The increasing role of the professional in the daily lives of Americans is having an "insidious, intimidating effect," Federal Trade Commission Chairman Michael Pertschuk said yesterday.
"A rebellion is brewing against the privileged position of professionals," ranging from doctors and lawyers to sex therapists and funeral directors, Pertschuk warned in a speech to the American Enterprise Institute Occupational Licensure Conference.
"The barriers to entry and innovation erected by professionals are beginning to fall," Pertschuk said.
"Nothing dissolves a mystique faster than seeing lawyers advertise inexpensive legal services like used car dealers advertise special deals," Pertschuk said. "Vigorous competition, coupled with adequate consumer information, assures the optimum range of quality at the lowest possible price."
Pertschuk said that licensing is being used to fuel growing "professionalism." Pointing to recent state-level legislative proposals to license auctioneers, well diggers, home improvement contractors, pet groomers, electrologists, sex therapists, data processors, appraisers and TV repairers, Pertschuk warned that "too often licensing bears little relation to quality."
"[Licensing] becomes a vehicle for the dominance and exclusive authority of a profession, legitimizing its monopoly on discerning and remedying needs, and enforcing its mystique by limiting access to special knowledge," Pertschuk said.
Besides leading to increased costs to consumers, Pertschuk said licensing is used by members of a particular profession "as a means of enhancing their prestige and incomes."
He said licensing is defended because it is supposed to raise the quality of the service being offered.
But "more and more, we are discovering that professionals are not markedly different from any other sellers who offer their services in trade," he said.
Pertschuk cited an earlier study by the FTC comparing the price and quality of TV repairs in Louisiana, where repairers were licensed, with the District of Columbia, where there was no licensing. The result was that prices were 20 percent higher in Louisiana, "but virtually the same incidence of unnecessary repair (occurred) in both places," he said.
In citing the ill effects of licensing, Pertschuk said "it is estimated that 33 cents of every dollar spent last year on auto repair went for unnecessary work. Last year, two million Americans underwent operations they didn't need, at a cost of 10,000 lives and $4 billion."
Pertschuk said that professional groups such as State Medical Boards or State Bar Associations use licensing to prevent competition in their professions.
"It is hardly surprising that, once licensed, the profession is in a position to determine how much competition it will tolerate," he said. "Licensing boards, dominated by members of the profession, may act like any other cartel -- adjusting entry standards to protect the incomes of established practitioners."
"It is not unusual for boards to reject higher percentages of applicants during periods of economic downturn when their services are in less demand," Pertschuk said. "Nor is it unusual for them to restrict advertising, promotion and innovative ways of delivering their services, thereby making it more difficult for new entrants to compete."
Under Pertschuk, the FTC has attempted on several occasions to curtail the activities of professional associations. Last year, it lifted restrictions on price advertising by optometrists, opticians and ophthalmologists. The FTC staff has called for significant price disclosure in the funeral industry.
Further, the commission is investigating physician control over Blue Shield boards, as well as impediments to competition imposed by licensing of lawyers, accountants and dentists. It has also called for significant changes in the structure of medical boards that certify medical schools.