Last week, we wrote about a number of licensing reforms across the country. One way states are reforming is by increasing state oversight of licensing boards to bring them into compliance with the North Carolina State Board of Dental Examiners v. FTC decision.
The Garden State, which has recently earned a spot on the naughty list for its push to license pet groomers, is looking to bring itself into compliance with the Court’s decision. From the legislative summary:
This bill directs a regulatory officer to establish and implement a protocol for the review and approval of regulations, actions and decisions proposed by a professional board to determine whether the proposed regulation, action, or decision has the potential to displace competition…
The bill also provides that if a regulatory officer determines, as a result of the officer’s review, that a board’s proposed regulation, action, or decision is not consistent with and does not further or promote clearly articulated and affirmatively expressed State policy, or is not the inherent, logical or ordinary result of the board’s statutorily-delegated authority, or both, the regulatory officer must disapprove, veto, modify, amend, or remand to the board for the development of a factual record of the proposed regulation, action or decision, as may be necessary or appropriate.
Under the provisions of the bill, a board’s proposed regulation, action, or decision will not take effect unless the regulatory officer has conducted the review authorized by the provisions of the bill and taken additional action as may be necessary or appropriate under the bill, provided that no provision of the bill is to be construed to…preclude any action to address possible anticompetitive impacts after the proposed regulation, action, or decision has taken effect.
You can read the full bill here.
For context, the Sherman Antitrust Act of 1890, one of many progressive reforms to emerge from the Gilded Age, was designed to prevent anticompetitive practices by monopolies. But what happens if the monopoly is backed by a state government?
A number of states have their own monopolies, such as those on liquor stores. But in the 1943 Parker v. Brown ruling, the Supreme Court found that actions taken by state governments were not covered by the Sherman Act (this exemption is sometimes called “state action immunity doctrine.”)
Flash forward to 2010: in North Carolina, a number of non-dentist-operated teeth whitening services received cease and desist orders from the North Carolina Board of Dental Examiners for practicing dentistry without a license. In response, the FTC filed a complaint claiming the Board was engaged in anticompetitive practices.
In a 6-3 ruling, the Supreme Court found in favor of the FTC. In the majority opinion, Justice Kennedy said, “[b]ecause a controlling number of the Board’s decision makers are active market participants in the occupation the Board regulates, the Board can invoke state-action antitrust immunity only if it was subject to active supervision by the State, and here that requirement is not met.”
The argument that an unlicensed profession is “unregulated” is as tired as it is nonsensical. Licensing is just one of many ways to regulate an industry. But, in a way, it is a form of “self-regulation.” Even after North Carolina Dental, boards have tremendous latitude to set rules and regulate the conduct of their members.
State oversight is a welcome change of pace, but why not just move to a more traditional regulatory regime and reduce the power these modern-day guilds have over their professions?
For a more thorough discussion of how licensing boards can be reformed, read this paper form the Institute for Justice’s Robert Everett Johnson.
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