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88–720 2014

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 

Small Business Committee Document Number 113–076 

Available via the GPO Website: www.fdsys.gov 

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Congress.#13
(II) 

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 VELA ́ ZQUEZ, 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 

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(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Sam Graves ..................................................................................................... 1 

Hon. Nydia Vela ́zquez ............................................................................................. 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. 

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SBREP-219 with DISTILLER

(1) 

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, Vela ́zquez, 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. 

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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 Vela ́zquez for her opening statement. 

Ms. VELA ́ ZQUEZ. 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 

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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 Vela ́zquez, 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. 

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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 necSBREP-219 with DISTILLER

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essarily 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. 

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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. Vela ́zquez. 

Ms. VELA ́ ZQUEZ. 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. VELA ́ ZQUEZ. 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 handsoff 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 

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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. VELA ́ ZQUEZ. 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. VELA ́ ZQUEZ. 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 

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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 

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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 

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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? 

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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 conSBREP-219 with DISTILLER

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sulted. 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 

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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.] 

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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 

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1This 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. 

I. Introduction 

Chairman Graves, Ranking Member Vela ́zquez, 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

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 

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2The 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). 

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. 

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 

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4The 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. § 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 § 45(a)(2). 5 15 U.S.C. § 46 (2006). 

6See, 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. 7FED. TRADE COMM’N STAFF, POLICY PERSPECTIVES: COMPETITION AND THE REGULATION OF

ADVANCED PRACTICE NURSES (2014), http://www.ftc.gov/system/files/documents/reports/policyperspectives-competition-regulation-advanced-practice-nurses/140307aprnpolicypaper.pdf. 8FED. 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). 10FED. 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-estatebrokerage-industry-report-federal-trade-commission-and-u.s.department-justice/v050015.pdf. 

•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. 

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. 

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 liSBREP-219 with DISTILLER

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11This 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. 12Morris M. Kleiner & Alan B. Krueger, The Prevalence and Effects of Occupational Licensing, 

48 BRIT. J. INDUSTRIAL RELATIONS 2 (2010). 13For 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. 14George 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. 16Morris 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). 17See, 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. 

censed 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

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. 

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 

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18For 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 re- moved 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. 19For 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. 

or services to where they are most in demand, potentially reducing 

consumer access to valued services.18

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. 

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: 

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20For a more complete exposition of this framework, see POLICY PERSPECTIVES: COMPETITION

AND THE REGULATION OF ADVANCED PRACTICE NURSES, supra note 7, at 16–17. 21Many of these advocacy comments can be found at http://www.ftc.gov/policy/advocacy/advocacy-filings. 22See, 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. 23FTC 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-departmentjustice-comment-governor-jennifer-m.grahholm-concerning-michigan-h.b.4416-impose-certainminimum-service-requirements-real-estate-brokers/v050021.pdf. 

• 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

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 elecSBREP-219 with DISTILLER

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24FTC 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-concerningtexas-h.b.252-establish-system-voluntarily-license-electricians-and-electrical-contractors/ 

v890034.pdf. 25FTC 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-commenthonorable-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-proposecertain-restrictions-competition-among-accountants/v890073.pdf. 26FTC 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. 27FTC 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-staffletter-nc-representative-stephen-laroque-concerning-nc-house-bill-698-and-regulation/ 

1205ncdental.pdf. 28FTC 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-commentmaine-board-dental-examiners-concerning-proposed-rules-allow-independent-practice/ 

111125mainedental.pdf. 29See supra note 7 and accompanying text. 30FTC 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. 31FTC 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-boardveterinary-medicine-concerning-regulations-remove-restrictions/p864641.pdf. 32Many 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). 

tricians,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. 

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 

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33See, 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.’’). 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). 36St. 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). 37FTC 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-accreditationconcerning-proposed-accreditation-standards-dental/131204codacomment.pdf. 

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. 

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

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 

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38See, 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-brendanreilly-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. 39The 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. 40The 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-andemployees-committee-regarding-connecticut/130605conncoopcomment.pdf. 

supervisory requirements for dental therapists and impede the development of this emerging model for delivering dental health services. 

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

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

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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. 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. 47For an example outside the health care area, see, e.g., Rhode Island Board of Accountancy, 

107 F.T.C. 293 (1986) (consent order). 48See, e.g., In the Matter of Massachusetts Bd. of Registration in Optometry, 110 F.T.C. 549 

(1988). 49Louisiana 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). 

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

Similarly, in 2010, the Commission challenged the North Carolina Board of Dental Examiners for issuing a series of cease-anddesist 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

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 ethSBREP-219 with DISTILLER

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ical 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. 

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. 

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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 

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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). 

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 longstanding 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. § 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. 

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 AssoSBREP-219 with DISTILLER

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ciation 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 violaSBREP-219 with DISTILLER

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4See, 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). 

tions 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. § 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. 

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. 

Æ 

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