Markets Wired

Federal Trade Commission staff submitted written comments on proposed Nebraska legislation that would require review of the competitive impact of the state’s licensing regulations and laws, with the goal of procompetitive reform of restrictions on regulated occupations. The comments, drafted in response to a request from Nebraska State Senator Laura Ebke, support the approach described in the proposal, noting that “implementation of the Bill may pose certain challenges, and . . . highlight concerns about any potential expansion of antitrust immunity for licensing boards controlled by active market participants.”

The comment was issued in conjunction with FTC Acting Chairman Maureen K. Ohlhausen’s Economic Liberty initiative to assess the harms of excessive occupational licensing, its impact on individuals and society, and reforms that would promote greater economic opportunity for all Americans, consistent with legitimate consumer protection goals.

All occupational licensing restrains competition to some extent because establishing entry requirements for an occupation tends to limit the supply of people who can provide certain services, which “can lead to higher prices . . . [or] reduced non-price competition on terms such as convenience or quality.” Such requirements may also discourage entrepreneurship and innovation. As the staff comments also state, “licensing can offer important benefits, such as protecting consumers from actual health and safety risks.” For some occupations, after accounting for both the costs and benefits of particular restrictions, “there might be a convincing rationale for some, but not all, licensing requirements;” but for other licensed occupations, “it is difficult to imagine a good rationale to require licensing.”

Staff of the FTC’s Office of Policy Planning and its Bureaus of Competition and Economics submitted the comment in response to a request for comments on an amended draft of Nebraska LB299, which would provide for the review of proposed licensing legislation and existing occupational regulations, and would require that Nebraska regulators attempt to promote competition by using “the least restrictive regulation necessary to protect consumers from present, significant, and substantiated harms . . . when competition alone is not sufficient.”

The staff comment supports the goals of LB299 but cautions against licensing reform measures that could be misused to undercut reform efforts by potentially protecting, rather than eliminating, anticompetitive regulation by self-interested regulatory boards.

The Commission vote to issue the staff comment was 2-0. It was sent to State Senator Ebke on January 17, 2018. (FTC File No. V180004; the staff contact is Daniel J. Gilman, Office of Policy Planning, 202-326-3136)

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