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Licensing Boards Under Fire from Federal Trade Commission - Restriction of Trade & Violating Anti-Trust Laws

8/11/2013

17 Comments

 
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By Barry Campbell, SOPL Managing Director
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary."  Adam Smith,  The Wealth of Nations: An Inquiry into the Nature & Causes of the Wealth of Nations

In a nutshell: State licensing boards are under fire from the Federal Trade Commission for restricting competition, raising consumer prices, violating antitrust laws, and reducing customer choices.

All arguments about the effectiveness of licensing aside, are the licensing boards operating legally themselves? Perhaps not, according to the Federal Trade Commission (FTC). The problem resides in the fact that they are generally composed of practicing members of the regulated industry, which begs the question of whether they are in violation of antitrust laws. The motives for supporting licensing are especially suspect when the support comes from the industry itself. Do the licensing boards operate to protect the public or themselves?
This is not an issue of locksmith licensing in particular, but licensing in general, though the implications apply to our trade as much as any other. A recent, applicable case began in North Carolina in 2010. An FTC complaint alleged that, "[d]entists in North Carolina, acting through the instrument of the North Carolina Board of Dental Examiners ('Dental Board'), are colluding to exclude non-dentists from competing with dentists in the provision of teeth whitening services," the FTC complaint said. "The actions of the Dental Board prevent and deter non-dentists from providing or expanding teeth whitening services, increase prices and reduce consumer choice without any legitimate justification or defense, including the 'state action' defense." (1)

Effectively, this is the same as a locksmith licensing board attempting to stop non-locksmiths from performing vehicle unlocks, rekeying locks, or any of a number of other services without first obtaining a locksmith license.

Further, “[t]he complaint says teeth-whitening services are offered by dentists and non-dentists in North Carolina and that dentist members of the board "can and do control the operation of the dental board" and have financial interest in board decisions. The dental board consists of six licensed dentists, one licensed hygienist and one consumer member who is neither a dentist or a hygienist.” (1)

The heart of the FTC complaint is the rather obvious conflict of interest in having industry members regulate the industry. Their pecuniary interest can easily outweigh their interest in the public good. Licensing self-interest will easily impede the actions of an otherwise free market. Healthy competition, which is in the best interests of all, is subjugated to the will of the few.

This year, the 4th Circuit Court agreed with the FTC. “We are pleased that the Fourth Circuit agreed that a state regulatory board dominated by self-interested private actors cannot shield its anticompetitive conduct from antitrust review using the state action doctrine,” FTC chairwoman Edith Ramirez said in a statement. “This decision…recognizes that exemptions to the antitrust laws are to be applied narrowly and that consumers are best off when there is vigorous competition.” 

“The Fourth Circuit panel agreed. “At the end of the day, this case is about a state board run by private actors in the marketplace taking action outside of the procedures mandated by state law to expel a competitor from the market,” Shedd wrote.” (2)

The ruling is not a fluke. ”The Federal Trade Commission (FTC or Commission) has a long history of challenging state licensing boards’ actions that restrict competition.” (3)

The findings are very similar to a case in Indiana 27 years ago:
“Under our precedents, a restraint may be adJudged unreasonable either because it fits within a class of restraints that has been held to be " per se" unreasonable, or because it violates what has come to be known as the "Rule of Reason," under which the "test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition." Chicago Board of Trade v. United States, 246 U.S., at 238.  

While this is not price fixing as such, no elaborate industry analysis is required to demonstrate the anticompetitive character of such an agreement." National Society of Professional Engineers, supra, at 692. A refusal to compete with respect to the package of services offered to customers, no less than a refusal to compete with respect to the price term of an agreement, impairs the ability of the market to advance social welfare by ensuring the provision of desired goods and services to consumers at a price approximating the marginal cost of providing them. Absent some countervailing procompetitive virtue -- such as, for example, the creation of efficiencies in the operation of a market or the provision of goods and services, see Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., supra; Chicago Board of Trade, supra ; cf. National Collegiate Athletic Assn. v. Board of Regents of Univ. of Okla., 468 U.S. 85 (1984) -- such an agreement limiting consumer choice by impeding the "ordinary give and take of the market place," National Society of Professional Engineers, supra, at 692, cannot be sustained under the Rule of Reason. 

Even if the Commission were incorrect in its reading of the law, however, the Federation's claim of immunity would fail. That a particular practice may be unlawful is not, in itself, a sufficient justification for collusion among competitors to prevent it. See Fashion Originators' Guild of America, Inc. v. FTC, 312 U.S. 457, 468 (1941). Anticompetitive collusion among private actors, even when its goal is consistent with state policy, acquires antitrust immunity only when it is actively supervised by the State. See Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 57 (1985). There is no suggestion of any such active supervision here; accordingly, whether or not the policy the Federation has taken upon itself to advance is consistent with the policy of the State of Indiana, the Federation's activities are subject to Sherman Act condemnation.” (4)
Note in the case cited above, “[t]hat a particular practice may be unlawful is not, in itself, a sufficient justification for collusion among competitors to prevent it.” This speaks directly to those who support licensing of the locksmith trade as a means of battling phony locksmiths. Licensing supporters tend to make exaggerated claims as to the power of licensing boards. The boards can only do what the law allows them to do, and they can only enforce their rules upon those who are licensed.

Board motives are not all that may be questioned here. Licensing boards of all types may be reevaluated. “Joyce Osborn, president and founder of the Alabama-based Council for Cosmetic Teeth Whitening, a trade association, told Carolina Journal that the issue is not about public health or safety, or even a concern that non-dentists are motivated only by financial self-interest, as the N.C. dental board asserts. Osborn says dentists want to maintain a lucrative monopoly and protect their own revenues from lower-cost competitors.
“It contends that the practice of allowing professions and occupations to be regulated solely by state occupational licensing boards comprised of a majority of the licensees of the profession is anti-competitive and exclusionary because those members have a financial conflict of interest. When members of such a licensing board enforce the state’s Dental Practice Act, they are engaging in a conspiracy that violates federal antitrust laws. 

“Other interesting questions hinge on the scope of court decisions and whether the ultimate decision in the teeth-whitening case is broad enough to affect other state monopolies. 

“Should the FTC’s actions be upheld, Carlton said all 2000 state-mandated occupational licensing boards throughout the country will be at risk of having general federal jurisdiction over state boards by overturning state-mandated “occupational and professional peer regulation and review.” (5)
One response to the original FTC complaint even “identifies the existence of at least 20 other states with similar legislation.”(6) Locksmith licensing boards are probably among those 2000 licensing boards in 20 states.

Perhaps an explanation of the FTC's role in all of this is in order. The FTC is often thought of as a consumer protection agency, but that is not how it got its start. “The FTC was created in 1914 with a principle purpose of preventing unfair methods of competition in commerce. Over the years, the US Congress has enacted laws to further expand the authority of the FTC and clarify its authority to police anticompetitive practices. This federal agency’s work is performed by the Bureaus of Consumer Protection, Competition, and Economics. Specifically, the FTC is authorized to investigate and prosecute businesses and others alleged to have violated the FTC Act, generally related to anticompetitive activities. Enforcement proceedings are adjudicated through an administrative process before an administrative law judge in a “trial-type proceeding” conducted under the FTC Rules of Practice.” (6)

In this particular case, “[t]he complaint concludes that the conspiracy, acts, and practices of the Board constitute anticompetitive and unfair methods of competition in or affecting commerce in violation of section 5 of the FTC Act.” (6)

Section 5 of the Federal Trade Commission Act reads: 
"Whenever the Commission shall have reason to believe that any such person, partnership, or corporation has been or is using any unfair method of competition or unfair or deceptive act or practice in or affecting commerce, and if it shall appear to the Commission that a proceeding by it in respect thereof would be to the interest of the public, it shall issue and serve upon such person, partnership, or corporation a complaint stating its charges in that respect and containing a notice of a hearing upon a day and at a place therein fixed at least thirty days after the service of said complaint. 

The person, partnership, or corporation so complained of shall have the right to appear at the place and time so fixed and show cause why an order should not be entered by the Commission requiring such person, partnership, or corporation to cease and desist from the violation of the law so charged in said complaint. 

Any person, partnership, or corporation may make application, and upon good cause shown may be allowed by the Commission to intervene and appear in said proceeding by counsel or in person. 

The testimony in any such proceeding shall be reduced to writing and filed in the office of the Commission. 

If upon such hearing the Commission shall be of the opinion that the method of competition or the act or practice in question is prohibited by this subchapter, it shall make a report in writing in which it shall state its findings as to the facts and shall issue and cause to be served on such person, partnership, or corporation an order requiring such person, partnership, or corporation to cease and desist from using such method of competition or such act or practice." (7)
In the North Carolina case, "The Dental Board consists of six licensed dentists, one licensed hygienist, and one “consumer member,” who is neither a dentist nor a hygienist. Each dentist member is elected to this position by the licensed dentists of North Carolina, and serves a three-year term. Collectively, the six dentist members can and do control the operation of the
Dental Board. Each dentist member is financially interested in decisions reached by the Dental Board because, while serving on the Dental Board, each dentist member continues to engage in the for-profit business of providing dental services."

More, the FTC points out:

"THE DENTAL BOARD IS ACTING TO SUPPRESS COMPETITION" 

"VIOLATIONS ALLEGED -

26. The combination, conspiracy, acts and practices described above, constitute
anticompetitive and unfair methods of competition in or affecting commerce in violation
of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45. Such
combination, conspiracy, acts and practices, or the effects thereof, are continuing and
will continue or recur in the absence of appropriate relief." 
(7)
“The Commission explained that, because the Board is controlled by practicing dentists, the Board’s challenged conduct must be “actively supervised” by the State for it to claim state action exemption from the antitrust laws. 

“Further, the Commission found that the Board’s actions resulted in higher prices and fewer choices for consumers of these products and services. 

“As for concerted action, the Commission held that Board members were capable of entering into an agreement and conspiring under Section 1 because they are actual or potential competitors. The dentist members of the Board were “separate economic actors pursuing separate economic interests whose joint decisions could deprive the marketplace of actual or potential competition.” The Commission then found evidence that the dentist members of the Board did, in fact, have a common plan to exclude non-dentist teeth whitening providers from the market. 

“In fact, the Commission went so far as to state that the challenged conduct bears a close resemblance to conduct condemned by the Supreme Court as “per se” illegal. Finally, the Commission held that the Board failed to advance a legitimate pro-competitive justification for its conduct and rejected various social welfare and public safety concern defenses, among others, asserted by the Board. 

“Industry professionals, including those who are brought together to serve on a licensing Board or function as an agency by operation of state law, must be cognizant of their activities as they relate to the basic federal antitrust laws. The state action doctrine is clearly not a bullet-proof exemption. And, as seen in this case, the FTC will not hesitate to protect competition in the marketplace if the conduct of such professionals — even those who are technically part of a state agency — leads to higher prices and reduced choices for consumers.” (3)     
“The FTC charged that the North Carolina Board of Dental Examiners (the “Dental Board”) has impermissibly ordered nondentists to stop providing teeth-whitening services, which has made it harder to obtain these services and more expensive for North Carolina consumers.” (8)
“The FTC concluded that, for antitrust purposes, the Board was actually a private party, not a state agency, and, therefore, had to show both that it acted pursuant to a clearly articulated and affirmatively expressed state policy and that its behavior was actively supervised by the State itself. Id. (citing California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980)). 

“The Fourth Circuit agreed with the FTC, stating 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.” 

“Finally, the Court agreed with the FTC’s conclusion that the Board’s action amounted to an unreasonable restraint of trade. The Court endorsed the FTC’s analysis that the conduct was “inherently suspect” because “[t]he challenged conduct is, at its core, concerted action excluding a lower-cost and popular group of competitors,” and “[n]o advanced degree is needed to recognize” that the behavior “is likely to harm competition and consumers.” NCSBD, No. 12-1172, slip op. at 28-29.

“As the Court concluded, “[a]t the end of the day, this case is about a state board run by private actors in the marketplace taking action outside of the procedures mandated by state law to expel a competitor from the market.” NCSBD, No. 12-1172, slip op. At 32.” (9) 

“When is a board that is organized by a state to regulate an industry not considered a state agency worthy of antitrust deference under the "state action" exemption? According to the Federal Trade Commission – and now the Court of Appeals for the Fourth Circuit – it is not considered a state agency when a "decisive coalition" of the board is made up of participants in the regulated market and its actions are not actively supervised by the state. 

“The key question for the FTC and the 4th Circuit was whether the actions of the Board should be considered actions of a substate governmental entity or, instead, those of a private actor that must be actively supervised to qualify for the state action exemption. The court 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 be actively supervised to meet the exemption. A concurring opinion emphasized that it was crucial that the dentist Board members were elected by other dentists, not appointed by state officials, otherwise, "a much stronger case would have existed" to ignore the "active supervision" prong of the exemption. After making that determination, the court quickly found that the Board's actions were not "actively supervised" (therefore, not exempt) and were anti-competitive under the antitrust laws. 

“This case makes it more likely that other local licensure boards made up primarily of competing doctors, dentists, veterinarians, physical therapists, funeral directors and the like will need to more closely examine how their members are elected and what actions they take.” (10)
In a similar situation in Alabama, “[t]his issue is itself part a much broader debate over the proper limits of occupational licensing and the amount of leeway that professional boards should be given to set up barriers of entry. 

“The Institute for Justice has long been involved in campaigns against what it regards as overzealous licensing requirements, arguing that in areas like interior design or hair braiding, they are simply anticompetition measures. 

“Ms. Wilson and her lawyers say the board is not simply carrying out law but helping make it, too.” (11)

The bottom line is that licensing works, if you are honest about what licensing is meant to achieve. It has nothing to do with improving services or protecting the consumers – quite the opposite, in fact. Marginal companies may gripe about the fees and associated costs of licensing, but to the older, more established firms, it is cheap insurance against competition. The FTC is now challenging licensing boards that engage in such monopolistic practices. Optimal consumer choice and cost depend, not on licensing businesses, but on the free competition of the businesses. Successful businesses will be such as the result of offering high quality services, not as a result of political protection.

“The interest of [businessmen] is always in some respects different from, and even opposite to, that of the public ... The proposal of any new law or regulation of commerce which comes from this order ... ought never to be adopted, till after having been long and carefully examined ... with the most suspicious attention. It comes from an order of men ... who have generally an interest to deceive and even oppress the public”
― Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations. Volume 1 of 2

Picture
Barry Campbell, owner of Altic Lock Service and Managing Director of the Society of Professional Locksmiths. Barry is a graduate of Valparaiso University with a degree in Criminal Justice. He has worked in private security, investigations, and loss prevention. He is the author of A Homeowner's Guide to Residential Door Security. barry also is a former Professional member of the International Conference of Building Officials and a current Building Safety Professional member of the International Code Council. 


Sources:

(1) FTC issues complaint against North Carolina dental board, ADA (American Dental Association) News 6/18/2010 http://www.ada.org/news/4298.aspx

(2) FTC Shines in Teeth Whitening Case in Appeals Court 6/4/2013 The BLT: The Blog of Legal Times http://legaltimes.typepad.com/blt/2013/06/ftc-shines-in-teeth-whitening-case-in-appeals-court.html

(3) Health Care Antitrust Alert   FTC Does Not Embrace Dentist Board’s Anticompetitive Activity 12/13/2011 http://www.mintz.com/newsletter/2011/Advisories/1534-1211-NAT-AFR/web.htm

(4)T.C. v. Indiana Federation of Dentists, 476 U.S. 447 (1986) 06/02/86 FEDERAL TRADE COMMISSION v. INDIANA  http://biotech.law.lsu.edu/cases/antitrust/FTC_v_Indiana_Federation_of_Dentists.htm

(5) Feds Rule State Dental Board Illegally Stifled Competition 1/4/12 http://www.carolinajournal.com/exclusives/display_exclusive.html?id=8614

(6) NABP Legal Briefs: FTC: Facinorous Teeth Case August 4, 2011 National Association of Boards of Pharmacy http://www.nabp.net/news/nabp-legal-briefs-ftc-facinorous-teeth-case

(7) US Federal Trade Commission Drills North Carolina Dental Board...  Bolen Report 6/21/10 http://www.bolenreport.com/feature_articles/feature_article096.htm

(8) NC Dental Board Outlaws Teeth-whitening, FTC Says No Way  June 21,2010 http://www.skininc.com/spabusiness/regulations/96792599.html

(9) Fourth Circuit Holds State Agencies Operated by Market Participants Are Private Actors for State Action Purposes  June 11, 2013 http://www.mintz.com/newsletter/2013/Advisories/3132-0613-NAT-AFR/index.html

(10) FTC Wins Another "State Action" Case as 4th Circuit Finds State Board Can be a "Private Actor"  June 3,2013 http://www.schiffhardin.com/File%20Library/Publications%20%28File%20Based%29/HTML/antitrust_060313index2.html

(11) A Clash Over Who Is Allowed to Give You a Brighter Smile  May 25, 2013 http://www.nytimes.com/2013/05/26/us/clash-over-who-is-allowed-to-whiten-your-smile.html?_r=1&


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17 Comments
Danny link
8/11/2013 14:14:57

By writing this article, are you attempting to discredit licensing boards of not just our trade but all other professional regulation boards?

Suggesting that some players influence licensing boards strictly out of greed is not a nice way to endear yourself to fellow trade businesses.

So you outline why these licensing boards are bad and why they shouldnt exist in the current form, yet you dont expand to suggest what could be done.

It is really easy to knock the existing product/service or regulation on any subject, but not offering an alternative opinion, really sucks!

Reply
Tom Lynch link
8/11/2013 15:35:32

Danny, the Federal Trade Commission outlined it. We reported how it could affect our industry. If you have a bone to pick you can call FTC Chairwomen Edith Ramirez at 1-877-FTC-HELP.

Reply
Danny link
8/12/2013 03:05:06

Tom, reporting the facts is one thing. Giving an opinion on a better solution is something else. The FTC, as you point out, was originally convened to screen unfair competitive practises. Licensing boards created by industry insiders aimed at expanding personal profits, is deplorable. Medical boards were created to require educated medical students to have a minimum criteria to be able to practise legitimately and lawfully. Government appointed industry leaders are sought to provide, interpret and produce the necessary criteria for testing, but enforcement is publicly controlled.

Suggesting that the existing licensing boards that are industry appointed by certain fatcats, is wrong according to the sections of the FTC act as you have highlighted, but what is the solution?
The board of education, that recognizes a school as accreditted according to designated standards, discussed by teachers and educators at national and international conferences by the very people who work in that field, is core to having a rudimentary criteria.

Who do you suggest, enforce the rules? Who do you suggest create the rules?

Certainly, continue to voice disatisfaction with the current system if you are, but dont just slam it, offer an alternative for discussion!

Reply
Danny link
8/12/2013 03:05:27

Tom, reporting the facts is one thing. Giving an opinion on a better solution is something else. The FTC, as you point out, was originally convened to screen unfair competitive practises. Licensing boards created by industry insiders aimed at expanding personal profits, is deplorable. Medical boards were created to require educated medical students to have a minimum criteria to be able to practise legitimately and lawfully. Government appointed industry leaders are sought to provide, interpret and produce the necessary criteria for testing, but enforcement is publicly controlled.

Suggesting that the existing licensing boards that are industry appointed by certain fatcats, is wrong according to the sections of the FTC act as you have highlighted, but what is the solution?
The board of education, that recognizes a school as accreditted according to designated standards, discussed by teachers and educators at national and international conferences by the very people who work in that field, is core to having a rudimentary criteria.

Who do you suggest, enforce the rules? Who do you suggest create the rules?

Certainly, continue to voice disatisfaction with the current system if you are, but dont just slam it, offer an alternative for discussion!

Reply
Glenn Younger
8/12/2013 04:30:56

Good article.
I'm a free market believer.
The primary reason that most recently established state regulation boards and commissions were established was consumer protection. This is generally led by the state. Since that is a within a state's rights the FTC will have a hard time knocking any regulation down unless it is, like the dentist example, just to restrict trade.

In my state (California) getting trade influence with our Bureau is hard to do, and only marginally useful. But the state will continue to try and do what they can to eliminate bad actors from preying on consumers. One example of their usefulness is that almost 18% of all applicants for a locksmith license are denied due to criminal records (major felonies). Now that does not keep them from pretending to be locksmiths, but it does say something about those who are acting as locksmiths without a license.

The minimum standard for being a locksmith in many states is not having a major felony. I believe it is a good idea to not allow convicted felons to legally practice as locksmiths.

The question is then; What other requirements are justified by a state to practice our trade?
And: When does it stop being consumer protection and start being restraint of trade?

Reply
Barry Campbell link
8/12/2013 16:23:20

Thank you, Mr Younger, but I would suggest that the first thing California should do is stop licensing known scammers (http://www.sopl.us/4/post/2013/06/definitive-proof-that-locksmith-licensing-is-a-con-job-what-your-not-being-told.html).

And 18% of applicants being turned down may seem impressive until you consider that currently more than 30% of Americans have been arrested by the age of 23 (http://www.npr.org/blogs/thetwo-way/2011/12/19/143947345/more-than-30-percent-of-americans-arrested-by-age-23-study-says). But then that could include folks who were victims of the likes of Judges Ciavarella and Conahan who threw young people in prison in return for million-dollar kickbacks (http://www.forbes.com/sites/walterpavlo/2011/08/12/pennsylvania-judge-gets-life-sentence-for-prison-kickback-scheme/). On the other hand, you've got real criminals who play the plea bargain game - who have committed crimes that might have barred them from certain types of work, but pleaded to lesser charges that conviction-hungry prosecutors happily accept.

The question really is: When does it become consumer protection and stop being restraint of trade?

Reply
glenn younger
8/13/2013 15:16:42

The answer to your question is in your reply. It is no restraint of trade at all. It is so loose that even Run Local can get in. So it is not restraining anyone except those with a felony record. Run local president and VP do not have felony records. So even they get in.

Scammers exist because there is NO restraint of trade. A little restraint would be a good thing in my opinion. Maybe not possible according to the FTC.

But protecting the public is one of the jobs and duties of the government. Again in my opinion.

glenn younger
8/13/2013 15:16:53

The answer to your question is in your reply. It is no restraint of trade at all. It is so loose that even Run Local can get in. So it is not restraining anyone except those with a felony record. Run local president and VP do not have felony records. So even they get in.

Scammers exist because there is NO restraint of trade. A little restraint would be a good thing in my opinion. Maybe not possible according to the FTC.

But protecting the public is one of the jobs and duties of the government. Again in my opinion.

glenn younger
8/13/2013 15:17:33

The answer to your question is in your reply. It is no restraint of trade at all. It is so loose that even Run Local can get in. So it is not restraining anyone except those with a felony record. Run local president and VP do not have felony records. So even they get in.

Scam locksmiths exist because there is NO restraint of trade. A little restraint would be a good thing in my opinion. Just maybe not possible according to the FTC.

But protecting the public is one of the jobs and duties of the government. Again in my opinion.

glenn younger
8/13/2013 15:17:57

The answer to your question is in your reply. It is no restraint of trade at all. It is so loose that even Run Local can get in. So it is not restraining anyone except those with a felony record. Run local president and VP do not have felony records. So even they get in.

Scam locksmiths exist because there is NO restraint of trade. A little restraint would be a good thing in my opinion. Just maybe not possible according to the FTC.

But protecting the public is one of the jobs and duties of the government. Again in my opinion.

Barry Campbell link
8/12/2013 16:54:32

To add insult to injury - whether this ruling affects the NC locksmith licensing board or not, your license fees just tripled. And don't be late, the late fee doubled! (http://www.ncga.state.nc.us/Sessions/2013/Bills/Senate/PDF/S18v6.pdf)

Reply
Bill Neff, CPP, PSP, CML link
8/12/2013 21:11:07

Great Article. It would be nice if the FTC had any clout but it appears government been going the other direction with more mandates, rules and regulations. After all it appears that a large portion politicians think we the voters are stupid and inept and they want to help us out by what they think is right. Remember the meaning of politics is that poli means "MANY" and tics " Are BLOOD SUCKING INSECTS"

Reply
Barry link
8/13/2013 03:46:43

You are so right, Bill. That's what caught my interest in this story originally - we actually had a government entity protecting free trade!

Reply
Barry Campbell link
8/13/2013 17:22:25

Mr. Younger,

In your previous post you said, "The primary reason that most recently established state regulation boards and commissions were established was consumer protection" and "...the state will continue to try and do what they can to eliminate bad actors from preying on consumers." You now appear to be saying that, as far as protecting consumers from scammers, the California locksmith licensing law is entirely ineffective. I would certainly agree with you there.

You mention the 18% of applicants who have been turned down. That's almost one out of five. Is that for original applications or does that include applicants that have appealed? The reason I ask is because that part of the licensing law is the most subjective, with consideration given for length of time since the conviction, type of crime, age at time of conviction, etc. So, it is unlikely that the claim that the licensing law prevents all prior felons from working as a licensed locksmith. Even if so, there are the concerns I mentioned in my previous post.

But what nobody knows, is how many people who might have entered the field, or who might have stayed in the field on a part-time or retirement basis, elected not to do so because of the cost, in time and money, of getting or maintaining a license. Worse yet, they are victimized by the licensing law which will fine them thousands of dollars for performing even simple locksmith tasks, not because they have done anything wrong with regard to the customer, but only because they didn't ask for government permission first. That's not consumer protection, that is restraint of trade.

Interestingly,I just looked at the California locksmith licensing law -
http://www.bsis.ca.gov/about_us/laws/locksmith_law.shtml - and noticed that it did not even include a requirement for any liability insurance. You would think that, if consumer protection were any kind of priority, there would be some sort of requirement there.

Unfortunately, the extent of restraint of trade is difficult to measure, since it is impossible to measure the number of people who didn't do something. It would be interesting to see the number of licensees each year to monitor the growth (or lack of growth) of the industry.

I can't help but to also point out that in your first post you said, "I'm a free market believer," but in your next post state a contrary (but I believe more honest) opinion - "A little restraint would be a good thing in my opinion."

Reply
glenn younger
8/14/2013 04:07:55

Barry, both my comments are accurate. I am a free market believer, and a little restraint might be a goo thing. A total free market would be the wild, wild west. And although that sounds great to some I can say that it's not as much fun as it sounds.
Having worked in areas with little oversight, where wearing a gun was part of the uniform, I know first hand about "no rule, no regulations". I'm happy that we have a health regulations and inspections of food establishments for example.

So, just for me, I believe that the weeding out of at least a few of the bad guys, and requiring a license that cost $50 a year is not to much incursion. No one is keeping anyone out who wants to call them selves a locksmith. If someone wants to be in business and does not have at least a fairly clean record and $50 then they are not sincere about being in business.

So I believe (and this is just me) that no rules at all is bad.
A little oversight can bring some order and give some protection those regulated AND consumers.
Too much regulation by the state is costly, ineffective and discourages legitimate business.

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Barry Campbell link
8/14/2013 19:11:11

Typical fear-mongering rhetoric, Glenn. I'd like to believe you are above that. There is a world of difference between licensing and rules regarding business conduct. The essence of licensing is control over who may enter a certain field. Restraint of trade is the very nature of licensing because it either permits or denies the applicant the ability to even enter a trade.

Consumer protection is the establishment of rules of business conduct. We've already established, repeatedly, that licensing doesn't protect consumers from scammers. But when the consumer protection laws and other laws (which already exist) are applied, the scammers find themselves facing penalties. Interestingly, most of these actions have happened in non-license states - Missouri, Florida, and most recently, Georgia. See:
http://wgcl.membercenter.worldnow.com/story/22931543/state-levies-111k-fine-against-rogue-locksmith-exposed-by-cbs-atlanta-investigation
and:
http://www.tampabay.com/news/publicsafety/crime/two-owners-of-clearwater-based-dependable-locks-arrested-on-mail-fraud/1049772

To put it in slightly different terms, licensing determines who can play, but not how they play. Consumer protection laws determine the rules of the game.

I've got no problem with consumer protection laws - I support them - but I have a severe problem with those who try to erect barriers to entry into a field. But the most despicable are those who attempt to limit competition by erecting barriers and say they are doing it in the name of consumer protection.

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glenn younger
8/15/2013 06:53:09

Sounds like we agree. I'm just saying that licensing is not always restraint of trade. It seems like the word 'license' is what gets peoples back up.

In my state the only people who are restrained are those who do not have the $50 a year license fee, and those with major felonies. Thant is my example of licensing without restraint. Minor levels of consumer protection.

Regarding a need for insurance; I believe that would be a good requirement for having a locksmith license. But that would further a further restraint of trade. Is that good or bad?

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