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Antitrust Policy Should Target Government Monopolies

The FTC is right to be skeptical of state licensing boards, who are notorious for weaponizing regulations to keep would-be competitors out of business.

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By Joshua Polk and Anastasia Boden

Recent headlines involving antitrust law have focused on government investigations into “big tech” companies, like Facebook and Google. That’s amusing, given that it’s the government that is the biggest perpetrator of monopolistic behavior. It’s now widely recognized that state licensing boards, often dominated by industry players, weaponize regulations to keep would-be competitors out of business.

Licensure laws governing such innocuous occupations as floristry, blow-drying, and interior design, cannot seriously be said to protect the public; they protect licensees from the competition. If we truly care about preventing monopolies, we should focus antitrust efforts on licensure boards that use the law to enrich themselves and exclude aspiring entrepreneurs from their profession.

A good example of anti-competitive conduct by state regulators is “licensure creep,” the phenomenon by which regulators interpret their authority as encompassing more and more ancillary services in order to create a monopoly over those services.

Take the attempt of dental boards requiring licensure as a dentist to offer teeth whitening with LED lights—lights that are no more powerful than a household flashlight. The only reason for requiring somebody to obtain a full-blown dentist’s license to set up a mall kiosk for whitening teeth is to keep out fair competition.

Dental boards are repeat offenders when it comes to anti-competitive conduct. In 2003, the Federal Trade Commission charged the South Carolina Board of Dentistry with illegally preventing dental hygienists from providing basic preventive care to underprivileged children. Based on its concern that impoverished children were not receiving care, the South Carolina legislature had eliminated a law that required dentists to examine each child prior to a hygienist offering basic services. But the nine-member dental board, comprised of seven licensed dentists, reinstated the policy. The FTC concluded that the Board’s actions “deprived thousands of economically disadvantaged schoolchildren of needed dental care” without justification. 

Despite blatantly anti-competitive actions like this, government bodies often argue they are fully immune from antitrust liability. A case involving North Carolina’s dental board made its way all the way to the Supreme Court, with the Board arguing that it shouldn’t be subject to federal antitrust law. In that case, the Supreme Court made clear that while some state actions are immune from liability, it would withhold immunity from boards dominated by market participants unless they are “actively supervised” by the state and are implementing a “clearly articulated” state policy.

That precedent is crucial for future and ongoing FTC investigations into the industry. Recently, the FTC has started investigating state efforts to thwart teledentistry—even though teledentistry makes care more affordable and saves people from unnecessary trips to the ER or dentist’s office. (Indeed, it is these characteristics that make it a target of traditional practitioners).

The FTC recently investigated the Alabama Board of Dental Examiners for enforcing teledentistry restrictions against web-based teeth-straightening business SmileDirectClub. But, just like the North Carolina Board, the Alabama Board is arguing that as a state regulator, its attempt to squeeze out competition is immune from antitrust law.

The Board even sued the FTC, arguing that because the state gave it broad authority to regulate the dental industry, it satisfies the Supreme Court’s immunity standard. But that loose interpretation would block nearly all state boards’ antitrust scrutiny―who all regulate according to general public health policies. Alabama is essentially trying to render the Supreme Court’s important antitrust protections against government bodies meaningless.

Alabama’s actions should come as no surprise. Research from Arizona State University’s Center for the Study of Economic Liberty demonstrates that when more market insiders sit on boards, license requirements become more restrictive (and therefore anti-competitive). Alabama’s seven-person dental board is composed of six dentists and one dental hygienist.

In the medical industry, the consequences of anti-competitive licensing restrictions go far beyond crushing entrepreneurial hopes and raising prices. They can be deadly. Policies like Certificate of Need laws, which perversely grant existing businesses a say over whether a newcomer is allowed into the industry, have killed people by creating unnecessary shortages.

The FTC is right to be skeptical of the Alabama Board of Dental Examiners and its efforts to shut down innovation in the dental industry. By granting industry players the legal authority to destroy upstart companies, licensure bodies pose a serious threat to competition.

For that reason, the FTC can and should focus its efforts on public boards and hold them accountable where they pursue policies that harm entrepreneurship for their benefit.

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