Skip to main content

Licensing Boards Might Violate Federal Law: Regardless, They Are Terrible Policy


Competition is as American as baseball and apple pie. “May the best man win” is a sentiment so old it doesn’t care about your pronouns. The beneficial effects of competition on economic markets are well documented. So why do we let powerful business interests change the rules of the game when they tire of competing in the free market? Most of the time when an occupational license is enacted, it is the members of the regulated industry who push hardest in favor of the license. Honest competition may be fundamentally American, but thwarting that competition through licensing seems to be fundamentally Oklahoman. Oklahoma doesn’t have the most occupational licenses, but when they do license an occupation, the requirements tend to be more onerous than the same license in other states.

But what if, instead of merely breaking the rules of fair play to keep out would-be competition, Oklahoma licensing boards are also breaking the law? Normally a concerted effort to lock out competition would violate federal antitrust law; but there is an exception for anticompetitive state policies. As 1889’s latest paper argues, there is good reason to think Oklahoma's licensing boards do not qualify for that exception. But let's set that aside for just a moment. Even if they do qualify, are we really comfortable giving certain industries a huge leg up on their competition? Are we comfortable using an exception to antitrust law to do it?


Football fans hate winning on a questionable last-second penalty. The legitimacy of the win will always be in doubt. The only thing worse is losing on a questionable last-second penalty. And that's what Oklahoma is doing. Occupational licensing is terrible policy. It transfers wealth from lower-income consumers to higher-income licensed professionals, distorting the market for services and creating inefficiencies. That's the system we hope doesn’t get flagged for market interference? Don't swallow your whistle now, ref! 


Let's turn back to whether there should be a flag on the play. Courts used to assume that occupational licensing boards fit within the state action exception to antitrust law, where states get a pass because, well, they’re states. However, in 2015 the Supreme Court held that if a board is made up of active market participants (i.e., the people on the board are regulating themselves, and competing with everyone who would like to join them, as most Oklahoma boards are), then it must be actively supervised by the state to enjoy the immunity. Former Governor Fallin and the Attorney General’s office attempted to shield the licensing boards through an executive order. But even with the order, the oversight Oklahoma exercises over the boards still fall short of active supervision. 


The executive order demands that boards submit their non-rulemaking actions to the AG for review. If the AG recommends modifying or undoing the action, boards are ordered to do so, and failure to follow the recommendations is grounds for termination. 


There are several problems with this plan. The Attorney General has a number of important statutory and constitutional duties, but supervising licensing boards isn't one of them. An executive order from the Governor can’t add it to his to-do list. Even if it could, the AG regularly represents and advises the board on legal matters. If he is also tasked with supervising them, it creates a conflict of interest. 


On top of this, the executive order doesn't allow the AG to actually overturn or veto a board’s decision: it only threatens to remove board members who fail to follow the AG's advice. An entire board might be fired, but the underlying action would still be the law of the land until a court or a new board overturned it. Taken together, this paints a picture of boards that could do great and lasting damage if they went rogue.


Many free-market economists dislike antitrust law in general, but they like licensing even less. Antitrust law restricts too much legitimate economic activity. In the absence of a government-issued monopoly, it’s difficult to keep new entrants out of a lucrative field. Antitrust is a blunt instrument, hammering mergers that might otherwise make consumers better off. But government-created cartels like occupational licensing regimes have staying power. Unlike an unregulated monopoly, which signals to entrepreneurs that there is money to be made in finding ways to innovate and compete with the monopolists, a government licensing scheme creates powerful disincentives to new entrants. So, while antitrust law may be a blunt instrument, it can and should be safely aimed at occupational licensing. 


Even if courts don’t call out licensing boards for roughing the consumer, it is well within the power of Oklahoma’s legislature to stop the shenanigans before the ball is snapped. The legislature could enact private certification. This would allow private companies to certify that a given professional is competent. Those who were outstanding in their field could pursue additional credentials, signaling to consumers that these are the best of the best. Privately certified practitioners would be exempt from licensing laws. Consumers would still know who was trustworthy, while avoiding the negative side effects of the current licensing regime. 


Mike Davis is Research Fellow at 1889 Institute. He can be reached at mdavis@1889institute.org.

Popular posts from this blog

No License, Sherlock: Licensing for Private Investigators

What does a private investigator do? Surely, we’re all familiar with various movies and shows featuring the exciting adventures of Sherlock Holmes or Magnum PI. However, reality is often disappointing, and the fact is private investigation is usually dull and relatively safe. Private investigators are tasked with conducting surveillance and fact-finding missions for their clients, but they gain no special powers to do so.  My recent paper deals with the licensing of private investigators. Oklahoma’s private investigator licenses are governed by the Council of Law Enforcement Education and Training (CLEET), which follows the advice of a committee made up of people who run private investigative agencies. Improved competition is not likely to be in the best interest of these agencies, so it is questionable whether they should be in a gate-keeping position they could easily turn to their advantage. Private Investigators must undergo a series of trainings and pas...

Eat Your Vegetables: City Council Considers A Well-Disguised Sin Tax

The Oklahoma City Council is considering a well-disguised sin tax. They call it a Healthy Neighborhood Zoning Overlay, but the effect is the same. It limits new dollar stores in the specified neighborhood. The ostensible goal is to create a welcoming environment for grocery stores selling fresh meat and produce. But it accomplishes this goal by giving existing dollar stores a monopoly, which will raise prices, and punish residents for shopping at the purveyors of (allegedly nothing but) junk food, instead of subsisting on fresh, organic kale smoothies like good little citizens. Why would the Council intentionally restrict the supply of stores where many of their residents buy basic household goods and food? Several possibilities present themselves, though none are sound.   A fundamental misunderstanding of the laws of supply and demand. Economists call the current state of the neighborhood a contestable market: dollar stores choose low prices because the mere p...

On Coronavirus and American Exceptionalism

Most of us have no idea whether to fear the coming coronavirus pandemic or to scoff at what seems to be a panic, complete with toilet paper buying sprees. I find myself mostly in the latter camp, due not to some great scientific knowledge, but as a matter of general disposition. But I’m also a father of young children, so a touch of protective instinct kicks in whenever a big outside force that could harm my family rears its head. With much I don’t know, there is something I do know: If forced to weather a pandemic, I’d rather do so in the United States than any other country on earth. Watching news coverage, I cannot help but notice a subtle message underlying the words of far too many in the political commentariat. Many seem to speak about China’s management of the outbreak with envy . Their analysis is that because we are a big, unruly, open society, we cannot hope to make people to do what is necessary to stem the spread. The old “China for a Day” fantasy of Thomas Fri...

Congrats, MAPS 4: The Magic of Obscure Election Dates

How surprising was it that MAPS 4 in Oklahoma City passed? It was a hard-fought, noisy campaign, with debaters “FOR” and “ AGAINST ” duking it out in public forums, polls showing a race that was neck-and-neck, hard feelings on both… Oh wait. Nope. We were thinking of some other election, maybe one that occurred on a date when people were actually engaged and thinking about voting. You know, some date, like we don’t know, in November of an even-numbered year. The MAPS 4 vote happened yesterday, December 10, in an odd-numbered year, on a date that pretty much said “Hey, really folks, don’t bother. Just leave this to us.” The “us” in a city numbering 650,000 citizens was a total of 44,439 , or 6.8% of the population. That’s right, just over one-twentieth of the population has decided that everybody is going to continue paying extra sales tax. Except that’s overstated. Actually, only 31,865 people voted in favor of MAPS 4. That’s only 5% of the population. But wait, the diffe...