Four centuries ago, Sir Edward Coke, one of the founding fathers of the Anglo-American legal tradition, explained how businesses often collude with government to illegalize competition. They persuade the government to adopt licensing laws or other restrictions, which allow existing firms to raise prices and reduce innovation, knowing they’re protected by the law and don’t have to satisfy customers. The business owners who do this usually claim they’re just trying to protect customers against incompetence, or some public health threat, or whathaveyou. Lord Coke didn’t buy these excuses. These businesses, he said, “pretend public benefit, intend private.” He later took the lead in passing the English Statute of Monopolies, to block government from giving exclusive trading rights to businesses.
Sadly, such abuses continue, and as George Leef explains in Forbes today, a good example is now before the Supreme Court: the case of teeth-whitening in North Carolina. PLF, joined by the Cato Institute, filed this brief in the case.
Licensed dentists, not wanting competition for teeth-cleaning services, used the state’s Board of Dental Examiners to shut down teeth-whitening services, using the excuse that it’s unsafe. (It isn’t; you can do it at home with an over-the-counter kit.) The Federal Trade Commission sued the Board under the antitrust laws, but because the Board is a state agency, it claimed that it was immune from laws against monopolization. The Fourth Circuit ruled that the Board is not exempt from those laws, and the Supreme Court will now review the case.
We should hope for a broad decision that will apply against the many instances similar to this where government empowers private parties to exploit licensing laws “to advance their own interests in restricting competition at the expense of the public interest.”
Those quoted words, incidentally, come from retired Justice John Paul Stevens and it is hard to see why members of the Court’s “liberal wing” (of which Stevens was a member) should be any more receptive to cartel-like behavior than members of the “conservative wing” just because state government authority is (barely) involved.