[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
BARRIERS TO ENTREPRENEURSHIP: EXAMINING THE ANTI-TRUST IMPLICATIONS OF
OCCUPATIONAL LICENSING
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
JULY 16, 2014
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 113-076
Available via the GPO Website: www.fdsys.gov
__________
U.S. GOVERNMENT PRINTING OFFICE
88-720 WASHINGTON : 2014
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
HOUSE COMMITTEE ON SMALL BUSINESS
SAM GRAVES, Missouri, Chairman
STEVE CHABOT, Ohio
STEVE KING, Iowa
MIKE COFFMAN, Colorado
BLAINE LUETKEMEYER, Missouri
MICK MULVANEY, South Carolina
SCOTT TIPTON, Colorado
JAIME HERRERA BEUTLER, Washington
RICHARD HANNA, New York
TIM HUELSKAMP, Kansas
DAVID SCHWEIKERT, Arizona
KERRY BENTIVOLIO, Michigan
CHRIS COLLINS, New York
TOM RICE, South Carolina
NYDIA VELAZQUEZ, New York, Ranking Member
KURT SCHRADER, Oregon
YVETTE CLARKE, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRAD SCHNEIDER, Illinois
RON BARBER, Arizona
ANN McLANE KUSTER, New Hampshire
PATRICK MURPHY, Florida
Lori Salley, Staff Director
Paul Sass Deputy Staff Director
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Sam Graves.................................................. 1
Hon. Nydia Velazquez............................................. 2
WITNESS
Mr. Andrew Gavil, Director, Office of Policy Planning, Federal
Trade Commission, Washington, DC............................... 3
APPENDIX
Prepared Statements:
Mr. Andrew Gavil, Director, Office of Policy Planning,
Federal Trade Commission, Washington, DC................... 14
Questions and Answers for the Record:
Questions to Mr. Andrew Gavil from Rep. Blaine Luetkemeyer... 26
Additional Material for the Record:
None.
BARRIERS TO ENTREPRENEURSHIP: EXAMINING THE ANTI-TRUST IMPLICATIONS OF
OCCUPATIONAL LICENSING
----------
WEDNESDAY, JULY 16, 2014
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 1:02 a.m., in Room
2360, Rayburn House Office Building, Hon. Sam Graves [Chairman
of the Committee] presiding.
Present: Representatives Graves, Chabot, Luetkemeyer,
Tipton, Hanna, Huelskamp, Schweikert, Collins, Velazquez,
Schrader, and Meng.
Chairman Graves. Good afternoon, everyone, I call this
hearing to order. I want to thank everyone for being here.
When folks set out on a career path, they know that some of
the jobs require certain licenses, educational backgrounds, and
fees. Most people agree that certain professions should be
subject to standards to protect the public, such as doctors,
lawyers or architects. However, in the United States over the
last 60 years, the number of occupations subject to State and
local licensure laws have expanded greatly. Today not only do
doctors need a license, but in some States professionals such
as fortune tellers or interior designers require one as well.
In light of this, it is not surprising that a recent study
found that occupational licensing was the number one regulatory
burden that faces small firms today.
Understandably, this growing trend is sparking controversy
as entrepreneurs question why certain licenses are needed,
particularly if the license or educational requirements seem to
have little to do with protecting the public. The balance
between individual rights to pursue economic opportunities and
States' rights to regulate economic activity within their
borders appears to be tipping towards more regulation.
As entrepreneurs seek out new opportunities, they are
finding more roadblocks in the way of earning a living or
creating jobs. Often, these barriers are erected by licensing
boards made up of men and women who are currently in the
profession or the potential competitors of those seeking to
enter the profession. These hurdles are particularly difficult
to clear for those with limited financial means or lower levels
of education. As entrepreneurs look for solutions, they are
starting to file Federal lawsuits alleging that certain
occupational licenses violate Federal anti-trust laws.
In my home State of Missouri, we are lucky to be
consistently ranked as one of the least burdensome States for
occupational licensing. However, in June hair-braiders filed a
Federal suit against a Missouri law which requires braiders to
obtain a cosmetology license. The State cosmetology license
requires 1500 hours of training and two exams with all the
various costs that are involved. But according to the suit,
neither the training nor the test covers hair braiding. While
we want competent and skilled workers in Missouri, and I
strongly believe in States' rights to protect the welfare of
its citizens, this occupational license, which does not seem
tailored to the actual profession, appears to be a way to keep
new competition out and infringe on an individual's economic
liberty.
Today we are fortunate to have Director Gavil from the
Federal Trade Commission, who will highlight some of the
concerns and inform us of the actions that the FTC is taking as
enforcer of the Federal anti-trust laws to promote competition
and reduce unnecessary barriers to work.
Now I yield to Ranking Member Velazquez for her opening
statement.
Ms. Velazquez. Thank you, Mr. Chairman. Occupational
licensing is a process by which states compel those involved in
a particular profession or industry to meet specific standards,
such as training, education or certain character requirements.
The main justification for occupational regulation is to
protect the public's health and safety. For example,
individuals want to know health practitioners adhere to basic
quality standards or that architects have achieved certain
training requirements to design structurally sound buildings.
However, the rapid growth of licensing requirements across a
broad array of job fields has raised questions about the
effectiveness of these regulations and potential unintended
consequences.
In the 1950s, less than one in every 20 workers was in an
occupation requiring occupational licensing. Today roughly, 30
percent of Americans work in a field requiring state licensing,
creating additional hurdles for entrepreneurs looking to join a
new field.
New licensing laws are almost always crafted with industry
input and enjoy broad immunity from federal oversight. The
states' power, however, is not absolute. It falls on the
Federal Trade Commission to ensure that occupational licensing
standards are advancing the goal of protecting the public and
not serving intentionally or inadvertently to limit competition
in a manner that runs afoul of antitrust laws.
For decades, the FTC has initiated enforcement actions
designed to eliminate restrictions on business practices of
state license professions, including restrictions on new
competitors, advertising and solicitation, and even price
meetings. As a result of FTC's efforts, robust marketplaces
thrive in many professions, preserving consumer choice and
keeping prices competitive. As always, the key is striking the
appropriate balance, preserving occupational licensing systems
that serve legitimate consumer protection purposes, while
preventing licensure from restricting competition and stymieing
entrepreneurship.
It is my hope that today's discussion will shed light on
how the commission is advancing that goal and how the committee
can be helpful on this topic. In that regard, I thank the
witness for being here, and I am certain your testimony will
provide and will shed light and valuable insight.
With that Mr. Chairman, I yield back.
Chairman Graves. Our witness today, as I mentioned, is
Andrew Gavil, the Director of the Office of Policy Planning at
the Federal Trade Commission. Director Gavil has led this
office since September of 2012, and he oversees the Office's
advocacy efforts to support competition and protect consumers.
Prior to this role, Director Gavil taught anti-trust at the
Howard University School of Law and authored numerous articles
on competition policy. Thanks for being here. We appreciate it.
STATEMENT OF ANDREW GAVIL, DIRECTOR, OFFICE OF POLICY PLANNING,
FEDERAL TRADE COMMISSION, WASHINGTON, D.C.
Mr. Gavil. Thank you, Mr. Chairman. Good afternoon.
Chairman Graves, Ranking Member Velazquez, members of the
Committee, thank you for the opportunity to appear before you
today. I am Andrew Gavil, the Director of the Office of Policy
Planning at the Federal Trade Commission, and I am pleased to
join you to discuss competition perspectives on the licensing
and regulation of occupations, trades, and professions. The
Commission's testimony describes the FTC's approach to
evaluating the potential competitive effects of such regulation
and how we use a combination of advocacy and enforcement tools
to promote competition among professionals. The FTC and its
staff recognize that occupational licensure can offer many
important benefits. It can protect consumers from actual health
and safety risks and support other valuable public policy
goals. However, that does not mean that all licensure is
warranted, and most importantly in our experience, it does not
mean that the benefits of all of the specific restrictions
imposed on occupations are sufficient to justify the harm they
can do to competition and mobility in the workforce.
We have seen many examples of licensure restrictions that
likely impede competition and hamper entry into professional
and service markets, yet offer few, if any, significant
consumer benefits. In these situations, regulations may lead to
higher prices, lower quality services and products, and less
convenience for consumers. In the long term, they can cause
lasting damage to competition and the competitive process by
rendering markets less responsive to consumer demand and by
dampening incentives for innovation.
Occupational regulation can be especially problematic when
regulatory authority is delegated to a nominally independent
board comprising members of the very occupation to be
regulated. When the proverbial fox is put in charge of the hen
house, board members' financial incentives may lead the board
to make regulatory choices that favor incumbents at the expense
of competition and the public. This conflict of interest may
lead to the adoption and application of licensure restrictions
that discourage new entrants, deter potential competition from
professionals in related occupations, and suppress innovative
forms of service delivery that could challenge the status quo.
Such entry and innovation can have substantial consumer
benefits.
From a competition policy perspective, it is also helpful
to appreciate that we view anticompetitive occupational
licensing in the broader context of industry regulation that
instead of protecting consumers, can become protectionist of
current industry incumbents.
Our economy is evolving rapidly, in part due to emerging
technologies that facilitate new products, services, business,
and even new business models. When these develop and challenge
incumbents in heavily regulated industries, it is not unusual
to see regulatory responses, spurred on by those very
incumbents which erect barriers to new business models and have
the effect of slowing or even barring their development, even
when consumer demand for new methods is pronounced.
The FTC and its staff address these concerns primarily in
two ways: First, as part of the FTC's competition advocacy
program, where appropriate and feasible, we respond to calls
for public comment and invitations from legislators and
regulators to identify and analyze specific licensure
restrictions that may harm competition without offering
significant consumer benefits. In recent years, for example, we
have focused on diverse issues, including advertising
restrictions, automobile distribution, nursing scope of
practice restrictions, accreditation standards, taxicabs and
related forms of passenger vehicle transportation, casket
sales, and real estate brokerage. Typically, we urge
policymakers to integrate competition concerns into their
decision making process; specifically, that they consider, one,
whether any particular licensure regulations are likely to have
a significant and adverse impact on competition; two, whether
the particular restrictions are targeted to address actual
risks of harm to consumers; and, three, whether the
restrictions are narrowly tailored to minimize any burden on
competition.
When appropriate, we have also used our enforcement
authority to challenge anticompetitive behavior by occupational
regulators. The Commission has authorized civil challenges in
several instances when faced with delegations of authority to
regulatory boards comprising self-interested competitors,
alleging that each board's actions harmed competition and that
the ``state action'' doctrine was an insufficient defense to
the conduct.
As you know, one of these cases, North Carolina State Board
of Dental Examiners, is currently pending before the U.S.
Supreme Court.
The Commission has not studied and has not taken a position
on whether there is excessive licensing of occupations, trades
or professions as a general matter. As I have described,
however, it has demonstrated a long-standing commitment to
tracking and identifying regulatory restrictions that unduly
restrict competition in specific trades, occupations, and
professions, and has taken enforcement action when appropriate
to stop self-interested regulatory boards from abusing their
authority to eliminate competition.
I am, of course, happy now to respond to any questions you
may have. Please note, however, that as is indicated in the
written statement of the Commission, although the prepared
statement presents the views of the Federal Trade Commission,
my oral testimony and responses to questions reflect my views
and do not necessarily reflect the views of the Commission or
any particular commissioner. Thank you.
Chairman Graves. Mr. Hanna.
Mr. Hanna. How do you navigate that process intellectually?
I mean, where do you kind of generally set the bar for what
needs to be regulated and what shouldn't be, and isn't that
very subjective so that, you said you are not particularly
proactive about limiting. Does that mean--well, what does that
mean?
Mr. Gavil. It means, in short, that as a practical matter,
we have not found ourselves to be very successful when not
invited to the party. When State regulators and legislators are
considering legislation, we have found over time that we can be
most effective in encouraging them to consider competition when
we are invited to do so or when they have indicated a
willingness to accept comments, as through public comment
periods.
Mr. Hanna. Do you find that they are relatively willing to
listen?
Mr. Gavil. We do, especially when we have those public
comment periods and when we are invited. Our recent experience
shows that around three-quarters of the time we find that we
are at least partially successful in influencing the awareness
of the competition concerns that typically are the concerns
that we would focus on and explain.
Mr. Hanna. Like what?
Mr. Gavil. So this goes back to the first part of your
question, you know, what is it that we are urging and what is
our analysis. We are competition specialists; we are economists
and lawyers working together. Many people in our office have
decades of experience in particular industries, such as the
healthcare industry, and with intellectual property issues.
Typically what we would bring to bear on a question of
regulation is an understanding of how to evaluate the likely
competitive impacts of a particular restriction.
Mr. Hanna. So is it your opinion that regulation--I mean,
there are people out there who never saw a thing they didn't
want to regulate, and there are other people who believe that
free enterprise somehow creates perfect outcomes. I think both
are probably misguided. But in general, can you--there are
businesses that clearly need licenses, need to be regulated,
and those that don't. How do you separate the two and how do
you measure the value that is created through kind of letting
the market do it on its own? Because, frankly, customers are
ultimately the best deciders of the value they receive, and
that is part of the process.
Mr. Gavil. I would completely agree, Congressman, and I
think that one of the things we look for is regulations that
interfere with that process. The market is going to work best
when you see a free interchange between supply and demand,
between the suppliers of services or products and consumers.
A recent example, to make it more concrete, we filed
comments in Missouri and New Jersey in connection with the
practices of auto distribution. Two-thirds of the States
prohibit manufacturers from selling directly to consumers. We
commented, in both instances, favoring statutes that would
withdraw that restriction. The company that was particularly
the spur to this was Tesla, but Tesla is the camel's nose under
the tent.
The question is whether or not, as in other industries the
interchange of manufacturers and customers should be determined
based on consumer preferences.
Mr. Hanna. So generally new business models that are
threatening to existing business models within some geographic
or business organization, group of organizations are always
somewhat resisted, but in New Jersey you saw someone actually
create a law around that, with a business model that isn't
really the government's business to judge upon. I guess that is
what you----
Mr. Gavil. Well, what you see sometimes is that the
regulations already exist and they are a bar or sometimes new
regulations are being introduced that would create a bar.
Mr. Hanna. So it actually inhibits innovation and limits
competition and kind of reinforces the status quo?
Mr. Gavil. Absolutely, and that would be our concern, and
we have seen that pattern repeat in many healthcare fields, in
auto distribution, and in the taxi industry right now, where
what we see is heavily regulated incumbents actually using
those regulations to impair innovation from new business models
and new products and services.
Mr. Hanna. Thank you very much.
Mr. Gavil. Thank you.
Mr. Hanna. Yield back.
Chairman Graves. Ms. Velazquez.
Ms. Velazquez. Thank you. Thank you for being here today.
Mr. Gavil, several states have already begun to offer better
reciprocity between their licensing regulations to enable
workers to start working immediately following a move to a new
state. This is especially beneficial for military families.
Besides offering portability to increase workers' mobility
across state lines, what else can be done to reien in licensing
laws?
Mr. Gavil. Congresswoman, I think that we have actually
noted in a number of our comments that these particular issues
facing military families are significant, but they are an
example of a broader problem. I think reciprocity laws and
portability laws can go a long way toward reducing barriers
that impede the mobility of the workforce and the ability to
move to where the jobs are, so I would applaud that as a
general matter personally and think that that is something
worth considering in a variety of contexts.
Ms. Velazquez. Under antitrust law, the courts have
hesitated to rule on cases involving state licensing boards
because of the state immunity doctrine, but one recent case
suggests this hands-off approach may be changing even when a
state board is involved. Can you give a brief overview of this
state immunity doctrine and how limiting, not eliminating the
state's immunity could serve some purpose?
Mr. Gavil. Sure. With one caveat. As I indicated, we do
have a case pending before the Supreme Court, and I want to be
cautious about commenting on that case in particular, but the
broad framework I think is a very important one that has been
developed by the Supreme Court over a number of decades to try
and strike a reasonable balance between the States' sovereignty
and autonomy, and the national policy that favors competition,
and the state action doctrine is an attempt to implement that
balance, and I think that it has sought to do that by
recognizing that States, when acting as themselves, as
sovereigns, should have that kind of ability to be exempt from
Federal antitrust laws.
The more troubling issues come up when they delegate
authority to private parties, and that is the issue squarely
before the Supreme Court in North Carolina Dental; it is the
degree to which private parties acting with an imprimatur of
government regulation should be permitted to go forth without
any deterrent from the Federal antitrust laws.
Ms. Velazquez. Thank you. Is there a role for the FTC in
creating guidance or providing tools on best practices for
state occupational licensing boards to improve their
transparency, uniformity, and clarity of information they
provide the public?
Mr. Gavil. Yes, and I think we try to do that very much so
in our advocacy program. We are consistent in the framework
that we try to use, and I have outlined it in our testimony
today, and that is the framework that we urge State regulators
and legislators to consider as well; to always take into
account the competition consequences of any restrictions that
they place, including the fact of licensing any new occupation.
Ms. Velazquez. Thank you.
Mr. Gavil. Thank you.
Chairman Graves. Mr. Collins.
Mr. Collins. Thank you, Mr. Chairman. You mentioned the
taxi issue. Now, in New York State up where I live in Buffalo,
we just recently had someone like Uber, it is called Lyft, and
they have opened up, or attempted to open up service in New
York City, Rochester, Buffalo, and recently there was a lawsuit
brought, I am not sure exactly who brought it, but obviously
the taxi company's unions and so forth.
Interestingly, the court ruled that they could not operate
in New York City, but in fact, could operate in Rochester and
Buffalo, and I think the issue gets down to--obviously taxicabs
and unions would view them unlicensed, unsafe and so forth, and
I think all of us agree we need regulations to make sure the
public is safe, they are insured, people know who they are, and
all that goes with public safety, which I think can be handled
outside of some of the issues the taxicabs are bringing up, the
cost of a medallion and so forth and so on.
I am just kind of curious because it is the forefront right
now of regulations trying to stifle innovation, you know, what
you see going on in things like Uber, Lyft, and so forth.
Mr. Gavil. I think you are right, Congressman, very much
so, that this is just the tip of the iceberg. This is a part of
a new and expanding part of the economy. Smartphones have
triggered an extraordinary amount of innovation and development
through applications that are platforms that allow people to
communicate with each other in new ways, and these
transportation applications are an expression of that. I would
also agree that finding the right balance in terms of
regulation and allowing the free market to innovate is a
critical question in this area. We have submitted four comments
in the last year and a half: One in Colorado; one in Anchorage,
Alaska; one in Chicago; and one in the fourth place that I am
not remembering right now, but we have done four of those to
try and lay out what we think is an appropriate framework for
evaluating how regulators should go about adapting to new
innovation, permitting it, encouraging it, and facilitating it
while articulating and accounting for any appropriate consumer
safety concerns.
One concrete example comes to mind. In Chicago, we
commented on a ride-sharing regulation that was proposed, and
the initial proposal required three times the level of
insurance for an individual person using their car through a
ride sharing app as compared to a taxi. Obviously that would
impose greater costs on the ride-sharing, and our question was
``why?,'' what is the justification? Is there any evidence to
support an increased concern about safety when individuals are
using their cars? If there is, there may be a basis for
regulations, but if there isn't, then you are merely erecting a
barrier to competition that may not be justified.
Mr. Collins. Now, do you see any nexus at all for the FTC
on interstate commerce where you do certainly have the
potential in two cities in two different States where someone
might be using a ride share service to cross a State line that
might give you a nexus to some action different than somebody
just running around the city of Buffalo?
Mr. Gavil. Uh-huh. To go back to my last question, I can't
believe I forgot the fourth one was the District of Columbia,
so let me just get that out and clear.
I think that clearly, there is national level competition
going on in this industry, but historically, the regulation was
very local, and that alone has created some of the tension. You
have new national competitors coming in, and they are facing
regulations. As you mention, in New York it could be okay in
one city and not okay in another city. That is because the
legacy regulations are very local. They can be citywide. In
some jurisdictions, California and Colorado are examples, there
is some Statewide regulation. So that makes it quite
complicated for an innovator to come in and try to compete in
multiple jurisdictions. They have to understand and adapt to
the regulations in multiple jurisdictions. That alone increases
the cost of entry.
Mr. Collins. Thank you very much. I think that is all I
have. Yield back, Mr. Chairman.
Chairman Graves. Mr. Schrader.
Mr. Schrader. Thank you, Mr. Chairman. I guess I am
wondering why we are having the hearing a little bit. I am sure
that will come out as we go forward, I guess, but it is my
understanding as a past life being in the Oregon State
legislature that occupational licensing was a State area of
expertise, not Federal Government. Is that still accurate?
Mr. Gavil. For the most part it is, yes.
Mr. Schrader. Okay. So I hope there is no inference that we
want the Federal Government to take an increasing role in
occupational licensing. Do you feel that is your province, to
take on the occupational licensing that has been up to the
States, been a States' rights issue for a while?
Mr. Gavil. So I would separate my response into two
buckets. On the advocacy front, typically what we are doing is
commenting to State regulators and to State legislators, not
questioning their authority but trying to introduce a
competition perspective to their thought process.
On the enforcement side, I think we do recognize that many
of these professions have a significant impact on interstate
commerce, and that goes back to the prior question. When they
do have a significant impact on interstate commerce, and it
involves conduct that is anticompetitive, it does fall within
the jurisdiction of the Federal antitrust laws. But honestly,
we have used that in a very measured way. Those cases are few
and far between, and we try to target them on some of the worst
conduct that we find.
Mr. Schrader. I would hope so. That sort of argument could
be made for Federal intervention in everything, all State,
local ordinances, that type of rationale. I appreciate the
measured approach that you guys are using here. You talk about
the role of the FTC. I think that is fine. A comment had come
up and you had agreed that it should be the consumers are the
most important piece of this, and they are the best judge of
whether or not the licensure is working. I guess I would argue
that that would depend. There are a lot of professions that I
think are pretty complicated, the consumer has an unrealistic
expectation, the medical field in particular, of what medical
anesthesiologists, cardiologists can and cannot do. Lawsuits
abound based on mythology of accurateness and invincibility of
medical technology or medical approaches.
So to me, it seems like there is an opportunity for
professions to self-regulate, and the ultimate arbiter is not
just the customer but your State legislature, your State
courts. Really those folks can probably adjudicate these issues
as well or better, having that local perspective and seeing
what is actually going on than we at the Federal government,
wouldn't you agree?
Mr. Gavil. I would, and I think that the point you make is
a very important one, which is--and the economists would call
it situations that involve information asymmetries, which just
means that we as consumers don't really know much about how to
judge the quality of certain things that happen, especially in
health care. In situations like that, that is a classic
justification for some degree of regulation. In pricing
contexts, even some of them in the taxi area, you wouldn't want
to get into a cab not knowing what the rate is going to be that
you would be charged.
So we have argued that although jurisdictions should be
flexible in allowing new payment models, it is appropriate to
think about disclosures to make sure that consumers understand
what they are agreeing to, whether it is through an app or
getting into a taxi. So, I think, yes, across a broad range of
areas, that sort of problem with information is a traditional
justification for some degree of regulation. I think what we
would argue is try to look for the least restrictive kind of
regulation possible to permit the free market to operate.
Mr. Schrader. Yeah, I would agree. I remember as a
budgeteer in the Oregon State Legislature, there were certain
boards that seemed to be building little protective fiefdoms
where the requirements only would benefit a select few that
would get the good contracts and other very well qualified
accountants, surveyors, engineers would be unable to apply.
But, again, I think that is where the State legislature, my
ways and means group, my budget group were able to discern
that, call the group to the table and have a discussion and
oftentimes were able to get them to change their rules and
regulations.
Mr. Gavil. And we work cooperatively with State antitrust
enforcers in many instances. When we see problematic
legislation, regulation or conduct at the State level, we often
work together with the State enforcers.
Mr. Schrader. So your role--it sounds like the best role,
from my perspective, that you would play is advisory to the
States, legislatures and the local boards to make sure they are
doing things the right way and help with competition.
Mr. Gavil. Absolutely, and that is the core of our advocacy
program. It is about trying to encourage people to take a
competition perspective, and we act as competition advisers in
that role.
Mr. Schrader. Very good. Thank you. I yield back, Mr.
Chairman.
Chairman Graves. Mr. Luetkemeyer.
Mr. Luetkemeyer. Thank you, Mr. Chairman.
Mr. Gavil, I would like to focus on the enforcement part of
what you have been talking about here. I think it can be a
barrier to entrepreneurship if it is not done correctly, and
that concerns me. While I support the enforcement of the laws
and your pursuing of bad actors, I have some concerns. You
know, recently the Committee on Oversight and Government Reform
did a study and got a hold of a lot of the internal memos at
the Department of Justice with regards to Operation Chokepoint,
and you are mentioned prominently in there in a couple
different spots, and I want to talk about that a little bit
with regards to, number one, have you or your office had any
communications with DOJ with regard to payment processors?
Mr. Gavil. We have not been involved in that matter at all
in the Office of Policy Planning.
Mr. Luetkemeyer. Has the Federal Trade Commission been
working with DOJ?
Mr. Gavil. I am honestly not familiar with what might have
been going on or coordination between the agencies. It is not a
matter that I have had any personal knowledge of.
Mr. Luetkemeyer. Well, on page 12 of a memo from the Deputy
Assistant Attorney General, it says here that they are working
with the FTC through information gleaned through FTC's many
actions, and as a result, they have even assigned somebody who
your principal payment processor expert to work with them.
Mr. Gavil. Congressman, that may be true, but again, I just
don't have any personal knowledge of it. It wasn't my office
that was involved in that matter.
Mr. Luetkemeyer. Well, you just said that you are part of
the enforcement of making sure this all works.
Mr. Gavil. No, the FTC has an enforcement arm. Actually, my
office takes principal responsibility for initiating
advocacies. We typically do not get directly involved in very
much enforcement. On occasion, we do advise enforcers in terms
of the competition theory, but in this particular matter we had
no role that I know of.
Mr. Luetkemeyer. You mean your division did not have? FTC
may have had?
Mr. Gavil. I cannot speak for the entire FTC, but my office
didn't have any involvement in that matter.
Mr. Luetkemeyer. Okay. Because I am very concerned because
I think it appears that with your cooperation, they are going
beyond just enforcement. It appears that they are going on a
witch hunt to try and do away with entire industries versus
just the bad actors within that industry, and they do that by
choking off financial services, and apparently your agency has
a lot of history apparently with payment processors; is that
correct?
Mr. Gavil. As far as I know, the agency has done work with
payment processors, but again, it hasn't been me or my office.
Mr. Luetkemeyer. Okay. How do you interact, then, with
other Federal agencies in your position?
Mr. Gavil. In my position? Yes, in a number of ways. As
part of our advocacy program sometimes we will engage in,
frequently we will engage in what we call informal advocacy,
where we confer with sister Federal agencies about competition
issues. Other agencies, for example, that are considering
regulations that may have an impact on competition, they may
invite public comments or they may invite our advice informally
to talk about the competition consequences, so that is a kind
of work that my office would do that is agency to agency.
Mr. Luetkemeyer. You don't see that the competition issue
here with regards to other activities within an industry and
the payment processing connection between those--have you ever
heard of Operation Chokepoint?
Mr. Gavil. I actually had not followed it and, like I said,
I have not worked directly on it in my role as Director of the
Office of Policy Planning.
Mr. Luetkemeyer. Well, it certainly is kind of concerning
to me that your agency, which is--part of it you said is
enforcement of.
Mr. Gavil. Yes.
Mr. Luetkemeyer. In your statement here you talk about it,
yet you have no recollection or awareness of the Department's
interaction with an enforcement agency. How does that work?
Mr. Gavil. It would not be unusual, Congressman, that
different parts of our agency are working with each other and
with other agencies, and we just wouldn't be involved in it.
For example----
Mr. Luetkemeyer. Right hand never knows what the left hand
is doing?
Mr. Gavil. I wouldn't describe it that way. I would say
they were working on different projects, and not every one of
us is engaged with----
Mr. Luetkemeyer. I would describe it that way because you
are all within the same agency, are you not?
Mr. Gavil. But none of us are engaged----
Mr. Luetkemeyer. Part of your agency is enforcement as
well. But you have no concern, no knowledge of the enforcement
part of your agency?
Mr. Gavil. I don't think that fairly characterizes what I
said. I said I had no knowledge of this particular activity. I
think I did say I do have knowledge of some enforcement options
and some enforcement actions when I am consulted and when my
office is consulted. We had no role to play in this matter, so
I really don't have any knowledge about it.
Mr. Luetkemeyer. That is a head scratcher. I yield back.
Thank you, Mr. Chairman.
Chairman Graves. Dr. Gavil, in your written testimony you
provided a framework for analyzing licensing requirements. Can
you walk us through a couple of examples, one where it would be
deemed appropriate for that licensing and one where it would
impede competition, just as examples.
Mr. Gavil. Sure. So we recently issued a policy paper on
the regulation of advanced practice registered nurses. APRNs
are sometimes described as a mid-level professional, more
advanced training than a registered nurse but not the same
training as a physician. And in many States, we have seen
regulations that would mandate by law that such APRNs can only
function under the direct supervision of a physician, even
though their training would allow them to do certain things
independently.
So in our policy paper we questioned whether these sorts of
restrictions can really be justified, and one way to think
about is a mismatch. There clearly is some concern about public
safety, but when we surveyed the evidence on public safety,
there was a lot of evidence to support the ability of APRNs to
do certain things independently and to practice independently.
In a time where access to health care is especially
important, APRNs may provide a less expensive and more
accessible kind of health care. So our policy paper tries to
collect that evidence and sets out the case for why those sorts
of regulations may not be justified. And we asked States to
consider, and we filed a number of comments, and a number of
States actually consistent with our comments have been
abandoning those very strict supervision requirements, and we
have been pleased to see that development.
Another one that was actually just in the news this week,
The Washington Post had an editorial yesterday about dental
therapists, and dental therapists in some sense is an analogue
to APRNs. It is a mid-level professional, more skilled than a
dental hygienist, more education and training than a dental
hygienist, but not quite a dentist. But in areas where there is
a shortage of dental care, dental therapists may be a new and
emerging model that would allow for greater access and lower
cost dental care, and we filed a comment with the Commission on
Dental Accreditation, which is the accrediting body of the
American Dental Association, urging them in a similar way to
avoid using the accreditation process to mandate supervision by
dentists and not allow these dental therapists to autonomously
provide certain basic services. So those are two recent
examples where we felt like the regulation was a mismatch, it
was excessive and inappropriate.
In the taxi cases, to give you an example where we do think
some regulation might be appropriate, the issue has been
whether the regulation is greater than necessary to meet the
needs of consumers. Certainly we all care about safety and
quality, but as I mentioned earlier, an example would be
insurance. Would we concede that some insurance requirements,
some inspection requirement might be appropriate? Yes. But when
we see disparate requirements that would create a competitive
disadvantage, we would question those and ask whether they
really have some factual basis and can be justified.
Chairman Graves. Well, I want to thank you for testifying
today and shedding some light on the role that obviously the
FTC plays in protecting competition and ensuring that
entrepreneurs have an opportunity to enter various occupations.
We very much appreciate you coming in, and with that, I would
ask unanimous consent that members have 5 legislative days to
submit statements and supportive materials for the record.
Without objection, that is so ordered, and with that, the
hearing is adjourned. Thank you.
Mr. Gavil. Thank you, Congressman.
[Whereupon, at 1:41 p.m., the committee was adjourned.]
A P P E N D I X
PREPARED STATEMENT OF
THE FEDERAL TRADE COMMISSION
on
Competition and the Potential Costs and Benefits of Professional
Licensure
Before The
COMMITTEE ON SMALL BUSINESS
UNITED STATES HOUSE OF REPRESENTATIVES
WASHINGTON, D.C.
JULY 16, 2014
I. Introduction
Chairman Graves, Ranking Member Velazquez, and Members of
the Committee, thank you for the opportunity to appear before
you today. I am Andrew Gavil, the Director of the Office of
Policy Planning at the Federal Trade Commission (``FTC'' or
``Commission''), and I am pleased to join you to discuss
competition perspectives on the licensing and regulation of
occupations, trades, and professions. In my time here today I
will describe the FTC's approach to evaluating the potential
competitive effects of such regulation and how we use a
combination of advocacy and enforcement tools to promote
competition among professionals.\1\
---------------------------------------------------------------------------
\1\ This written statement presents the views of the Federal Trade
Commission. Oral testimony and responses to questions reflect my views
and do not necessarily reflect the views of the Commission or any
individual Commissioner.
The FTC and its staff recognize that occupational licensure
can offer many important benefits. It can protect consumers
from actual health and safety risks and support other valuable
public policy goals. However, that does not mean that all
licensure is warranted and, most importantly in our experience,
it does not mean that the benefits of all the specific
restrictions imposed on occupations are sufficient to justify
the harm they can do to competition and mobility in the
workforce. We have seen many examples of licensure restrictions
that likely impede competition and hamper entry into
professional and services markets, yet offer few, if any,
significant consumer benefits. In these situations, regulations
may lead to higher prices, lower quality services and products,
and less convenience for consumers. In the long term, they can
cause lasting damage to competition and the competitive process
by rendering markets less responsive to consumer demand and by
dampening incentives for innovation in products, services, and
---------------------------------------------------------------------------
business models.
Occupational regulation can be especially problematic when
regulatory authority is delegated to a nominally
``independent'' board comprising members of the very occupation
it regulates. When the proverbial fox is put in charge of the
henhouse, board members' financial incentives may lead the
board to make regulatory choices that favor incumbents at the
expense of competition and the public. This conflict of
interest may lead to the adoption and application of licensure
restrictions that discourage new entrants, deter potential
competition from professionals in related occupations, and
suppress innovative forms of service delivery that could
challenge the status quo. Such entry and innovation can have
substantial consumer benefits.
From a competition policy perspective, it is also helpful
to appreciate that we view anticompetitive occupational
licensing in the broader context of industry regulation that,
instead of protecting consumers, can become protectionist of
current industry incumbents. Our economy is evolving rapidly,
in part due to emerging technologies that facilitate new
products, services, businesses, and even business models. When
these develop and challenge incumbents in heavily regulated
industries, it is not unusual to see regulatory responses,
spurred on by those very incumbents, which erect barriers to
new business models and have the effect of slowing or barring
their development, even when consumer demand for new methods is
pronounced.
The FTC and its staff address these concerns primarily in
two ways. First, as part of the FTC's competition advocacy
program, where appropriate and feasible, we respond to calls
for public comment and invitations from legislators and
regulators to identify and analyze specific licensure
restrictions that may harm competition without offering
significant consumer benefits. In recent years, for example, we
have focused on diverse issues including advertising
restrictions, automobile distribution, nursing scope of
practice restrictions, accreditation standards, taxicabs and
related forms of passenger vehicle transportation, casket
sales, and real estate brokerage. Typically, we urge policy
makers to integrate competition concerns into their decision-
making process--specifically, that they consider whether: (1)
any particular licensure regulations are likely to have a
significant and adverse effect on competition; (2) the
particular restrictions are targeted to address actual risks of
harm to consumers; and (3) the restrictions are narrowly
tailored to minimize any burden on competition, or whether less
restrictive alternatives may be available.
When appropriate, we have also used our enforcement
authority to challenge anticompetitive behavior by occupational
regulators. The Commission has authorized civil challenges in
several instances when faced with delegations of authority to
regulatory boards comprising self-interested competitors,
alleging that each board's actions harmed competition and that
``state action'' was an insufficient defense to the conduct.\2\
As you know, one of these cases, North Carolina State Board of
Dental Examiners,\3\ currently is pending on a writ of
certiorari before the U.S. Supreme Court.
---------------------------------------------------------------------------
\2\ The state action doctrine holds that certain sovereign acts of
state governments are exempt from antitrust scrutiny. It also holds
that certain private actors may be exempt from antitrust liability if
they can demonstrate that their actions were taken pursuant to a
clearly articulated decision by the state to displace free market
competition in favor of regulation, and that their conduct is actively
supervised by the state. Cal. Retail Liquor Dealers Ass'n v. Midcal
Aluminum, 445 U.S. 97, 105-06 (1980).
\3\ North Carolina State Bd. of Dental Examiners v. FTC, 717 F. 3d
359 (4th Cir. 2013).
The Commission has not studied and has not taken a position
on whether there is excessive licensing of occupations, trades,
or professions as a general matter. As I have described,
however, it has demonstrated a long-standing commitment to
tracking and identifying regulatory restrictions that unduly
restrict competition in specific trades, occupations and
professions, and has taken enforcement action when appropriate
to stop self-interested regulatory boards from abusing their
---------------------------------------------------------------------------
authority to eliminate competition.
This testimony will cover three main points.
First, it provides a brief overview of the FTC's
interest and experience in competition issues related to
occupational licensure and related restrictions;
Second, it outlines general competition concerns
in this area, touching on some of the issues raised in the
Committee's invitation to testify; and
Third, it concludes by providing additional details
on the FTC's work relating to the potential competitive harm of
excessive regulation of the professions and other service
occupations, including FTC research, competition advocacy, and
law enforcement.
II. Interest and Experience of the FTC
Competition is at the core of America's economy, and
vigorous competition among sellers in an open marketplace can
provide consumers the benefits of lower prices, higher quality
products and services, and greater innovation. In furtherance
of that national policy, the FTC Act grants the Commission
broad enforcement authority with regard to both competition and
consumer protection matters in most sectors of the economy.\4\
In addition, Section 6 of the FTC Act provides, among other
things, a general authority to investigate and report on market
developments in the public interest, as well as authority to
make recommendations based on those investigations.\5\ This
distinct charge supports the agency's research, education, and
competition advocacy efforts.
---------------------------------------------------------------------------
\4\ The FTC's authority reaches ``[u]nfair methods of competition''
and ``unfair or deceptive acts or practices'' that are ``in or
affecting commerce.'' 15 U.S.C. Sec. 45(a)(1) (2013). With some
exceptions, the FTC's authority ranges broadly over ``commerce''
without restriction to particular segments of the economy. Id. at
Sec. 45(a)(2).
\5\ 15 U.S.C. Sec. 46 (2006).
To fulfill these statutory mandates, the Commission seeks
to identify private, public, and quasi-public restrictions that
may unreasonably impede competition. In the context of
occupational licensure, the Commission and its staff have for
over thirty years conducted various economic and policy
studies,\6\ as well as focused inquiries into regulations
applying to particular professions such as nursing,\7\ eye
doctors and vendors of optical goods,\8\ legal services,\9\ and
the real estate brokerage industry.\10\ As mentioned above, the
Commission has relied on both competition advocacy and
enforcement tools in responding to potentially anticompetitive
occupational regulations and conduct by occupational regulatory
boards.
---------------------------------------------------------------------------
\6\ See, e.g., Carolyn Cox & Susan Foster, Bureau of Econ., Fed.
Trade Comm'n, The Costs and Benefits of Occupational Regulation, 4-12
(1990), http://www.ramblemuse.com/articles/cox--foster.pdf.
\7\ Fed. Trade Comm'n Staff, Policy Perspectives: Competition and
the Regulation of Advanced Practice Nurses (2014), http://www.ftc.gov/
system/files/documents/reports/policy-perspectives-competition-
regulation-advanced-practice-nurses/140307aprnpolicypaper.pdf.
\8\ Fed. Trade Comm'n, Competition in the Sale of RX Contact
Lenses: An FTC Study (2005), http://www.ftc.gov/sites/default/files/
documents/reports/strength-competition-sale-rx-contact-lenses-ftc-
study/050214contactlensrpt.pdf; Ronald S. Bond et al., Fed. Trade
Comm'n, Staff Report on the Effects of Restrictions on Advertising and
Commercial Practice in the Professions: the Case of Optometry (1980),
http://www.ftc.gov/sites/default/files/documents/reports/effects-
restrictions-advertising-and-commercial-practice-professions-case-
optometry/198009optometry.pdf.
\9\ Jacobs et al., Cleveland Regional Office & Bureau of Economics,
Fed. Trade Comm'n, Improving Consumer Access to Legal Services: The
Case for Removing Restrictions on Truthful Advertising (1984).
\10\ Fed. Trade Comm'n & U.S. Dept's Justice, Competition in the
Real Estate Brokerage Industry (2007), http://www.ftc.gov/sites/
default/files/documents/reports/competition-real-estate-brokerage-
industry-report-federal-trade-commission-and-u.s.department-justice/
v050015.pdf.
III. Competition Issues Related to Licensure and Other
---------------------------------------------------------------------------
Occupational Regulations
Licensure is a process that establishes the conditions for
entry into an occupation. Licensing regulations typically
specify entry conditions and define the various practices that
constitute a licensed occupation.\11\ Unlicensed practice, or
the provision of services outside one's scope of practice,
generally is prohibited by statute and may be subject to civil
or criminal penalties. One study has found that approximately
29 percent of the U.S. workforce is required to obtain a
license to work for pay.\12\
---------------------------------------------------------------------------
\11\ This testimony focuses on competition issues for licensure,
which is one particular form of occupational regulation. For a general
discussion of less restrictive regulatory alternatives to licensure,
such as certification, output monitoring, and registration, see Cox &
Foster, supra note 6, at 21-22, 43-51.
\12\ Morris M. Kleiner & Alan B. Krueger, The Prevalence and
Effects of Occupational Licensing, 48 Brit. J. Industrial Relations 2
(2010).
For some occupations, the process of licensure--and
particular licensure regulations--may be an appropriate policy
response to identified consumer protection or safety concerns.
Licensure can help to prevent consumer fraud and mitigate the
effects of certain types of market failure, such as information
asymmetries between professionals and consumers.\13\ Licensure
regulations may serve an especially important function in
health care, where consumers might face serious risks if they
were treated by unqualified individuals, and patients might
find it difficult (if not impossible) to adequately assess
quality of care at the time of delivery.
---------------------------------------------------------------------------
\13\ For example, consumers may not have reliable access to, or
sufficient ability to understand, relevant information relating to the
quality of the services they are consuming or the risks they may face
and conflicts of interest may arise when professionals serve as both
diagnosticians and treatment providers. See, e.g., Cox & Foster, supra
note 6, at 4-12.
We note, at the same time, that licensure inherently
constrains competition, albeit to varying degrees.\14\ When a
law or regulation establishes entry conditions for an
occupation, only individuals who satisfy those conditions are
legally authorized to provide the services associated with that
occupation, which tends to reduce the number of market
participants. This reduction in supply, and the resulting loss
of competition, can lead to higher prices, reduced non-price
competition on terms such as convenience or quality, or other
distortions in services or labor markets.\15\ For example, one
recent study suggests that licensing an occupation at the state
level is associated with a 17% increase in earnings by members
of the occupation.\16\ In addition, although licensure may be
designed to provide consumers with minimum quality assurances,
licensure provisions do not always increase service
quality.\17\ Licensure costs and burdens, such as training or
education requirements, may also discourage innovation and
entrepreneurship. In some cases, these regulatory barriers to
entry may severely impede the flow of labor or services to
where they are most in demand, potentially reducing consumer
access to valued services.\18\
---------------------------------------------------------------------------
\14\ George J. Stigler, The Theory of Economic Regulation, 2 Bell
J. Econ. & Mgmt. Sci. 3, 13 (1971) (``The licensing of occupations is a
possible use of the political process to improve the economic
circumstances of a group. The license is an effective barrier to entry
because occupational practice without the license is a criminal
offense.'').
\15\ Regarding licensure generally, see Morris M. Kleiner,
Occupational Licensing, 14 J. Econ. Persp. 189, 192 (2000) (``The most
generally held view on the economics of occupational licensing is that
it restricts the supply of labor to the occupation and thereby drives
up the price of labor as well as of services rendered.''); see also Cox
& Foster, supra note 6, at 21-36.
\16\ Morris M. Kleiner & Alan B. Krueger, Analyzing the Extent and
Influence of Occupational Licensing on the Labor Market, 31 J. Labor
Econ. S-173, S-191 (2013); see also Cox & Foster, supra note 6, at 28-
31 (reviewing studies of effects of licensing on the prices of dental,
legal, and optometric services).
\17\ See, e.g., Morris M. Kleiner & Robert T. Kurdle, Does
Regulation Affect Economic Outcomes: The Case of Dentistry, 43 J. Law &
Econ. 547, 570 (2000) (``Overall, our results show that licensing does
not improve dental health outcomes as measured by our sample of dental
recruits. Moreover, treatment quality does not appear to improve
significantly on the basis of the reduced cost of malpractice insurance
or a lower complaint rate against dentists, where regulation is more
stringent.''); see also Cox & Foster, supra note 6, at 21-29.
\18\ For example, FTC staff comments on nursing regulations have
focused on primary care provider shortages and the abilities of
advanced practice nurses and others to meet the needs of underserved
populations. See generally Policy Perspectives: Competition and the
Regulation of Advanced Practice Nurses, supra note 7, at 2, 20-26; see
also FTC Staff Comment Before the Louisiana House of Representatives on
the Likely Competitive Impact of http://www.ftc.gov/os/2012/04/
120425louisianastaffcomment.pdf (regarding a bill that would have
removed certain supervision requirements for APRNs working in medically
underserved areas or treating underserved populations); FTC Staff
Letter to the Hon. Jeanne Kirkton, Missouri House of Representatives,
Concerning Missouri House Bill 1399 and the Regulation of Certified
Registered Nurse Anesthetists (March 2012), http://www.ftc.gov/os/2012/
03/120327kirktonmissouriletter.pdf.
The FTC and its staff have not closely studied whether, or
to what extent, particular occupations should be subject to
licensure as a form of regulation or whether the U.S. economy
is characterized by excessive occupational licensing. Nor have
we attempted to design regulatory institutions or tell various
jurisdictions and licensing authorities how best to administer
their licensing laws. Rather, we have recognized that specific
licensure regulations can have good, bad, or mixed competitive
effects, depending on the circumstances. Therefore, we
typically focus on case-by-case competition analysis of
particular restrictions in review of specific laws and
regulations that may affect competition and urge legislators
---------------------------------------------------------------------------
and regulators to do the same.
IV. Advocacy
A central goal of the FTC's competition advocacy program is
to encourage federal, state, and local policymakers, as well as
private, self-regulatory authorities, to integrate competition
concerns into their decision-making process. By doing so, we
hope they can avoid standards likely to interfere unnecessarily
with the proper functioning of a competitive marketplace.\19\
Even well intentioned laws and regulations may impose undue
burdens on competition, in ways that ultimately harm consumers.
Moreover, public restraints on competition may sometimes prove
particularly harmful and durable, but may not always be
actionable under the federal antitrust laws. Competition
advocacy--in the form of comments, testimony, workshops,
reports, and amicus briefs--encourages federal and state policy
makers to consider likely competitive effects of existing and
proposed regulations, while also taking into account other
important policy goals.
---------------------------------------------------------------------------
\19\ For a general discussion of the FTC's ``policy research and
development'' mission and the role of the advocacy program, see, e.g.,
William E. Kovacic, The Federal Trade Commission at 100: Into Our 2nd
Century 92-109; 121-24 (2009), http://www.ftc.gov/ftc/workshops/ftc100/
docs/ftc100rpt.pdf. See also James C. Cooper, Paul A. Pautler, & Todd
J. Zywicki, Theory and Practice of Competition Advocacy at the FTC, 72
Antitrust L.J. 1091 (2005); Maureen K. Ohlhausen, Identifying
Challenging, and Assigning Political Responsibility for State
Regulation Restricting Competition, 2 Competition Pol'y Int'l 151, 156-
7 (2006) (competition advocacy ``beyond enforcement'' of the antitrust
laws), https://www.competitionpolicyinternational.com/file/view/6289;
Tara Isa Koslov, Competition Advocacy at the Federal Trade Commission:
Recent Developments Build on Past Success, 8 CPI Antitrust Chron. 1
(2012), https://www.competitionpolicyinternational.com/file/view/6732.
---------------------------------------------------------------------------
A. Framework for Analysis
To address these concerns while still preserving the
potential benefits of occupational licensure, the Commission
and its staff propose the following framework for evaluating
licensing regulations:
Are there significant and non-speculative
consumer health and safety issues, or other legitimate
public policy purposes, that warrant some form of
licensure?
Are any of the specific conditions or
restrictions imposed as part of the licensure scheme
likely to have a significant adverse effect on
competition and consumers?
If so, do the specific licensing conditions
or restrictions adopted address the issues that gave
rise to the decision to require licensure and protect
against demonstrable harms or risks? For example, will
they in fact reduce a risk of consumer harm from poor-
quality services? Will the regulation yield other
demonstrated or likely consumer benefits, such as
reducing information or transaction costs for
consumers?
Are the regulations narrowly tailored to
serve the state's policy priorities such that they do
not unduly restrict competition?\20\
---------------------------------------------------------------------------
\20\ For a more complete exposition of this framework, see Policy
Perspectives: Competition and the Regulation of Advanced Practice
Nurses, supra note 7, at 16-17.
When consumer benefits are slight or highly speculative, a
licensure regime may not be desirable. Similarly, a specific
regulation that imposes non-trivial impediments to competition
may not be justified. Even when particular regulatory
restrictions address well-founded consumer protection or other
concerns, the inquiry should not end there. If the restrictions
are also likely to harm competition, policy makers should
consider whether the regulations could be more narrowly
tailored to minimize the burden on competition while still
---------------------------------------------------------------------------
achieving other goals.
B. Specific Advocacy Efforts
Since the late 1970s, the Commission and its staff have
submitted hundreds of comments \21\ and amicus curiae briefs
\22\ to state and self-regulatory entities on competition
policy and antitrust law issues relating to such professionals
as real estate brokers,\23\ electricians,\24\ accountants,\25\
lawyers,\26\ dentists \27\ and dental hygienists,\28\
nurses,\29\ eye doctors and opticians,\30\ and
veterinarians.\31\ These advocacy efforts have focused on
various restrictions on price competition, contracts or
commercial practices, entry by competitors or potential
competitors, and truthful and non-misleading advertising.
---------------------------------------------------------------------------
\21\ Many of these advocacy comments can be found at http://
www.ftc.gov/policy/advocacy/advocacy-filings.
\22\ See, e.g., Brief of the Federal Trade Commission as Amicus
Curiae Supporting Arguments to Vacate Opinion 39 of the Committee on
Attorney Advertising Appointed by the Supreme Court of New Jersey, 190
N.J. 250 (N.J. 2007), http://www.ftc.gov/policy/advocacy/amicus-briefs/
2007/05/re-petition-review-committee-attorney-advertising-opinion-39;
Brief Amici Curiae of the United States of America and the Federal
Trade Commission on Review of UPL Advisory Opinion No. 2003-2, 277 Ga.
472 (Ga. 2003). For access to the FTC's other recent amicus briefs, see
http://www.ftc.gov/policy/advocacy/amicus-briefs.
\23\ FTC and Department of Justice Comment to Governor Jennifer M.
Granholm Concerning Michigan H.B. 4416 to Impose Certain Minimum
Service Requirements on Real Estate Brokers (2007), http://www.ftc.gov/
sites/default/files/documents/advocacy--documents/ftc-and-
department-justice-comment-governor-jennifer-m.grahholm-concerning-
michigan-h.b.4416-impose-certain-minimum-service-requirements-real-
estate-brokers/v050021.pdf.
\24\ FTC Staff Comment to the Hon. Glen Repp Concerning Texas H.B.
252 to Establish a System to Voluntarily License Electricians and
Electrical Contractors (1989), http://www.ftc.gov/sites/default/files/
documents/advocacy--documents/ftc-staff-comment-hon-glen-
repp-concerning-texas-h.b.252-establish-system-voluntarily-license-
electricians-and-electrical-contractors/v890034.pdf.
\25\ FTC Staff Comment to the Honorable Jean Silver Concerning
Washington Administrative Code 4-25-710 to Require Additional Academic
Credits for Certified Public Accountants (CPAs) (1996), http://
www.ftc.gov/sites/default/files/documents/
advocacy--documents/ftc-staff-comment-honorable-jean-silver-
concerning-washington-administrative-code-4-25-710-require/v960006.pdf;
FTC Staff Comment to the Hon. Jim Hill Concerning Oregon H.B. 2785 to
Propose Certain Restrictions on Competition Among Accountants (1989),
http://www.ftc.gov/sites/default/files/documents/
advocacy--documents/ftc-staff-comment-hon-jim-hill-
concerning-oregon-h.b.2785-propose-certain-restrictions-competition-
among-accountants/v890073.pdf.
\26\ FTC Staff Letter to the Supreme Court of Tennessee, Concerning
Proposed Amendments to the Tennessee Rules of Professional Conduct
Relating to Attorney Advertising (2013), http://www.ftc.gov/sites/
default/files/documents/advocacy--documents/ftc-staff-
letter-supreme-court-tennessee-concerning-proposed-amendments-
tennessee-rules-professional/130125tennesseadvertisingletter.pdf.
\27\ FTC Staff Letter to NC Representative Stephen LaRoque
Concerning NC House Bill 698 and the Regulation of Dental Service
Organizations and the Business Organization of Dental Practices--
(2012), http://www.ftc.gov/sites/default/files/documents/
advocacy--documents/ftc-staff-letter-nc-representative-
stephen-laroque-concerning-nc-house-bill-698-and-regulation/
1205ncdental.pdf.
\28\ FTC Staff Comment Before the Maine Board of Dental Examiners
Concerning Proposed Rules to Allow Independent Practice Dental
Hygienists to Take X-Rays in Underserved Areas (2011), http://
www.ftc.gov/sites/default/files/documents/
advocacy--documents/ftc-staff-comment-maine-board-dental-
examiners-concerning-proposed-rules-allow-independent-practice/
111125mainedental.pdf.
\29\ See supra note 7 and accompanying text.
\30\ FTC Staff Comment Before the North Carolina State Board of
Opticians Concerning Proposed Regulations for Optical Goods and Optical
Goods Businesses (Jan. 2011), http://www.ftc.gov/os/2011/01/
1101ncopticiansletter.pdf; Letter from Maureen K. Ohlhausen et al. to
Arkansas State Representative Doug Matayo (Oct. 4, 2004), http://
www.ftc.gov/os/2004/10/041008matayocomment.pdf. Cf. FTC Staff Comment
Before the Connecticut Board of Examiners for Opticians (Mar. 27,
2002), http://www.ftc.gov/be.v020007.htm.
\31\ FTC Staff Comment Before the Virginia Board of Veterinary
Medicine Concerning Regulations to Remove Restrictions on Advertising
and Non-Veterinarian Relationships (1996), http://www.ftc.gov/sites/
default/files/documents/advocacy--documemts/ftc-staff-
comment-virginia-board-veterinary-medicine-concerning-regulations-
remove-restrictions/p864641.pdf.
For example, a series of FTC staff competition advocacy
comments have addressed various physician supervision
requirements that some states impose on advanced practice
registered nurses (APRNs).\32\ FTC staff have not questioned
state interests in establishing licensure requirements--
including basic entry qualifications--for APRNs or other health
professionals in the interest of patient safety. Rather, staff
have questioned the competitive effects of additional
restrictions on APRN licenses, such as mandatory supervision
arrangements with particular physicians, which are sometimes
cast as ``collaborative practice agreement'' requirements.
Physician supervision requirements may raise competition
concerns because they effectively give one group of health care
professionals the ability to restrict access to the market by
another, potentially competing group of health care
professionals. Based on substantial evidence and experience,
expert bodies have concluded that APRNs are safe and effective
as independent providers of many health care services within
the scope of their training, licensure, certification, and
current practice.\33\ Therefore, we have suggested that
mandatory physician supervision may not be a justified form of
occupational regulation.
---------------------------------------------------------------------------
\32\ Many of the individual advocacy comments regarding nursing
restrictions, along with the research and analyses underlying those
comments, are described in detail in Policy Perspectives: Competition
and the Regulation of Advanced Practice Nurses, supra note 7. For a
broader discussion of the advocacy program and competition perspectives
on APRN, nurse anesthetist, and retail clinic regulations, see Daniel
J. Gilman & Julie Fairman, Antitrust and the Future of Nursing: Federal
Competition Policy and the Scope of Practice, 24 Health Matrix 143
(2014).
\33\ See, e.g., Inst. of Med., Nat'l Acad. of Sciences, The Future
of Nursing: Leading Change, Advancing Health, 98-99 (2011); Nat'l
Governors Ass'n, The Role of Nurse Practitioners in Meeting Increasing
Demand for Primary Care, 7-8 (2012), http://www.nga.org/files/live/
sites/NGA/files/pdf/1212NursePractitionersPaper.pdf (study funded by
U.S. Dep't Health & Human Servs., reviewing literature pertinent to NP
safety and concluding ``None of the studies in the NGA's literature
review raise concerns about the quality of care offered by NPs. Most
studies showed that NP-provided care is comparable to physician-
provided care on several process and outcome measures.'').
In some situations, we engage in competition advocacy
because we can find no plausible public benefit justifying
licensure restrictions. For example, in 2011, the Commission
filed an amicus brief in St. Joseph Abbey v. Castille,\34\
clarifying the meaning and intent of the Commission's ``Funeral
Rule.'' \35\ The plaintiffs, monks at St. Joseph Abbey who had
built and sold simple wooden caskets consistent with their
religious values, had challenged Louisiana statutes that
required persons engaged solely in the manufacture and sale of
caskets within the state to fulfill all licensing requirements
applicable to funeral directors and establishments. Those
requirements included, for example, a layout parlor for 30
people, a display room for six caskets, an arrangement room,
the employment of a full-time, state-licensed funeral director,
and, even though the Abbey did not handle or intend to handle
human remains, installation of ``embalming facilities for the
sanitation, disinfection, and preparation of a human body.''
The U.S. Court of Appeals for the Fifth Circuit found that ``no
rational relationship exists between public health and safety
and restricting intrastate casket sales to funeral directors.
Rather, this purported rational for the challenged law elides
the realities of Louisiana's regulation of caskets and
burials.'' \36\
---------------------------------------------------------------------------
\34\ Brief for the Federal Trade Commission as Amicus Curiae
Supporting Neither Party, St. Joseph Abbey v. Castille, 712 F.3d 215
(5th Cir. 2013), cert. denied, 134 S. Ct. 423 (2013).
\35\ 47 Fed. Reg. 42260 (1982).
\36\ St. Joseph Abbey, 712 F.3d at 226 (affirming the district
court decision that the challenged regulations, and their enforcement
by the state board, were unconstitutional).
Private activities of accrediting organizations or trade
associations also can influence licensing restrictions, either
directly--as, for example, when state law requires a degree
from an accredited school in order to obtain a license--or
indirectly, when association activities establish a de facto
standard of professional practice. A notable example is
reflected in recent FTC staff comments to the American Dental
Association's Commission on Dental Accreditation (CODA), in
which FTC staff suggested that CODA not take the unusual step
of including supervision and scope of practice limitations in
accreditation standards for new dental therapist education
programs.\37\ Although the standard would not be binding on
state legislatures, FTC staff were concerned that it could
effectively constrain the discretion of the states in defining
scope of practice and supervisory requirements for dental
therapists and impede the development of this emerging model
for delivering dental health services.
---------------------------------------------------------------------------
\37\ FTC Staff Comment Before the Commission on Dental
Accreditation Concerning Proposed Accreditation Standards for Dental
Therapy Education Programs (2013), http://www.ftc.gov/sites/default/
files/documents/advocacy--documents/ftc-staff-comment-
commission-dental-accreditation-concerning-proposed-accreditation-
standards-dental/131204codacomment.pdf.
As noted earlier, another area of concern relates to how
heavily regulated industries respond to new and disruptive
forms of competition. In some cases, regulators seek to adopt
regulations that facilitate that competition, especially when
it appears to respond to consumer demand and offer new or
different services or products. In other instances, however,
some regulators have responded by acting to protect those
currently subject to regulation. This has been happening in the
taxi and related transportation business, where innovative
smartphone applications have provided consumers with new ways
to arrange for transportation and, in some cases, enabled new
sources of transportation services. Although some jurisdictions
have responded by adapting, others have sought to either
enforce existing regulations or adopt new ones that would
impede the development of these new services without seemingly
valid justifications. We have urged these jurisdictions to
carefully consider the adverse consequences of limiting
competition and question the basis for any restrictions
advocated by incumbent industry participants.\38\
---------------------------------------------------------------------------
\38\ See, e.g., FTC Staff Comment to the Honorable Brendan Reilly
Concerning Chicago Proposed Ordinance O2014-1367 Regarding
Transportation Network Providers (2014), http://www.ftc.gov/system/
files/documents/advocacy--documents/ftc-staff-comment-
honorable-brendan-reilly-concerning-chicago-proposed-ordinance-o2014-
1367/140421chicagoridesharing.pdf. Regarding new methods of retail
sales of automobiles, see, e.g., FTC Staff Comment Before the Missouri
House of Representatives Regarding House Bill 1124, Which Would Expand
the Current Prohibition on Direct-to-Consumer Sales by Manufacturers of
Automobiles (2014), http://www.ftc.gov/policy/policy-actions/advocacy-
filings/2014/05/ftc-staff-comment-missouri-house-representatives-0.
---------------------------------------------------------------------------
V. Enforcement
Although the FTC often relies on competition advocacy to
discourage potentially anticompetitive occupational licensure
laws and regulations, it has also relied upon its enforcement
authority to challenge anticompetitive conduct by independent
regulatory boards that falls outside of the scope of protected
``state action.'' \39\ These enforcement actions have included
challenges to agreements among competitors that restrained
advertising and solicitation, price competition, and contract
or commercial practices, as well as direct efforts to prohibit
competition from new rivals, without any cognizable
justification.\40\
---------------------------------------------------------------------------
\39\ The Supreme Court has very recently admonished that reliance
on the state action doctrine is ``disfavored.'' FTC v. Phoebe Putney
Health System, Inc., 133 S.Ct. 1003, 1010, 1016 (2013). As the Supreme
Court has observed, ``[t]he national policy in favor of competition
cannot be thwarted by casting ... a gauzy cloak of state involvement
over what is essentially ... [private anticompetitive conduct].'' Cal.
Retail Liquor Dealers Ass'n v. Midcal Aluminum, 445 U.S. 97, 106
(1980). As prerequisites to invocation of the state action doctrine,
Midcal requires that the challenged private conduct be (1) undertaken
pursuant to a clearly articulated and affirmatively expressed state
policy to displace competition with regulation, and (2) actively
supervised by the state. Id. at 105-06.
\40\ The Commission also has advocated against attempts to exempt
certain licensed health care professions from antitrust scrutiny for
the purpose of permitting blatantly anticompetitive conduct. See FTC
Staff Comment Before the Connecticut General Assembly Labor and
Employees Committee Regarding Connecticut House Bill 6431 Concerning
Joint Negotiations by Competing Physicians in Cooperative Health Care
Arrangements, 3 (2013), http://www.ftc.gov/sites/default/files/
documents/advocacy--documents/ftc-staff-comment-connecticut-
general-assembly-labor-and-employees-committee-regarding-connecticut/
130605conncoopcomment.pdf.
For example, in 2003, the Commission sued the South
Carolina Board of Dentistry, charging that the Board had
illegally restricted the ability of dental hygienists to
provide basic preventive dental services in schools.\41\ In
2000, to address concerns that many schoolchildren,
particularly those in low-income families, were not receiving
any preventive dental care, the state legislature eliminated a
statutory requirement that a dentist examine each child before
a hygienist could perform preventive care in schools. In 2001,
the FTC's complaint charged, the Board re-imposed the dentist
examination requirement. The complaint alleged that the Board's
action unreasonably restrained competition in the provision of
preventive dental care services, deprived thousands of
economically disadvantaged schoolchildren of needed dental
care, and that is harmful effects on competition and consumers
could not be justified. The Board ultimately entered into a
consent agreement settling the charges.\42\
---------------------------------------------------------------------------
\41\ In re South Carolina State Board of Dentistry, Complaint
(2003) (Dkt. No. 9311), http://www.fic.gov/os/2003/09/
socodentistcomp.pdf. See also In re South Carolina Board of Dentistry,
Opinion and Order of the Commission (2004) (Dkt. No. 9311), http://
www.fic.gov/os/adjpro/d9311/04072Scommissionopinion.pdf.
\42\ In re South Carolina State Board of Dentistry, Decision and
Order (2007) (Dkt. No. 93 I I), available at http://www.ftc.gov/os/
adjpro/d93111070911decision.pdf.
Similarly, in 2010, the Commission challenged the North
Carolina Board of Dental Examiners for issuing a series of
cease-and-desist letters that successfully expelled low-cost
non-dentist providers of teeth-whitening services.\43\ The U.S.
Court of Appeals for the Fourth Circuit agreed with the FTC
that state agencies `` `in which a decisive coalition (usually
a majority) is made up of participants in the regulated
market,' who are chosen by and accountable to their fellow
market participants, are private actors and must meet both
Midcal prongs [that is, clear articulation and active
supervision.]'' \44\ The court further held that the Board had
not been subject to the type of active supervision Midcal
requires.\45\ Finally, the court affirmed the FTC's conclusion
that the Board's behavior was likely to cause significant
competitive harm, finding it ``supported by substantial
evidence.'' \46\
---------------------------------------------------------------------------
\43\ North Carolina State Bd. of Dental Examiners v. FTC, 717 F. 3d
359, 365 (4th Cir. 2013). As noted above, the case is before the U.S.
Supreme Court.
\44\ Id. at 368. See also supra note 39.
\45\ Id. at 370.
\46\ Id. at 374.
Some of the Commission's most important enforcement actions
challenging restrictions on the dissemination of truthful
advertising of professional services have been in the health
care area.\47\ For example, some boards of optometry \48\ and
dentistry \49\ have sought to suppress information that could
be useful to consumers of their services. The FTC has also
challenged advertising restraints imposed by private self-
regulatory associations. In the seminal case of American
Medical Association (``AMA''),\50\ the Commission found, among
other things, that the AMA, through its ethical guidelines, had
illegally suppressed virtually all forms of truthful, non-
deceptive advertising and similar means of solicitation by
doctors and heath care delivery organizations. The Commission
ordered the AMA to cease and desist from prohibiting such
advertising. However, it allowed the AMA to continue its use of
ethical guidelines to prevent false or deceptive advertisements
or oppressive forms of solicitation.
---------------------------------------------------------------------------
\47\ For an example outside the health care area, see, e.g., Rhode
Island Board of Accountancy, 107 F.T.C. 293 (1986) (consent order).
\48\ See, e.g., In the Matter of Massachusetts Bd. of Registration
in Optometry, 110 F.T.C. 549 (1988).
\49\ Louisiana State Bd. of Dentistry, 106 F.T.C. 65 (1985)
(consent order).
\50\ 94 F.T.C. 701 (1979). The Commission's decision was affirmed
and modified by the U.S. Court of Appeals, 638 F.2d 443 (2d Cir. 1980),
and affirmed in a 4-4 vote by the Supreme Court, 455 U.S. 676 (1982).
---------------------------------------------------------------------------
VI. Conclusion
Occupational licensing can serve important goals and, when
used appropriately, protect consumers from harm. But, as is
illustrated by the Commission's history of advocacy and
enforcement, excessive occupational licensing can make
consumers worse off, impeding competition without offering
meaningful protection from legitimate health and safety risks.
Even when some form of licensure is warranted, specific
regulations can have significant adverse effects on competition
and consumers. Such regulations should be analyzed for their
impact on competition and, when they are likely to harm
consumers, individually justified. States also should be
cautious when delegating authority to enforce such regulations
to self-interested boards of the very occupation to be
regulated.
Thank you for the opportunity to share the Commission's
views and to discuss our efforts to promote competition and
protect consumers.
Questions for the Record from
Rep. Blaine Luetkemeyer (MO-3)
Committee on Small Business
U.S. House of Representatives
``Barriers to Entrepreneurship: Examining the Anti-Trust
Implications of Occupations Licensing''
July 16, 2014
Questions to Andrew Gavil, Director of the Office of Policy
Planning, Federal Trade Commission
The Office of Policy Planning has not been involved with
any policy initiatives or enforcement actions involving payment
processors. To be responsible, I have asked the appropriate
staff in the Commission's Bureau of Consumer Protection to
provide substantive responses to certain questions. Those
responses follow mine below.
1. The Office of Policy Planning is responsible for
developing and implementing long-range competition and
consumer protection policy initiatives. As I understand
it, your office also advises Federal Trade Commission
staff on cases raising new or complex policy issues. In
carrying out these responsibilities, has your office
been involved over the past two years with any policy
initiatives relating to payment processors? Has your
office had to provide advice to the Federal Trade
Commission on cases involving payment processors that
raise new or complex policy issues?
No. In the past two years, the Office of
Policy Planning (``OPP'') has not been involved
with any policy initiatives relating to payment
processors and has not provided advice to the
Commission regarding cases involving payment
processors.
2. As a matter of agency policy, would your office
have to study any potential changes in Federal Trade
Commission enforcement policy with respect to payment
processing before they are adopted? Has your office
conducted such a study?
No. There is no FTC policy requiring OPP
involvement in any particular consideration of
enforcement policy. I am not aware of any
potential changes being considered regarding
the FTC's enforcement policy with respect to
payment processors and OPP has not conducted
any study of potential changes in FTC
enforcement policy with regard to payment
processors during my time as OPP director. In
addition, I am not aware of any such OPP study
prior to my tenure here.
3. Has your office or any office within the Federal
Trade Commission conducted any examination or study
relating to payment processing? If so, what was the
nature of those studies and what was their conclusion?
OPP has not conducted any examination or
study relating to payment processing during my
time as OPP director and I am not aware of any
such OPP examination or study prior to my
tenure here.
Bureau of Consumer Protection Response: As
part of its efforts to stop fraud and cut off
the supply of money to fraudulent operations,
the Commission has had a long-standing
enforcement program directed at payment
processors that engage in unlawful conduct. For
more than a decade, the Commission has charged
a variety of nonbank payment processors and
other intermediaries with engaging in unfair
acts and practices in violation of the FTC Act,
16 U.S.C. Sec. 45, and/or with providing
substantial assistance to telemarketers in
violation of the Telemarketing Sales Rule, 16
C.F.R. Part 310.
The payment methods involved in the
Commission's cases have included credit and
debit cards,\1\ Automated Clearing House
(``ACH'') debits,\2\ unsigned demand drafts
known as Remotely Created Checks (``RCCs''),
and electronic versions of RCCs, known as
Remotely Created Payment Orders (``RCPOs'').\3\
Regardless of the payment method, the
Commission's cases have highlighted red flags
that should have put the defendants on notice
of a high likelihood of illegal activity. These
signs include unusually high rates of returned
or reversed transactions (or chargeback rates
in connection with credit cards), sales scripts
or websites containing statements that are
facially false or highly likely to be false,
consumer complaints, and inquiries from law
enforcement or regulators.
---------------------------------------------------------------------------
\1\ E.g., FTC v. Innovative Wealth Builders, Civ. No. 13-CV-00123
(M.D. Fla. June 11, 2014) (Stip. Perm. Inj.) (alleging that credit card
processor violated the TSR by assisting telemarketers of debt relief
services); FTC v. Loewen, 2013 WL 5816420 (W.D. Wash. Oct. 29, 2013)
(Summ. J.) (finding defendants' activities, including credit card
processing, violated the TSR).
\2\ E.g., FTC v. Your Money Access, LLC, Civ. No. 07-5147 (E.D. Pa.
Aug. 11, 2010) (Stip. Perm. Inj.) (alleging ACH and RCC payment
processor unfairly debited or attempted to debit more than $200 million
from consumer accounts on behalf of fraudulent telemarketers); FTC v.
Electronic Financial Group, No. W-03-CA-211 (W.D. Tex. Mar. 23, 2004)
(Stip. Perm. Inj.) (settlement requiring defendants to pay $1.5
million).
\3\ E.g., FTC v. Automated Electronic Checking, Inc., Civ. No. 13-
00056-RCJ-WGC (D. Nev. Feb. 5, 2013) (Stip. Perm. Inj.) (payment
processor of RCCs and RCPOs); FTC v. Neovi, Inc., 598 F. Supp. 2d 1104
(S.D. Cal. Sept. 16, 2008), aff'd, 604 F.3d 1150, 1158 (9th Cir. 2010)
(Perm. Inj.) (Internet-based check creation and delivery service).
Any decision about whether to take law
enforcement action is largely defined by the
facts of a particular case. The Commission will
continue to carefully consider the relevant
facts of each case--including the processor's
relationship to the merchant, its participation
in the merchant's illegal activities, and the
extent of its knowledge of the illegal
activities--to determine whether law
---------------------------------------------------------------------------
enforcement is appropriate.
In addition, the Commission has worked with
NACHA--The Electronic Payments Association,
Visa and MasterCard, as well as the Electronic
Transactions Association to learn about
standard industry practices and to promote
self-regulatory initiatives. Self-regulation,
if it is sufficiently robust, can serve as an
important complement to law enforcement in this
area. Industry standards, such as those from
Visa and MasterCard, have been in place for
many years and have assisted processors and
banks in ferreting out entities engaged in
illegal conduct.
4. Has your office or any other office at the Federal
Trade Commission cooperated with the Department of
Justice and/or any federal banking regulator in any
fashion on Operation Choke Point?
As I testified, OPP has not been involved in
what some may have described as ``Operation
Choke Point.''
Bureau of Consumer Protection Response: The
Commission participated in an inter-agency
working group--the Consumer Protection Working
Group of the Financial Fraud Enforcement Task
Force--that, among other things, focused on
payment processors engaged in unlawful conduct.
The members of the working group, which
included the Department of Justice (``DOJ'')
and federal banking regulators, exchanged
information about payment processors, and
coordinated their work in this area to maximize
the efficient use of government resources in
order to protect consumers from fraud. As
discussed above, the Commission has brought
enforcement actions against payment processors
engaged in unlawful conduct for more than a
decade; and FTC staff has shared information
with DOJ even prior to the Working Group's
formation in 2012. The term ``Operation Choke
Point'' was developed by DOJ staff to refer to
its own work in this area. The Commission does
not use this term in reference to its work
involving payment processors, which again
preceded our involvement in the inter-agency
working group described above.
5. In what manner does the Federal Trade Commission
cooperate with law enforcement agencies and federal
banking agencies?
OPP interacts on a regular basis with other
federal and state government agencies regarding
competition policy matters, including
competition advocacy, workshops, and industry
studies. We have also participated in the
preparation of various antitrust enforcement
guidelines. OPP does not cooperate with other
agencies directly in any law enforcement
matters.
Bureau of Consumer Protection Response: With
regard to consumer protection matters, the FTC
partners with various civil and criminal
agencies on matters of overlapping jurisdiction
or expertise. The FTC frequently works with the
Consumer Protection Branch of DOJ's Civil
Division, which has authority to bring civil
penalties for violations of FTC administrative
orders and FTC rules.\4\ The Commission's
Criminal Liaison Unit also partners with DOJ
(including the U.S. Attorneys' Offices) and
other federal and state criminal law enforcers
to promote criminal prosecution of consumer
frauds. This is consistent with Section 6(k) of
the FTC Act, 16 U.S.C. Sec. 46(k), which grants
the FTC authority to refer matters to DOJ for
criminal law enforcement and share information
with DOJ attorneys. The FTC and the Consumer
Financial Protection Bureau share concurrent
enforcement authority over most non-bank
financial entities. The agencies coordinate
their work through a Memorandum of
Understanding, which is designed to ensure
consistency in approach, facilitate information
sharing, and prevent duplication. The FTC also
coordinates with other banking agencies
informally on enforcement issues to ensure
consistency and avoid duplication.
---------------------------------------------------------------------------
\4\ See, e.g., U.S. v Sonkei Communications, No. SACV11-1777-AG
(C.D. Cal. Apr. 15, 2014) (Stip. Perm. Inj.) (resolving allegations
that the defendants violated the FTC's Telemarketing Sales Rule by
helping clients make illegal robocalls, call phone numbers on the
National Do Not Call Registry, and mask Caller ID information).
6. Documentation provided by the Department of
Justice to the House Oversight and Government Reform
Committee indicates that at least one Federal Trade
Commission attorney was assigned to the Department of
Justice to work on Operation Choke Point. Please
provide all information related to that assignment. How
many Federal Trade Commission staff have been assigned
to the Department of Justice to work on Operation Choke
Point and/or similar initiatives? How many Federal
Trade Commission staff are working internally on
---------------------------------------------------------------------------
Operation Choke Point and/or similar initiatives.
As indicated above in response to Question 4,
OPP has not been involved in ``Operation Choke
Point.''
Bureau of Consumer Protection Response: On or
about June 2013, one FTC staff attorney was
designated a Special Assistant United States
Attorney to assist in the investigation and
possible criminal prosecution of suspects who
work in the payment processor industry.
Approximately 50% of the attorney's time was
spent working on the criminal matter, with the
remainder spent working on FTC matters. No
other attorneys have been assigned to DOJ to
work on matters involving payment processors.
As discussed above, the FTC has brought
enforcement actions against payment processors
for more than a decade. During that period,
several attorneys and investigators have worked
on more than a dozen enforcement actions filed
by the Commission.
[all]