Federal law forbids private parties from engaging in
anticompetitive conduct. But what happens when a state regulatory
board is staffed by private market participants who use government
power to push anticompetitive measures that advance their own
economic interests? Does that also count as an antitrust
violation?
The U.S. Supreme Court grappled with those questions on Tuesday
when it heard
oral argument in North Carolina Board of Dental Examiners
v. Federal Trade Commission, a case arising from that board’s
efforts to prevent non-dentists from offering teeth-whitening
services. Because six of the board’s eight members are licensed
practicing dentists with a direct financial stake in restricting
entry to the teeth-whitening market, a lower court deemed the
board’s anticompetitive conduct to be illegal under federal
law.
Arguing against the dental board before the Supreme Court on
Tuesday was Deputy Solicitor General Malcolm Stewart, who began his
remarks by describing the board’s members as possessing “an evident
self-interest in the manner in which the dental profession is
regulated and in regulations that might keep other people from
competing with dentists.”
Yet Justice Antonin Scalia dismissed the notion
of a self-interested licensing board out of hand. “Do you really
think that the financial interest of the individual members of the
board is going to be significantly affected? Of each individual
member of the board?” Scalia asked. “My goodness. I—I find that
hard to believe.”
Scalia should give the matter more thought. Better yet, he
should devote careful attention to a
friend of the court brief submitted in this case on behalf of
45 leading economists who urge the Supreme Court to take seriously
the threat posed by occupational licensing abuse. “In the real
world,” the brief details, “occupational licensing boards routinely
use government power to promote the private financial interests of
their own members and licensees, rather than to promote any
legitimate government interests.”
I would also urge Scalia to find himself a copy of economist
Walter E. Williams’ pioneering 1982 book
The State against Blacks, in which Williams reveals
the myriad ways that state licensing boards harmed
African-Americans who tried to break into such occupations as
plumber and electrician. Sometimes those boards were acting out of
pure racial animus—entrenched white workers who sat on the boards
wanted to keep black workers out. But other times the boards were
just seeing green. As Williams explains, once occupational
licensing has restricted competition, “incumbent
practitioners…can charge higher prices and hence have higher
incomes as a result of their monopolized market.”
One final point. In its March 2014 decision
against the North Carolina Board of Dental Examiners, the U.S.
Court of Appeals for the 4th Circuit observed, “this case is about
a state board run by private actors in the marketplace taking
action outside of the procedures mandated by state law to expel a
competitor from the market.” Scalia should study that one too.
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