State Licensing Boards, Antitrust, and Innovation

Regulatory Transparency Project of the Federalist Society, 2017

17 Pages Posted: 16 May 2018 Last revised: 24 Aug 2018

See all articles by James C. Cooper

James C. Cooper

George Mason University - Antonin Scalia Law School, Faculty

Elyse Dorsey

Government of the United States of America - Federal Trade Commission

Joshua D. Wright

George Mason University - Antonin Scalia Law School, Faculty

Date Written: November 13, 2017

Abstract

Every state has occupational licensing laws or regulations, which require individuals seeking to offer a certain service to the public first to obtain approval from the state. Occupational licensing requirements historically derive from a desire to protect unwitting consumers from bad actors. In recent years, however, the number of licensed professions in the United States has skyrocketed and licensing requirements have become increasingly onerous. When incumbents wield licensing requirements not as a defensive shield to protect consumers but as an offensive sword to exclude new entrants, serious concerns regarding the competitive implications of the licensing schemes arise. Self-interested incumbents have incentives that may differ from consumers, and these self-interested incumbents can—and sometimes do—impose requirements that do not enhance quality, but rather restrict output, increase prices, and hamper innovation. This Paper explores the competitive implications of state occupational licensing regimes. Part I analyzes the historical development and justification for occupational licensing. Part II reviews the empirical evidence regarding the effects of occupational licensing on factors such as quality, price, innovation, and availability. Part III summarizes how antitrust law, and particularly the state action doctrine, treats state board-enacted occupational licensing. Part IV explores the interplay of occupational licensing and antitrust laws in the United States, delving into a particularly striking case at the intersection of occupational licensing and innovation: Teladoc, Inc. v. Texas Medical Board. Part V provides some suggestions for agency engagement in monitoring the effective use of occupational licensing.

Keywords: antitrust, state licensing boards, occupational licensing, state action doctrine, Teladoc, innovation

Suggested Citation

Cooper, James C. and Dorsey, Elyse and Wright, Joshua D., State Licensing Boards, Antitrust, and Innovation (November 13, 2017). Regulatory Transparency Project of the Federalist Society, 2017. Available at SSRN: https://ssrn.com/abstract=3165265 or http://dx.doi.org/10.2139/ssrn.3165265

James C. Cooper

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-9582 (Phone)

Elyse Dorsey (Contact Author)

Government of the United States of America - Federal Trade Commission ( email )

600 Pennsylvania Ave., NW
Washington, DC 20580
United States

Joshua D. Wright

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

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