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Amicus brief of “Antitrust Scholars” in N.C. Dental Examiners case

Yesterday, Todd posted about the public choice scholars’ amicus brief in the N.C. Board of Dental Examiners case, which I’ve posted on a lot here. I would have signed on to that brief, had I not already signed on to the antitrust scholars’ brief, written by Rebecca Haw Allensworth, Aaron Edlin, and Einer Elhauge.

The gist of that brief is derived from ideas present in Einer’s important 1991 Harvard Law Review article, The Scope of Antitrust Process, and Rebecca and Aaron’s recent Penn Law Review article, Cartels by Another Name: Should Licensed Occupations Face Antitrust Scrutiny?

I also write about the N.C. Board of Dental Examiners case, from a similar perspective, in my recent Harvard Journal of Law and Public Policy article, The New Private-Regulation Skepticism: Due Process, Non-Delegation, and Antitrust Challenges.

Here’s the summary of the argument from the antitrust scholars’ brief:

Petitioner advocates a radical change in this Court’s precedent on antitrust state action immunity, which has consistently held that financially-interested market participants must be treated as private actors, regardless of whether the state makes them a state agency. Under Petitioner’s logic, a state instead can, by the simple expedient of calling market actors a state agency and giving them authority to enforce their cartel, immunize that private cartel and effectively repeal the operation of federal antitrust law. This sort of inverse preemption of federal antitrust law by states has never been permitted by this Court. Petitioner mischaracterizes the cases it claims support its position, which in fact have never given state action immunity to financially-interested market participants unless they are actively supervised by disinterested government actors, and ignores or mischaracterizes other cases that plainly hold the contrary.
In recent decades, the states have created a host of new licensing boards made up of market participants with strong incentives to restrain trade. [Cite to Edlin & Haw article in Penn Law Review.] Occupational licensing, once limited to a few licensed professions, is widespread and growing — from 5% of the U.S. workforce in the 1950s, to 15% in the 1970s, to 30% today. Occupational licensing has been abused by incumbent market participants to exclude rivals, often in unreasonable ways, and to raise prices. This disturbing trend already costs consumers billions of dollars every year and impedes job growth, and the trend would get much worse if the Court were to accept Petitioner’s argument and hold that financially-interested market participants enjoy antitrust immunity whenever the state empowers them as a state agency.
Even if the North Carolina board members were not themselves financially-interested market participants, the fact that they were all elected to their positions by financially-interested market participants should suffice to treat the board as private. After all, if a private cartel paid an employee a flat salary to fix prices for it, the fixed prices would predictably reflect the cartel’s financial interests even though the employee was not a market participant and had no direct financial interest in the prices set. Thus, election by financially-interested market participants should always be treated as sufficient to treat a board as private, although such election is not necessary for such treatment when (as here) the board members are themselves financially-interested market participants. Sufficiency should not, however be confused with necessity. Because state boards dominated by financially-interested market participants are almost always appointed, if the Court changed current law to make election by market participants necessary to lose immunity, it would leave the foxes to guard the henhouse for a large fraction of the workforce.

The antitrust scholars on the brief occupy different parts of the antitrust spectrum–in addition to me, there’s my colleague Tom Arthur at Emory, my former colleagues Steve Salop at Georgetown and Darren Bush at University of Houston, co-blogger David Hyman at Illinois, Ian Ayres at Yale, Ken Elzinga at UVA, Harry First at NYU, Scott Hemphill at Columbia, Herb Hovenkamp at Iowa, Dick Schmalensee at MIT, and many others.