The Federal Trace Commission and the Professions: A Quarter Century of Accomplishment and Some New Challenges

Abstract:     
Over the past 25 years, the Federal Trade Commission has consistently challenged price and nonprice horizontal restraints in the professions. Beginning with its case against the American Medical Association and extending through the Cal Dental proceeding, the FTC has significantly extended the reach of competition policy, transformed the way that professional services are supplied, and conferred sweeping benefits to consumers. After reviewing the major actions of the FTC, this paper (presented at the FTC's 25th Anniversary Symposium) focuses on the economics of the professions-the case for intervention, the case made by the professions in response to FTC challenges, and the new considerations raised by the Supreme Court in its Cal Dental ruling. We conclude that the major economic issues are now settled: There are no good reasons, either from a theoretical or an empirical vantage point, for concern about the effects of competition in the professions. To the contrary, the evidence supports the conclusion that competition yields major benefits to consumers in the form of lower prices, without adverse effects on quality. The concerns articulated by the Supreme Court are not supported by current economic understanding.

Number of Pages in PDF File: 28

Keywords: Professions, horizontal restraints, advertising, service quality, competition

working papers series