no requirement that the active
supervisor inquire into whether the board used the least restrictive alternative to
achieve the legislature’s goal. And there is certainly no ability for the
active supervisor or the state courts to disregard the state legislature’s intent to displace
competition in favor of a licensing scheme. Moreover, states could easily decide to get
rid of all of their state boards and switch to, um, the oversight of license occupations,
from the board to the tru- traditional, sorry, state agencies with full-time salaried state
employees. That gets rid of the need for active supervision
but has many disadvantages, uh, the most obvious being that it would add millions to a state’s
budget to employ all those people, because state board members currently serve with no
pay in most cases. It would also not necessarily change the state
legislature’s philosophy about which occupations to license, while making it harder to actually
maintain an antitrust challenge against the state. And while it would take care of the problem
of board members acting in their individual self-interests, it would not address a different
problem, which is regulatory capture of the state employees who start sympathizing with
the people in the industries that they regulate. Finally, I would add that a very large majority
of the work of occupational regulatory boards does not restrict competition in any way. Board members who practice in the profession
being regulated are usually the best people to evaluate standard of care cases. Many cases involve ethics violations, or behavioral
standards of licensees, such as medical licensees who operate while intoxicated or take sexual
improprieties with their patients, or lawyers who dip into their escrow funds. And while a licensing regime itself may restrict
competition, most individual licensing decisions are administerial and involve no discretion
on the part of the board members. Either the applicant checks the boxes for
the objective criteria to receive a license, or she doesn’t. In that case, it really seems massively unfair
to subject the board, or even worse, to subject the individual board members to potential
treble damage liability for a decision that the state, state legislature made and that
the board members were statutorily required to follow. Thank you. Uh, I in particular really appreciate, um,
you know, the diversity of views. Again, we want to have a conversation on these. And so, um, you know, I’m hoping we’ll have
a dialogue … and any thoughts from the other speakers? Um, well, well I’d, I’d like to, to weigh
in, uh, on your points. And I think I … We agree on many, many things. Um, I also, you know … Uh, I’m sensitive
of the fact that we operate in a federal system, uh, and that the states are our sovereign
… Mm-hmm.
… and they can take, they can take these actions. I think that there is a two-fold question
here though, is, um, should they be taking these actions, right? I care a lot about liberty …
Mm-hmm. … and I, I want to advocate that before
any, before any policymaker, whether it’s at the federal level or, or the state level. And I think that’s a lot of, of what we’re
trying to do here is to say, “Is this really, you know, um, uh, best for your, um, citizens?” It’s a true application of public choice theory,
right, where you’ve got concentrated benefit to the, uh, providers and they are going to
lobby and say, you know, “Uh, here are all the good things, wonderful things this licensing
regime is going to do.” And the consumers who will pay the price don’t
even know it’s happening, or their interests are very diffuse, so they are not going to
be there. Um, and so we’re, we’re trying to step into
the shoes of the consumers and the workers and say, “Hey, consider these, these things,
these things too.” Um, so … But, but on the second issue for
the state action doctrine, I think that’s what it’s really trying to do. It’s trying to say, “Is this truly an action
of the state, rather than the state …” Um, one of my favorite phrases from the case law
is casting a gauzy cloak of state authority on what is essentially private economic conduct. So I think that that’s kind of the other factor. Is this truly state, the state’s own, own
action? Rather that sort of devolving that to private
actors who will, you know, often act in their own private interests. Well I, I know you wanted to weigh in, and
I would just quickly respond that, um, board members, you know, if you talk to ’em, they
are really trying to do their best in the most, um, instances. Maybe they are acting in their self-interests
sometimes, and sometimes it’s pretty blatant, like the North Carolina dentist case. But I think a lot of these cases are really
on the margins where they really think they are doing the right thing. And so it’s, it’s … It seems a little paternal
for, um, the federal government to say, “Should you be making these decisions? We don’t think you should, and we’re going
to make it so you don’t get state action immunity unless you do it the way we think you should
it.” That’s, uh, that’s … That was all my point
on that. Yeah, um, well I think that, um, uh, Sarah and,
and Chairman Ohlhausen really covered, uh, most of the ground here but, uh, the only
thing I want to add is, uh, when … I just want to make sure that when we’re talking
about occupational licensing regimes that, I think Sarah alluded to this, that we’re
talking more broadly, not just limiting in fact the setting up credentials and saying,
“If you don’t get score X on your bar exam, you can’t be an attorney,” or … I mean,
that’s the, you know, in the sort of quintessential case, “You can’t be a hair braider if you don’t
have X number of, of hours.” Uh, you know, tho- that, that’s one level
but, uh, a lot of the work I did when I started at the, uh, at the FTC in the Office of Policy
Planning was looking at, uh, there’s a host of state restraints on competition that maybe
you can put them in the occupational licensing category but, uh, you know, uh, attorney … Limits
on attorney advertising. And we’ve, we’ve had, uh, several Supreme
Court cases on the First Amendment issues surrounding that but there is still, to this
day, uh, state bars that, that try to limit the ability of attorneys to advertise. Does that fit into occupational licensing? Not … I mean, you can maybe put it in that
but it, but it’s, it’s a, it’s a different animal, uh, minimum service requirements. There was an issue with that, uh, when the
Internet, uh, was burgeoning and there were online real- uh, real estate providers. Uh, uh, the, the traditional real estate providers
didn’t like that, so what did they do? They tried to, in various states, set up minimum
service requirements, uh, that said, “Well, if you’re going to be a real estate agent,
you’ve got to do house showings and you have to do all of these sort of things that traditional
real …” Well, why did they do that? To prevent disintermediation. Again, of that really occupational licensing,
it wasn’t about whether you can be a real estate agent or not. It was the regulations that are promulgated
by these boards. North Carolina Dental in fact wasn’t so much
about who could be a dentist and who couldn’t be. It was really in, in some ways, about scope
of practice, but it had a lot to do. So, the only thing I wanted to emphasize in
this discussion, and I think we touched on this, is in my view, most of the mischief
that these boards do, I mean I, I think that all the points that, uh, Chairman Ohlhausen
brought out as far as limiting economic mobility or labor mobility are really, really important. Those have to do with the regime itself, to
say you’ve got to have this qualification to be in this profession. Those are bad and they have their own anticompetitive
effects, but I think that to me the core mischief here is the, the regulations that these self-interested
boards often promulgate, um, not so much the restrictions of … in the profession in and
of itself. So that’s the only thing I would, I would,
I would add to that. So, I wanna come back to the federalism issue. I, I don’t want us to forget that but, um,
uh, Professor Cooper if we can stay with you as a … both an economist and a lawyer, can
you tell us what the empirics say? What are the … What’s the empirical evidence
on the effects of these restraints, whether there were potential costs? And, um, you know, are there benefits for
quality and other things? Yeah, uh, uh, thanks. Um, so the … Most of these regulations,
and, and I’m kind of painting it in a broad brush stroke, but most of these regulations
are justified typically, uh, some kind of form of the, the following story that, you
know, provide, uh, um … The, you know, consumers can’t discern the quality ex ante of what
provider X does. Provider X may be a dentist. They may be an ophthalmologist or an optometrist. They, they may be an interior designer, right? So you can’t figure out beforehand the quality,
um, of, of the, the service. And so this leads to what economists refer
to, uh, going back to George Akerlof’s famous article that is thrown out there all the time
is, uh, there’s a lemon’s market. Kind of the basic idea is that if you can’t
figure out quality ahead of time, consumers know that. They go into the marketplace and they discount
… Um, they, they don’t know if they’re going to get a good provider or a bad provider,
so they are only willing to pay a certain price that discounts that probability. And in the limit, and that’s an important
qualification, in the limit, um, the good providers completely exit the market because
the what … The equilibrium price that the consumer is willing to pay is not high enough
to attract the good providers into the market, and so you end up with this unraveling. Uh, and that’s often the, the, the horror
story that’s told to justify these regulations that we need … That the, the market would
unravel into a lemon’s market if, if, if we didn’t have this. Now, I do understand fairness and I think
that, uh, you know, these arguments, and again I think Chairwoman, Chairman Ohlhausen, uh,
alluded to this earlier, these arguments may have some purchase in … We talk about severe
information asymmetries, doctors, um … I’m a lawyer so of course I, I want to protect
our guild, right? No I’m, I’m, uh, uh … But, you know, there
can be severe, uh, uh, information asymmetries, what economists sometimes would call a credence
code. If you go to a doctor and they recommend you
get some kind of treatment, and you get it and you get better, you have no idea if what
they told you to do was the right thing or not, right? You know you got better. You don’t know. Um, even if you can evaluate, uh, say, you
know, you go to a doctor or, or maybe an attorney doing some sort of complex, uh, transaction,
maybe, uh, custody, something very … where the stakes are high, or your, uh, life in
a, in a capital murder case, uh, you may find out after the fact that, “Oh, my lawyer or
my doctor was no good,” because you, you die or you, um, uh … Or, or you go … Or you
get the death penalty, right? Um, the … If the costs are really high in
figuring it out, and maybe we think that, “Okay, well I can figure out that this wasn’t
a, a … That this was a bad service,” and then reputation in the marketplace can take
effect. But, um, when the costs of figuring that are
really high, maybe that’s where we want to step in and say, “Okay, we’re going to set
some kind of level.” Now we can talk later about should the state
set that level, or can we have private certification? I mean, those are, other … Those are certainly,
uh, areas of, of, of fair deb- debate. But although this argument may have some purchase
for these severe and, uh, asymmetric information problems, it’s harder to make that, in kind
of the archetypal case that I alluded to, that the, the hair braider or the interior
designer. You know, you go to get your hair cut and
you get a bad haircut, you can know that pretty quickly, right? I figured it out. And the costs are relatively low, maybe leaving
aside first dates or job interviews, right? But, but for the, for the most, most part,
um, these asymmetric information, uh, uh … Theoretically, this idea of a lemon’s market for hair braiders
or, or interior designers or barbers doesn’t really hold much, uh, water. Now going to your, your question so that’s
kind of the theory behind it, the, the empirics, um, are … pretty much suggest what, what
you would think. I mean the FTC did a lot of really, uh, cutting
edge work back in the, in the ’80s, uh, mostly in optometry, uh, to find that … And these
weren’t quite occupational licensing but they had to do with what were called commercial
practice restrictions, when doc- eye doctors were allowed to partner up with a LensCrafters. In fact, just a little bit of trivia. In Virginia, you still can. If you go to LensCrafters in Pentagon City
Mall, notice that you walk on the side door because the Dr. Smith can’t be legally associated
with LensCrafters. Just, just a … Uh, there are still some
states that have these so-called two door requirements but, um, there has been some
… There is good evidence in the ’80s that, that these restrictions, and restrictions
in advertising, uh, that are promulgated by these boards, don’t normally do much. And there is also more modern literature,
and, and I would commend every- everyone to look at, uh, uh, uh … in President Obama’s
Council of Economic Adviser report from last year. Um, it, uh … They do a great review of the
literature, the old stuff and the new stuff. And, you know, uh, it’s, it’s almost a hundred
percent unanimous that there is no impact on quality from, from these licensing. Uh, you know, no matter how, how you … Uh,
no matter how you measure it, I … So, uh, and that these laws do tend to increase price. I think the price effect is a, is a little
… They, they certainly limit mobility. They certainly limit entry. Um, the price effect is maybe not as robust
as the, the lack of quality effect, but it’s there. Um, the one thing I would, I would want to
add is just because you see a licensing regime increase the level of quality, that doesn’t
necessarily mean it’s good for consumers either, because everyone doesn’t need to buy a Mercedes,
right? I mean, you could make a regulation that every
car must have X, Y … You know, all these features, which means we’re all paying $50,000
for a car and it’s a really nice car. And the same thing could be true if you could
force everyone to go to an ophthalmologist who has spent, you know, five years, board-certified,
to get just your eye exam when now, if anyone has been to get their eye exam recently, all
you do is you stick your head in something with the, the receptionist does it for you
and you … They get your eye … They get your prescription really, really close, and
the eye doctor just kind of tweaks it a little bit, right? And, uh, so, you know … So maybe it’s higher
quality if you go to the ophthalmologist, but should we all be forced into higher quality? Not … Uh, it, it shouldn’t be the case. So, uh … So anyway I, I’ll just leave it
at that but that’s, that’s kind of where we are. I think the empirics, uh, say strongly that
these, these tend to limit competition and don’t really provide any benefits for consumers. So can I ju- I want to follow up on the price
effects. I know in the Obama report, I believe he said
something like the, the cost to consumers was around 100, uh, 100 billion dollars. So, can you talk a little bit more? You said they’re not about the price effects. Well, I mean there, there are a host of … Again,
I would commend anyone to look at that. They do a great literature review. I mean, there are a lot of studies. I think it’s just hard to tease out price
effects in this. I think that’s the, the, the, the main problem,
main, um, uh … I, I’m not exactly sure where they got that, that, that number. I think it’s, it’s law. I … There is no doubt that these are costly
to consumers. I would just say as an economist in, you know,
reviewing the literature, I just wouldn’t think that the, the price effects literature
is perhaps as not as robust as required but it’s there. I just wanted to be a, a little careful of
what I’m saying. Um, not so much on the, on the price effects
but on … You, you’re asking the, you know, empirics. What, what do we, what do we know? And, and I think one of the most interesting
factors, uh, or, or facts that I have seen, is that only about 60 occupations are licensed
in every state. But there are over 1,100 occupations that
are licensed in at least one state. So, to the extent that we are saying well
other states, like for example, uh, other states than North Carolina have … You could
go to a regular, you know, mall, kiosk too- tooth whitener. Were we seeing, you know, bad effects on,
you know, consumers’ health? The answer was, was no. We, we weren’t. Uh, and I think as you start to put your finger
on this great disparity so we have, you know, 60 where it seems like, you know, everybody
kind of agrees these need to be licensed. And as you get further and further out from
that core area where you’ve got a lot of states agreeing, I think that’s where you can at
least put your finger on, like, there was probably not a really good health or safety
or quality argument for having that, that license. I, I just … I just real quick add in and
to kind of echo that, and I think it goes back to what I had said before. If we have to think about the mischief, where
the mischief in these boards come from, it’s maybe … Do we agree that maybe dice, li-
a dentist should be licensed? Maybe. I mean, I think that’s a reasonable position. There are, there are certainly arguments on
either side. But even if we agree that dentists should
be licensed and they, they have to have some minimum quality, should they be able to say
kiosks, “And, and by the way, uh, you can’t get your consumers, you can’t get your teeth
whitened anywhere else except at my office for a lot of money,” right? I would say that, uh, in North Carolina, North
Carolina Dental, the North Carolina Dental case is an excellent case to show why active
supervision is a really good idea for these boards, because that would never have happened
if the … If there was a disinterested state official that was actively supervising that
board, and, and then we wouldn’t have all this kerfuffle. But, um, I, you know, I, I don’t really have
a lot of substantive things to add. I’d just like to, um, credit my colleague
Vic Domen, who is the current chair of the, uh, NAAG Antitrust Taskforce and, uh, works
in the Tennessee AG’s office. And he said whenever you start, uh, wondering
whether this, um, occupational regulation should exist, just substitute lawyer for whatever
occupation they’re talking about, and then you will probably be fine with it. Uh, one, one other thing that I, I just wanted
to mention, it’s not necessarily a binary choice of licensing or no, or no licensing. There is also the issue of, um, how strict
a license do you need. And that’s something the FTC has paid a lot
of attention to, is allowing people like nurse practitioners or a dental therapist, a, a
dental hygienist to practice to the top, top of their license. So, there was a case that preceded the North
Carolina Dental case, um, called South Carolina Dental, and we settled, uh, with, uh, the,
the dental board there. But the issue there was the state had said,
you know, we’ve got a problem with getting dental care, um, to poor children, right? Very poor dental health in, in the state,
um, and these kids just weren’t getting, you know, basic, you know, cleaning and screening
kind of stuff. So they rescinded the requirement that a dental
hygienist had to operate under the a- the immediate supervision of a dentist when providing
that care, um, so that the hygienist could go out into the poor schools and give these
kids, you know, some basic dental care. And the dentists went and re-instituted that
requirement as an emergency regulation in their, uh … You know, it was like could
it be clear the state wanted something different? But the thing there was the degree of licensing,
right? So it wasn’t saying, “Well, there shouldn’t
be any licensing.” It was allowing them to practice, and we’ve
done a lot of that. Um, one of the projects that I worked on,
when I headed up the Office of Policy Planning, was allowing nurse practitioners to practice
in big box stores like the CVS, uh, uh, Target, you know, th- things like that where you really
are expanding access to people who, you know, couldn’t take time off from work, may not
have health insurance, uh, they, uh … You know, on Saturday morning, their kids got
the, the eye … I’m a mother of four. I’ve seen all of this, you know. It’s Christmas Eve and you’ve got an eye infection. Oh, you know, the, the doctor is closed. You know, you, you want to be a … You don’t
want to go to the emergency room. You want, uh, to have this kind of care. And I think that’s the other thing is expanding
access to services into care. It’s most acute I think in the, in the health
space. Uh, and we’re going to be moving into a world
of telemedicine, right? There is enormous benefits to be had for that,
but we’re going to have to get the licensing right to allow that to, to happen, to allow
the nurse practitioner to be with the patient when the doctor is, you know, diagnosing re-
remotely. So, it’s a … So it’s not, it’s not a binary
thing either. Well, let’s come back to the federalism issue. And, um, Professor Cooper I’d like to hear
from you, what role is there for … Or if any, for federal antitrust law and, and, and,
uh, what about federalism? Uh, um, uh, that’s a good question, since
this is sponsored by the Federalist Society, right? Um, so, uh, uh, anyway, uh … Yeah, I think
that, that again, uh, uh, we, we’ve already started at least to touch on this but, uh,
the, the state action doctrine and, and may … Uh, I imagine that people are interested
in this, uh, uh, in, in, in our panel. You, you all may … Many of you are already
steeped in this, so I apologize, apologize if this is just a, a, a review but the, the
state action doctrine i- is really kind of a compromise, or the Supreme Court has crafted
as a compromise, between the national policy in favor of free market competition as evidenced
in the, the federal antitrust laws, and federalism which is, uh, uh, obviously part of our system
and part of our constitution. So, um, what is the, what is the state action
doctrine? Uh, uh, and how, how do you, you, you apply
it? Uh, Sarah actually alluded to this already
when she talked about North Carolina Dental is that there are two, there are two prongs. There is what is called clear articulation. Um, uh, the, the, the action that, you know
… So if you start with, say, a, a private, uh, with private actors, uh, or a, or a board,
uh, are … Is what they are doing, is it, is it, uh … i- is it pursuant to a clearly
articulated policy to sup-, uh, plant competition where some of the litigation issues come in
here in, in the FTC with Phoebe Putney? And, and, you know, there, there have been
some, uh … Is what is … How specific does the policy have to be? Uh, do you have to … Does it have to be,
uh, do you have to be acting to, uh, you know … Does the state have to spell it out precisely
and if you, and if you go beyond that you’re in trouble? Or, uh, I think that it’s, it’s generally
kind of this idea of reasonably foreseeable but there is always some, uh, which was the
Supreme Court said in Omni but, but, uh, it has to be … You can’t just say, “Well, the
state said I can regulate, so then I can do anything,” right? There … You, you, you have to be … There
has to be a state policy that says we are going to displace competition. Um, and then there is the act of supervision
prompt which again is, is something the Supreme Court has really elucidated what that means
in, in detail. They, they have said a lot about what active
supervision means. They … Or I’m sorry, what clear articulation
means, but not a lot about what active supervision means. So, North Carolina Dental was a landmark case
because it said that self-interested boards would be subject to this prong, right? So going back before, uh, before North Carolina
Dental, uh, it, it was clear that municipalities were subject only to this clear articulation. So if a town … The town of Hali, uh, decides
to limit competition in garbage, uh, uh, who can, who can pick up garbage, well, uh, we
don’t need to have someone supervising the municipality, but the municipality is not
sovereign so they don’t get the … They don’t have the benefits of federalism. But if they were acting pursuant to a state
policy, that’s, that’s okay. That’s enough. Um, until North Carolina Dental wrote around,
it was unclear whether the self-interested boards would call- be more like a town and
just be acting … If you’re acting pursuant to a state policy, that’s enough. Then you, you just go out and, and, and license
and regulate how you want to. Um, or would they be considered more like
private actors? And what was the landmark in, in something
again that the Federal Trade Commission has really been on the forefront of trying to
push this and find cases that, uh, uh, to, to test this proposition? Uh, what was, what was, uh, revolutionary
about North Carolina Dental was they said, “Yes, if there is a board, uh, that is composed
of self-interested actors who are a decisive majority who, who, uh, um, control, uh, control
the … Who are active market participants, then we’re just going to treat them like a
private cartel, like a trade association. And therefore, they are going to be subject
to, um, uh, subject to, to active, um, to, to, to active supervision.” So, um, that’s kind of where we are now. I mean, that’s how we … The, the, the, the
Supreme Court has, has made, has made that, um, made that balance. And now with North Carolina Dental, and why
in many way we’re having this panel, uh, I’ve had … Been on several panels with Sarah
about this, is that it, that it has rai- opened up a whole Pandora’s Box of federalism issues. So if we have active supervision, well how,
how are states going to implement this? You know, when, when are they allowed to regulate
profe- professions? This was front and center in the dissent in
North Carolina, uh, Dental written by Justice, uh, Alito about, you know, why can’t essential
… I’m obviously grossly paraphrasing but, you know, this is a state issue. States have regulated professions forever,
and if they want to say, uh, teeth whitening, uh, is a practice of dent-, uh, dentistry,
let them do that, and let them allow dentists, practicing dentists to comprise a board, uh,
to do that. Uh, some of the, the boundaries … So, so
that’s going to be one issue. Uh, you know, what, what does it mean to be
actively supervised, and how expensive is that going to be for states? Is that going to mean they’re going to have
to dismantle, uh, some of their, uh, some, some of these licensing regimes? Uh, another issue, uh, something I have written
about, a kind of shameless plug, uh, is, is, you know, what is antitrust inquiry going
to look like, ’cause we haven’t had that yet when a board is stripped of immunity? So, let’s say that you actually litigated
the substance of North Carolina Dental, and you had to do it under a rule of reason, well,
we know from National Society of Professional Engineers and other cases that what do … You
don’t let non-com- competition concerns into a rule of reason inquiry. So I say, “Well, I wanted to regulate the,
the use of teeth whitening because I was concerned that consumers were going to be harmed, because
they’d have too much fluoride or too much oxidiza- oxidation, or whatever. They burn their gums, whatever it is.” Well, all that may be true but that’s typically
going to be … That would not be a justification. Just like the engineers can’t say, “We’re
worried that bridges are going to fall down,” the dentists can’t say, “We’re worried the
consumers are going to burn their gums.” So that’s, I think, an unanswered … A very
unanswered question as to, to what sort of defenses, once you’ve been stripped and you
have to litigate the substance of this, what are the defenses left for the board? Uh, I have argued that there is, there … I
mean, it could be de facto per se, in which case it would lead to what’s called antitrust
preemption. But that’s a … It’s another, uh, uh, uh,
another, another issue but I, I will just kind of leave it there. Uh, I mean not only with … I mean, boards
are required to follow state law. So where is … Where does that fit into their
defense? Under a full-blown rule of reason analysis
is the board says, “I was following the law that I am required to follow, and you’re not
letting me put on a defense here.” Um, and I do have a, a big problem with National
Society of Professional Engineers, um, saying that … I mean, if the legislature has made
the decision to restrict competition for health and safety reasons, um, it’s not … It wasn’t
the board’s decision. It was the state legislature’s decision. So why are you making the board defend the
legislature’s decision, when they had no, uh, discretion whether or not to follow that,
that rule? So it’s, it’s a very, very complicated issue
and it’s, it’s, it’s really unfair to, to state boards and state board members to have
to, um, defend that. And, you know, since NC Dental, there has
been a lot of pushback from individual board members who are no longer willing to serve
on state boards, because they are individually liable for treble damages if, if they are
individually sued, like they were in the case that I was involved in. Um, and some states’ constitutions don’t allow
them to indemnify board members. So they are, they are not getting paid to
do this. They are doing this as a public service, and
then they are going to be hauled into court and, and made to defend a full-blown rule
of reason antitrust case with one hand tied behind their back. And, um, it’s, it’s not a workable situation
at all. Um, I, I didn’t know whether you wanted to
get into the, the bill? Yeah. I mean so one … Can … I’m sorry. I, I, I just wanted … Since we’re talking
about federalism I just add one thing, and I think it fits in really well with what … I
am completely, um, sympathetic with what Sarah is saying. And, you know, if we go back to the history
of the state action doctrine, a lot of it was motivated by a desire to … So, Lochner
of course said you can’t use substantive due process, um, so they will say, “Well, let’s
use the antitrust laws to go after state law.” And, and so in some ways, um, in, in the state
… And not in some ways, in actually very real ways, the state action doctrine was another
way to cabin an attack on state, state sovereignty in, in, in that respect. So now with North Carolina Dental, what you’re
saying is when you think about a rule of reason looks like, we would be back to … And you
can say whether it’s good or bad. I mean, there are certainly argument whether,
you know, there are… I have members of my faculty who say that,
that, that, that, uh, you know, that Lochner, uh, was, was … There is nothing wrong with
the Lochner, right? Um, so what … But what we would have, we
would have a rule of reason inquiry with a federal court re-weighing a state’s, uh, a
state legislature’s decision to say, “We think the scope of dentistry should be X,” or, “We
think health and safety reason should …” And so this is where I think it does raise
a host of federalism issues on how we would actually deal with the underlying, ’cause
state action is one thing but once we get past that, we then have an antitrust case. How do we deal with that and still respect
federalism I think is a really big question. Now, you know, just to go, go back to the,
the fundamentals in the state action doctrine, if the state has clearly articulated that
tooth whitening is the practice of dentistry, right, and the board just promulgates that,
that meets the state action law, right? That … They, they satisfy that, that defense,
right? So, ’cause one of the things I really, uh,
the way I try to think about how this works is, um, going back to what the Supreme Court
has said over time, which is this is supposed to assign political responsibility, not obscure
it, right? So if the state itself is saying, “Well, we
think that this common practice that in every other state, uh, is you can go to the drug
store and just get it and do it yourself, but we’re going to say it’s, you know, it’s,
uh, the practice of dentistry in our state,” and people don’t like it, well they can say
to the legislature, “What are you doing, right? We don’t, we don’t like that,” rather than
well, this murky thing some board member decided, uh, on his own. So, I mean, if the state has … That’s what
clear articulation is, right? So …
No, no, I think that … I, I think that’s right. I mean, you would still have the active supervision,
uh … Right, if you have the, the …
… if you have the self, self-interested board. But your point is well-taken that maybe there
is even nothing to actively … Like, so if the facts of North Carolina Dental were different
and they didn’t give the board any discretion to expand or to, uh, contract the scope of
what the practice of dentistry was, we perhaps would, would not have had North Carolina Dental,
um, because they’d say, “I, I had … I didn’t really take an action.” As you said, I just said … If they, they
said the scope of dentistry included teeth whitening in a mall kiosk, if you could imagine
a statute that said that, then there is no discretion. The legislature did it, not the board. And I, I think that’s a, that’s a, that’s
a fair point. Um, it would own … This would apply once
we get to board, when there is board discretion and that discretion violates the antitrust
laws, and it’s unsupervised discretion. And then we would have to … Then they would
try to defend it, as Sarah says, with how do we get into that? If they either say, “We can’t bring in health
and safety,” or if we bring in health and safety then it’s kind of back to Lochner in
a way where you have the federal judiciary sitting and saying, “Well, we would balance
health and safety against competition in a different way than, than you did.” But, but yeah, I mean, your point is absolutely
right. So Sarah, you mentioned the bill. There is a, a recent proposal, the, uh, the
Restoring Board Immunity Act which, um, which is intended to take these various concerns
into account. Uh, I’m, I’m interested to hear your thoughts,
um, from the panelists on, on this bill. So, how much time do we have left ’cause I
have, uh, a lot, a lot of concerns. We have about 10 minutes left. Um, so the bill’s summary states that there
is concern that the NC Dental decision eliminated a measure of state sovereignty. Um, but this bill gives no deference to principles
of federalism or to state sovereignty. Instead, it criticizes states like Maryland,
Tennessee, Montana, and Mississippi that actually managed to get their state legislatures to
pass an active supervision statute this year, by stating that they have only “established”
a layer of bureaucratic oversight that merely monitors board actions for consistency with
state licensing laws. Well, so what is the purpose of active supervision? It is to ensure that a board’s actions are
consistent with the state’s licensing laws. That’s exactly what they are supposed to do. It is to ensure that members of a state regulatory
board or private individuals participating in a state program are following clearly articulated
and affirmatively expressed state statutes authorizing that activity. It is not to substitute the act of supervisor,
or a judge’s opinion of what the licensing regime should be for the state legislature’s
decision. And as a matter of fact, this bill would subject
state boards to a much higher standard to receive state action immunity than private
trade associations, or other private citizens acting pursuant to state policy would have
to meet under the current case law of Patrick v. Burget, Ticor, and NC Dental. So not only does the bill summary criticize
the states that had passed state action statutes, but the bill itself will invalidate those
statutes. The bill’s requirements go significantly beyond
NC Dental’s requirements by mandating that only board actions complying with the policy
set out in section 5(b) will receive immunity. Or in other words, board actions that use
the least restrictive alternative will be immunized. And as I said earlier, that’s not a requirement
of NC Dental. There also seem to be some significant constitutional
problems with the bill’s requirements that state courts cannot give any deference to
the state legislature, or presume that the legislature determine that the restriction
was necessary to prevent harm to the public health, safety, or welfare. This again allows a state court judge to substitute
its judgment for the decision of the state legislature, and is contrary to antitrust
precedent that the legislature is presumed to have considered the anticompetitive effects
of the statutes and pass them anyway. In addition, there appears to be an extra
requirement that the state act in good faith to implemi- implement licensing reforms, in
order to receive immunity for any board decision. The board also changes the standard of review
to clear and convincing evidence, and puts the burden on the board to show that its actions
not only were to protect an identified important government interest, but that the restriction
was substantially related to that identified government interest, and that it used the
least restrictive alternative, and that it acted in good faith. So there’s a lot of standards there. The plaintiff only has to make out a prima
facie case that the restrictions substantially burdened his ability to engage in that profession,
to switch the burden to the board to justify its behavior. And the term substantially burdened is not
defined, and it seems like it would cover a potentially … Any restriction that a board
imposes. The board must then defend its actions without
the court being allowed to defer to the legislature, or presume that the legislature intended to
protect the public from harm, or that the restriction is substantially related to that
presumed harm. And like I said it before, it’s kind of like
being asked to fight with one arm tied behind your back. Um, and as I can tell you from doing this,
getting just one case against a board to summary judgment can cost several hundred thousand
dollars. So efforts like this bill will … That will
increase litigation against boards will significantly add to state budgets. So, uh, not to be … I don’t want to be too
snarky about it, but I think this bill highlights a common problem. When the federal government tries to mandate
state behavior, it, it really doesn’t have any idea how difficult and time-consuming
and expensive it is to implement these big ideas into 51 existing and different state
governments, and, um, how many revisions to state codes would be required to do so, because
this, uh, would conflict with wide swaths of, uh, the Virginia code. I can tell you that, the … Not just the
Administrative Process Act but all the enabling acts, uh, for the state boards itself. Um, at a minimum, this bill creates an unfunded
federal mandate for states to create an office of supervision of occupational boards, or
restructure its judicial review procedures. And, um, like I said, it will cause extensive
revisions to state codes. At the end of the day, this bill is really
unworkable for states to implement, which leaves the states without any antitrust immunity
for state boards’ decisions if the bill passes. Professor Cooper. Um … Oh, do I have any, uh …
Do you have any thoughts? Yeah, yeah. No, no. Um, um, well, my … You know, I, I would,
um … And Sarah did a great summary and I, I completely understand. Uh, uh, and I, I’m not super-familiar with
the bill. I have looked at it and I’ve, I’ve, um, um,
I, I thought a little about it. The thing that … You know, I, I certainly
think, you know, that the, the part of this bill that I, I, I do like is, is that, that
… This idea of changing the challenges to intermediate scrutiny, uh, uh, because, you
know, with rational basis, you … Which is how, how, how I would challenge, you know,
you challenge the state law in a rational basis. You, uh, these … The … You can … The
… It’s basically the, the state wins, and not always. I mean, the IJ has been, been successful in,
in, in some cases, but the deck is stacked against. I, I like the, the, the … That notion of,
of intermediate scrutiny type analysis where the state actually can’t just say, “Uh, lemons
market. See, the legislature said lemons market so
we win.” Exaggeration a little bit but, but it’s not
too, too much of an exaggeration. And, and so I actually happened to, to, to,
to maybe justify these, I mean, not just me as kind of an, an, an economist thinking that,
that some of these licensing laws are bad, but I understand the federalism, um, uh, certainly
understand the, uh, the, the, the federalism point. You know, the only thing I would say is, is
kind of beyond just the, the, um, um, the substance of this, is it is amazing to think
… I think when I, I left this place here and went over to the FTC and started working
in the Office of Policy Planning and working a lot on state restraints in competition to
think here we fast-forward, you know, many years. But, uh, here we’ve got a Democratic administration
releasing a very influential report that’s, well, fairly critical of, you know, last year,
um, not this year. I know that there is not a Democratic administration
… I see a few in the last year. There is a, uh, Democratic administration
releasing a fairly influential report on occupational licensing. It’s, you know, somewhat critical, at least
pointing out that there is a lot of improvement here. And then we have, uh, you know, three influential
Republican senators introducing a bill, uh, that takes serious aim, aim at the problem. Uh, I think the fact that it’s on a national
stage now and I think that there is this kind of bipartisan consensus that this is … Things
have gone awry at the state level with this occupational licensing, that something needs
to be done. I’m not exactly sure what, um … I’m an antitrust
lawyer so I like antitrust as a tool, but I think there is a lot of things to like in,
in, in, in this bill and we’ll just stay tuned. I guess that’s kind of where I am with it. Well, I mean, certainly the bill, the goals
of the bill are very consistent with what the FTC has been doing, both on the policy
front and, uh, on, on an enforcement front. And, and one of the things that, that I am
glad to see, it does preserve the FTC section 5 authority so, uh, which we, we don’t get
treble, uh, treble damages, uh, you know, that our cases are … Don’t seek money …
Right. … uh, in, in the, in these situations ’cause
I do, uh, you know, want to preserve, you know, some antitru- trust oversight but, um,
you know, some sensitivity to some of the difficulties it creates for the states. But, but I do think, you know, James you,
you have put your finger on it. I mean, uh, I, I think that it’s a signal
of the fact that a lot of people are seeing that this is, this is a problem. This is a problem for consumers. This is a problem for workers. This is a problem for the economy. So we need to figure out, how do we fix this? Um, I, I’ll add that the, um, parts of the
bill that, um, Senators Cruz and Lee and Sasse just, um, introduced, um, ha- are from a model
bill, and I’m blanking on the name, um, by, um, an organization with the certification,
the, the least restrictive alternative, the least to most restrictive being licensing. Um, and, um, several states actually did introduce
a bill that was based on that model bill this past session, and as far as I know, not a
single one passed. So, I mean, state legislatures are looking
at these issues. They’re just not … They’re just not there
yet. Um, and, and, um, included in the bill was
also mandatory sunset review for a certain number of boards every year and, um, and things
like that. So I think they’re, they’re moving but you
can’t get states to move very fast. It’s how many years now since the NC Dental
decision, and most of the states don’t have an active supervision bill, including Virginia,
much to my chagrin, so … Well, Lisa and I have a couple of other questions
but we want to make sure we save time for the … For your questions. So, um, we have … Yes, I see one in the
back, and we have a mic that’s going to go around. Um, perhaps if you just introduce yourself
and, and, and where you’re from. Thanks, Maureen, for the shout-out earlier. Sure. I’m Clark Neily, formerly of the Institute
of Justice and now with Cato. I guess I will start by saying to Sarah, um,
having worked in this area for about 20 years, I want to assure you that you have no more
fear of this bill getting enacted than a herd of unicorns stripping the Virginia countryside
there. Don’t worry about that. Um, but, but in all seriousness, I think there
is the real tension here is a failure of the states to get their own houses in order. Uh, as James mentioned, virtually everybody
now agrees that, that over … Occupational over-regulation is a huge problem. And then right down at the micro level, we
can talk about just abuse after abuse. You really do have to have a college degree
to do interior design in Florida. It really is illegal to sell floral arrangements
in Louisiana without a license, and I could go on and on. Um, I don’t want to pick on, pick on Virginia,
but I will. Virginia is one of the last two or three states
in the country that requires a, a funeral director’s license to sell caskets. Um, you have a certificate of need requirement
for medical devices. I could go on, but I won’t. As the failure of the states to get their
own houses in order, and the failure to evince any interest in getting their houses in order
on this front continues, I think it’s … As a practical matter, it is just going to invite
federal attention that you may not want. So the question is what has the state of Virginia
done, um, that has been sort of the most significant step in getting its house in order when it
comes to occupational over-regulation? First of all, it’s the Commonwealth of Virginia. I’m from Texas. And, um, I … You know, I’m not, I’m not
a hundred percent sure that we’ve done anything that’s, that’s noteworthy in that regard. I think that, um, um, we’ve, we’ve had an
active supervision bill that’s been introduced the last two years in the legislature. One of them went pretty far this year but
it still didn’t pass. Um, we … Like I said, we had one of those
model bills that required sunset review. I will say that I think that, um, uh, saying
that licensing is a huge problem in this country sometimes seems to me a little bit of an overstatement
because I don’t think … I mean, you … Sixty occupations are licensed in every state. I think we can all agree that maybe those
60 occupations should be licensed in every state. So let’s look at … Let’s pick the outliers
like funeral … Uh, well, not funeral directors ’cause they are licensed, but hair braiders
and floral designers, and work on that and, and, um, stop making the people that are in
the professions that really should be licensed feel threatened, um, that they are gonna … They
are gonna face some big antitrust cases. And when you say, I was curious, that they
should be licensed, what is that based on? Well, I, I think that … I, I mean personally,
I don’t want to go up in an airplane that’s not flown by a licensed pilot. I don’t want to be operated on by a … Someone
who is not a licensed, uh, doctor. I don’t want to necessarily have, um, a veneer
put on by a person who is not a licensed dentist. So I think that there is, there is occupations
where we can all agree that there needs to be some form of licensing, um, to … Uh,
the tort system is not adequate to protect against, uh, unlicensed, uh, con artists who
are practicing in the field. And I think that those are legitimate public
health and safety, um, issues that should be recognized. So what do we do with the empirics that say
that, uh, these kind of licensing zone actually affect quality even for professionals like
dentists or lawyers? Well, I think those professions do have, um,
extensive, um, self-regulation. There, there is, um, standard of care cases
all the time at the Board of Medicine. There is, um, people that lose their license
to practice law all the time. Are they perfect? No. But, um, I think that doctors are the best
people to determine whether the standard of care of other doctors is, is … was adequate. Um, I don’t think that bureaucrats are necessarily
the right people to determine that. But what, what about consumers? I mean, shouldn’t there be some choice for
the consumers? Some consumers may want a higher standard
of care. And, you know, James was saying there is the
cost trade-off, right? Some, some consumers in certain, in certain
areas may be willing to accept, um, a non-certified, you know, if the risk is relatively low. And they shouldn’t have the ability to make
those choices? Well that’s, that’s a fairly affluent consumer
who can determine those things. What about the, the consumer who doesn’t have
enough money and is forced to choose the lower-priced person, the, the lower quality person, because
they can’t afford anybody else? I mean …
Sure. … shouldn’t there be some minimum standards? Well, but, but I think when we, we frame it
that way, you kind of cut out the consumer who can’t afford the Cadillac care and just
isn’t getting any, any care, right? And, and we, we need, we need to be sensitive
to that. Um, I also think we need to, to keep in mind,
I think there is good evidence about the fact that competition leads to better quality,
right? And so when we see regimes that are cutting
off real competition then we, we should, we should be concerned. And I think that was the Professional Engineers’
case, right? Yeah. And they’re saying, “Oh no, competition is
going to lead to worse quality,” right? Because they’re going to compete to have lower
prices, and so, you know, the bridge is gonna fall down. But I think we have pretty strong evidence
at this point that a little competition has, has good qual-, uh, leads to better quality. In fact, uh, James you mentioned the Phoebe
Putney case … Yeah. … uh, where the FTC won a, a, uh, victory
in the Supreme Court but couldn’t stop the, uh, the merger to monopoly from happening. And the state, you know, was kind of saying,
“Well, we’ll oversee it. It will be, you know, don’t worry. It will be, it will be okay.” Uh, and so I was like, “Well, that’s a testable
proposition.” So I had, um, our economist take a look, and
we have some evidence suggesting quality has gone down, yeah, in that. So that’s, that’s the other thing that, you
know, competition will kind of give the array to consumers of choice, quality, conven-,
you know, all, all those things. I think we, we all agree on that. But I, but I also think … So we’re looking
at the licensed or not licensed, but also expand what is the profession, and that, that’s
a problem. And one of the things … Uh, the way I kind
of got involved in this, uh, early on was the issue of whether you needed to be an attorney
to do a real estate closing. Mm-hmm. And most states, you do not. You do not need to be an attorney. Virginia, uh, is a state, where you … It’s
not required. You … We’ve got, uh, a license …
We did something right. Yes. Right. Uh, but, um, but as you started to look at
the statutes and said, “What is the practice of law?” it’s really more hilarious. So my favorite was, “It is what attorneys
typically do.” I was like, “Well then, maybe you can say
golf is the practice of law.” Maybe, I mean … Like, you know, they were
trying to extend, like, it when you … … when you, like, mailed a letter from … … for a real estate closing and you put
it in the mail to send the documents, oh that had to be a lawyer who did that. Well, how was that? How was that, you know, a sensible kind of
thing? So …
Um, I, I would just … I mean, I … The, the idea that, that, um, maybe we want … Because
of information asymmetries, maybe we want some sort of, um, uh, some way for consumers
to figure out whether you’ve met some minimum qualifications, that’s fine and that, that
makes sense certainly in some area. But I think one of the … One of the issues
is, is … It’s unclear why the state needs to be that entity that does it. So, I mean, there could be private certification,
uh, you know, I … And, and, you know, maybe not for doctors, I don’t know, but it’s unclear
whether you couldn’t just, say, get rid of the Virginia Board of Medicine and so … And
replace it with a private certification regime that’s made up with doctors, you know, very
high professionals and say … You know, and a doctor can hang in their shingle and say,
“I have, have been … I’m part … I’ve been certified by the, you know, private board
of, of …” You know, kind of like the good housing, housekeeping seal of approval, which
I say kind of jokingly but as I understand it, I think before the FDA, I mean that was,
in large ways, how drugs were … You know, that, that, that there were private certification
regimes. And so, so one thing I think we need to think
about is whether it needs … We may need some way to get out of the asymmetric information
problem but it’s unclear, even if we say, “Yeah, we need something,” uh, that it has
to be, uh, government rather than, than, than private. And, and I just think that’s something we
need to, to think about as, as, as we go down this path. I think you’re just switching one self-protectionist
regime for the other. I don’t think … Whenever you’re going to
have doctors deciding what the qualifications are for doctors, and deciding who can’t be
a doctor, you are going to have situations where you’re probably, um, doing some … Displacing
competition. I don’t want to come right out and say anticompetitive
things but, um … And, and so … And why is a private certification company better
than a, a gov- a state government to determine that? It, it would allow consumers … Yeah. I mean, I mean yeah. And I think that everyone jumped in. Well, it’s going to still be a barrier of
entry. It’s just going to be a different barrier. Well, I think that, uh, there is a case, uh,
Sacker, I’m probably mispronouncing it, where they had to do if the ophthalmologists come
out and say, “This sort of, uh, keratometry ready …” You know, the, the, the laser surgery. If this is … You know, they said, “This,
this method is no good,” and so somebody sued and said, “Well, that’s a barrier of entry
in the Seventh Circuit.” And I think it was, uh, Easterbrook, I could
be wrong, but he said, “No, no. This is basically free speech. And, and maybe one organization has a bigger
imprimatur but it … Just because you, you say this, but consumers can choose.” So yes, I still may want to undergo this procedure,
even if the, uh, Academy of Ophthalmologists have said it’s, it’s not, it’s not ready for
prime time. But I guess the idea is consumers could sort
in. It wouldn’t be illegal to practice if you
don’t have the certification. Just a private certification would exist. And they wouldn’t have the state power to
… That would be the … To me, the biggest difference. So, I think one thing here is we’re starting
with the hardest case first when there are so many other things where you can say yes for, you know, makeup artists and hair
stylists and florists, uh, you know, social media reviews or Better Business Bureau can
provide that function. We don’t need the states saying, “Man, that is an ugly throw pillow so
you … don’t have a license,” you know. Uh, and, you know, uh, you kind of think about,
like, restaurants, right? So we have the Health Department that comes
and makes sure it’s clean in the back, right? Where the consumer isn’t going and, you know,
checking. But we don’t have them saying, “Does the food
taste good?” Right? You know, that … We … People rely on word
of mouth and reviews and, and things like that. And I think there is a whole host of those
things that can address, um, you know, let’s … Like, “Let’s start with the low hanging
fruit, fruit first.” Uh, and then also to … You know, the, the
great thing about states is a laboratory of the states, and you can see, you know, the
quality stuff where, you know, in, in some states where you have the nurse practitioners
are able to practice, you know, you can kind of say, “Well, how … You know, what’s the
effect on quality there? What’s the effect on, you know, uh, uh, there?” versus, um, saying, “Well, let’s, let’s, um,
visualize like, you know, the, the, um, the perfect licensing regime to be- to begin with.” We can kind of look at what, what’s already
working and, and then go, go after … I mean, I … The health ones are … I think, are
very appealing, uh, because, uh, there is such a need, such a need there that’s, that’s
being unmet. Um, but I’m not sure I’m ready to say that
doctors who perform brain surgery shouldn’t, shouldn’t be licensed. And that is not the focus of the FTC’s Economic
Liberty Taskforce certainly, but should you be able to go to the nurse practitioner to
get your kid’s flu shot? You know, I think the answer is pretty clearly
yes, that would probably be a very good thing. So …
So we only have about five minutes left. I want to make sure we have time for some
other questions. Any other questions in the room? Yes, we have one over here. Uh, the mic is coming to you. Oh, hi. Thank you. My name is, excuse me, Todd Wiggins. And my question has, uh, to do with small
businesses because, uh, the industry seems to be blowing up the small business, um, co-working
space industry such as WeWork and those kinds of, uh, shared spaces where so many new businesses
are coming in that are unregulated, uh, unlicensed probably. It, it … Number one, I’m sure that’s a good
place to solicit for services if you’re a lawyer, um, if you’re just starting off. But secondly, what about, um, those organizations? Should there be any regulations for who they
accept to work … to be in those co-working spaces? Should they be talking to attorneys about
what they would consider acceptable businesses for their spaces? Yeah, I, I, I would say, um … I’m not a regulator so wouldn’t know. Well I, I certainly wouldn’t want to say that,
uh, there should be regulation put on the co-working space, right, where they need to
have a, you know, some sort of government oversight saying, “Well, you can only accept
these, these kinds of business.” So I think reputation is going to be a part
of it, right? So if you’ve … If you create a reputation
for being a place where you’ve got, um, you know, unethical businesses or, or problematic
businesses, I think your reputation is going to suffer and other people won’t want to,
won’t want to go there. So I think there is, there is a market mechanism
that I would imagine, I haven’t studied this, I’m just theorizing, uh, would o-, would operate,
much like, you know, who rents, uh, in an office park or, you know, other commercial
building. I’d imagine that would be … have a similar
dynamic. I, I would just throw out there that I think
before you have any kind of economic regulation, you want to have an identifiable market failure,
you know, as a necessary but not sufficient cause. And then you still need to do a cost-benefit
analysis. Is this regulation going to, you know, actually
solve the problem and not be worse? Any other questions? We have a few minutes left. Yes. Yeah. I’m Melissa O’Donnell. The mic. Sorry, thanks. Hi, yeah. I’m Melissa O’Donnell. My question is related to how the bill fits
into the … A kind of larger framework of the state action doctrine, as it’s interpreted
by courts. First of all, is it, is it completely clear
that the bill would displace the two-prong test that the Supreme Court has announced
in North Carolina Dental and other cases? And number two, what would happen when a board,
a self-interested board, is promulgating a rule related to something that is not, is
not licensure as, as, uh, Professor Cooper was saying earlier. Like if it, if it’s, if it’s not … If the
rule that is promulgated is not related to licensure per se, but something else, would,
would … How would this law fit in? Are you talking about the, the bill …
The bill. … that was just introduced in Congress? Yes. Bill, not law. Excuse me. Well, I think that the fundamental holding
of NC Dental stands where a state board would need to meet both prongs of Midcal to get,
um, state action immunity. So they would still need to have … Be following
a clearly articulated state policy that displaces competition. They’d also need to have active supervision,
but the way active supervision is gained has … would be changed through this, uh, billing,
you would have to, to do all the things that the bill says you have to do in order to have
active supervision, rather than the way NC Dental laid out active supervision, um, and
I think that the … All the things you have to do to get active supervision are the problematic
parts of the, of the bill. Um, as far as the rule, it … Um, the board
is hampered on what it can do, um, by the, the clear articulation arm. So they … Um, in 2004, the FTC actually
sued, um, the Funeral Board, um, in Virginia for, um, having a regulation that was not,
um, enabled by any, um, corresponding state legislation. And the Funeral Board, um, my … It was actually
my old section at the FTC that sued me right after I had left. But, um, uh …
They just wanted to see you more, dear. They missed you. But I, I actually agreed with the FTC on that
one, and we quickly withdrew the, uh, the offending regulation and settled. And it was ver- all very neat and tidy and,
and, and done. So I, I hope that answers your question. I, I would … I mean, I … At least just
quick. My, my reading of the bill, and it, uh, is
that, you know, first I don’t think … I think it only covers the licensure decision. It’s a … It seems that there is a, you know,
section 4(a) I think says … Suggested it’s about the … Not the other, the other type
of regulations. And there are also two paths. So one path to immunity under this bill, however
limited it may be, just to, um, licensure decisions, uh, one path is the active supervision
path. The other path is setting up private right
of action that allows consumers to challenge … Or not consumers, I’m sorry, aggrieved,
um, workers to … Or people who have been, “I can’t practice my profession because of
this law,” um, to challenge under intermediate scrutiny, which would have … Would, would
essentially completely displace the, the, the Midcal type of analysis for, uh, uh, intermediate
scrutiny type of analysis. So that, that’s my reading of it. I don’t, I don’t claim to be, be an expert
there but, uh, that, that’s at least my take. All right, well, we’re out of time so please join me
in thanking our, um, excellent panelists.

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