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.