Correcting Crooked Licensing Boards With a Revolving-door Statute

• Jurisdiction: United States,Federal
• Citation: Vol. 39 No. 3
• Publication year: 2023

Correcting Crooked Licensing Boards with a Revolving-Door Statute

Ronnie Thompson

jthompson165@student.gsu.edu

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CORRECTING CROOKED LICENSING BOARDS WITH A REVOLVING-DOOR STATUTE

Ronnie Thompson^*

ABSTRACT

Contrary to conventional wisdom, occupational licensing restrictions do not serve a primary purpose of protecting consumers. They instead wage war on the market economy. This reality is unsurprising when one considers the makeup of a typical licensing board, which consists primarily of active market participants. These industry incumbents scheme to keep potential competitors out. Entrance exams for florists and onerous educational requirements for interior designers—absurd as they seem—become the rule rather than the exception. Despite their propensity for anticompetitive conduct, licensing boards elude review under the Sherman Act, the nation's chief law regulating anticompetitive conduct. Licensing boards need not defend their self-interested conduct thanks to a line of Supreme Court cases that establish relatively sweeping immunity.

Rather than rework an entire body of case law, this Note recommends a statutory solution to confront crooked licensing boards. States should look to the federal revolving-door statute for inspiration. Though the revolving-door statute addresses a slightly different subject in imposing lobbying bans on former executive branch officials, similar concerns of corruption predominate among licensing

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boards. Accordingly, states should craft their own revolving-door statutes and bar active market participants from occupying a majority of any licensing board's membership.

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CONTENTS

Introduction.................................................................................926

I. Background.............................................................................928

A. The Development of and Rationale Behind Occupational Licensing Boards................................................................929
B. Judicial Immunity for Licensing Boards?.........................931

II. Analysis...................................................................................934

A. The Primer: North Carolina State Board of Dental Examiners v. FTC..............................................................934
B. Federalism Concerns Provide an Insufficient Basis for Broad Immunity.................................................................. 936

1. The Active Supervision Requirement Lacks Much Force in Reality ...................................................................... 938
2. Active Supervision Does Not Render States Politically Accountable for Anticompetitive Licensing Board Conduct ........................................................................ 939

C. Constitutional Avenues for Judicial Relief Similarly Lack Promise .............................................................................. 941

III. Proposal.................................................................................942

A. A Heightened Judicial Standard?......................................943
B. Addressing the Root of the Problem with a Revolving-Door Statute.................................................................................944

1. A Brief Overview of Revolving-Door Statutes.............945
2. An Application to Occupational Licensing Boards...... 946

Conclusion....................................................................................949

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Introduction

People generally despise crooks. Among the worst crooks are those who concoct schemes to maximize their profits at the public's expense.¹ Congress sought to curtail these backdoor dealings with the Sherman Antitrust Act (Sherman Act), which declares that industry leaders may not steamroll consumers with anticompetitive economic practices.² To deter such behavior, the Sherman Act imposes severe penalties on crooks who dare to rig the market in their favor.³ Notwithstanding the statutory command against economic exploitation, one class of potential crooks—occupational licensing boards—largely evades Sherman Act scrutiny.⁴

Vested with authority from the state, occupational licensing boards differ from the private-sector power brokers who typically orchestrate anticompetitive plots.⁵ But this public-private distinction is largely

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superficial because active market participants, those currently working in the regulated industry, typically occupy most of the licensing boards' available seats.⁶ As regulators, many active market participants gather to limit competition and erect barriers to entry, just as any aspiring private-sector monopolist would.⁷ This behavior is unsurprising considering that active market participants possess strong incentives to exclude would-be competitors for the sake of protecting their own economic interests.⁸ Examples abound of licensing boards engaging in anticompetitive conduct:⁹ Florists in Louisiana must obtain a license from the state's horticulture commission to make floral arrangements.¹⁰ Although occupational licensing requirements are generally grounded in protecting health and safety, nothing suggests that receiving a pedestrian bouquet threatens a consumer's welfare.¹¹ Even more perplexing than the floristry license are the requirements that one must satisfy to obtain such credentials.¹² Despite no apparent compelling public safety justification for floristry licenses, a Louisiana district court concluded that the state "ha[d] rational and legitimate reasons" for the regulatory scheme and, therefore, it passed

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constitutional muster.¹³ This decision stripped one unlicensed Louisiana florist of her livelihood.¹⁴

Because occupational licensing boards, like the Louisiana Horticulture Commission, often evade the Sherman Act in pursuit of anticompetitive conduct, reforms are needed to improve their accountability. This Note addresses whether and how occupational licensing boards should be subjected to greater antitrust scrutiny. Part I examines the development of occupational licensing boards and the historical progression of antitrust jurisprudence in this context. Part II analyzes the current state of antitrust jurisprudence and its inability to reign in licensing boards' problematic actions. Part III proposes a solution to address licensing boards' conduct that draws on structures underlying revolving-door and anti-lobbying statutes.

I. Background

Nearly 25% of American laborers need a license to work.¹⁵ Once reserved for a select group of professionals, occupational licensing requirements now apply across industries irrespective of the worker's requisite degree of proficiency.¹⁶ It is often relatively lower-skilled workers who must confront onerous licensing requirements.¹⁷ As a consequence of the maze of regulations, aspiring workers find

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themselves unable to gain entry into or maintain their preferred profession.¹⁸ Even when they do obtain a license, workers could encounter difficulties when moving to a different state, where requirements will almost certainly differ.¹⁹ Together, the consequences of restrictive licensing regulations—such as barriers to market entry and limits on market mobility—help enrich industry incumbents.²⁰ With fewer potential competitors, industry incumbents charge higher prices for their services, meaning that consumers suffer economic harm as a direct consequence of anticompetitive licensing regulation.²¹ This dynamic, characterized by a handful of licensed professionals whose interests supersede the interests of everyone else, raises a pertinent question: How did we get here?

A. The Development of and Rationale Behind Occupational Licensing Boards

Because state legislatures cannot immerse themselves in the regulatory weeds of every industry, they often create occupational licensing boards and designate those boards as the entities responsible for determining how their profession will operate.²² Legislatures then appoint members to the boards and empower them with regulatory

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authority.²³ Industry incumbents, commonly referred to as active market participants, often dominate these boards' ranks.²⁴ These arrangements appear to make perfect sense, especially when considering that active market participants possess more expertise about their industry than a layperson does.²⁵ This line of thought tracks the rationale behind creating occupational licensing boards in the first place—namely, to protect consumer safety by establishing and enforcing industry standards.²⁶ Basic economic theory lends support to the consumer protection justification.²⁷ The lack of a licensing regime creates problems of "asymmetric information," where workers know more than consumers regarding their fitness to provide the requested services.²⁸ In effect, absent licensing requirements, consumers must roll the dice and hope that their selected service provider is qualified or else bear the consequences of their miscalculation.²⁹

To quell concerns related to consumer safety and service quality, licensing boards impose an array of educational and training requirements that prospective practitioners must satisfy before obtaining legal permission to work in an industry.³⁰ In theory, these entry-level thresholds ensure practitioner competency and increase

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service quality.³¹ But licensing boards—composed primarily of active market participants—sit behind most "quality-based" regulations.³² Thus, a closer examination of many licensing regulations suggests that their purpose is to restrict competition rather than to control quality.³³ ordinarily, this kind of conduct—such as requiring interior designers to incur nearly $1,500 in fees as well as brandish six years of education and experience just to obtain a license³⁴ —would implicate antitrust concerns, but licensing boards repeatedly dodge scrutiny in the judicial sphere.³⁵

B. Judicial Immunity for Licensing Boards?

Even the harshest critics accept the...