Here's a discussion of how this issue came to the fore in North Carolina, taken from a 2012 brief written by the Federal Trade Commission when the case of North Carolina State Board of Dental Examiners v. Federal Trade Commission before the U.S. Fourth Circuit Court (citations and footnotes omitted for readability):
Since 1989, peroxide-based teeth whitening has become one of the most popular cosmetic dental services. Teeth whitening is available as an in-office treatment, or take-home kits, by dentists; as over-the-counter products; and at salons, malls, and other convenient locations by non-dentists. Although all these methods employ peroxide, they vary in important respects, including immediacy of results, ease of use, necessity of repeated application, need for technical or professional support, and price. Thus, while dentists’ “chair-side” services are quick and effective—usually providing results in a single visit—they are also “the most costly” alternative. At the other end of the spectrum, over-the-counter products, with relatively low concentrations of peroxide, are the least expensive, but with highly variable efficacy, as they require diligent and repeated application by consumers.
Growing demand for teeth whitening services led, around 2003, to the entry of non-dentist providers. These providers generally occupy an intermediate level—in terms of cost, convenience, and efficacy—between dentists’ chair-side services and over-the-counter products. They utilize intermediate-concentration peroxide, in a single, consumer-administered application, lasting an hour or less. Non-dentist services are often offered at prices hundreds of dollars less than dentists’ in-office services. As competition from non-dentists mounted, North Carolina dentists demanded that the Board “do something” about the new market entrants.These complaints apparently had almost nothing to do with consumer safety. They were almost entirely about the competition from lower prices for these services. Here's how members of North Carolina's Board of Dental Examiners are selected:
It consists of six licensed dentists, elected directly by other state licensed dentists; one licensed dental hygienist, elected by other licensed hygienists; and one consumer member, appointed by the governor. The six dentist-members must also be active practitioners while on the Board; thus, they provide for-profit dental services (some including teeth whitening), and have a significant financial interest in the business of their profession.Unsurprisingly, this group decided that non-dentists should be barred from offering teeth-whitening services. These decisions about what only certain licensed practitioners are allowed to provide are typically not challenged by the antitrust authorities, so it was somewhat surprising that the FTC challenged this practice, and that the decision was upheld by the U.S. Fourth Circuit Court of Appeals. The case has now reached the the U.S. Supreme Court.
The broader issues at stake here go well beyond teeth whitening services in North Carolina. Aaron Edlin and Rebecca Haw review the arguments in "Cartels by Another Name: Should Licensed Occupations Face Antitrust Scrutiny?" which appears in the April 2014 issue of the University of Pennsylvania Law Review. Edlin and Haw point out that there are now hundreds of licensed occupations, like the dentists in North Carolina, who are often defining certain activities that those who lack such licensing are forbidden to do. They set the stage this way (again, footnotes omitted):
Once limited to a few learned professions, licensing is now required for over 800 occupations. And once limited to minimum educational requirements and entry exams, licensing board restrictions are now a vast, complex web of anticompetitive rules and regulations. . . . State-level occupational licensing is on the rise. In fact, it has eclipsed unionization as the dominant organizing force of the U.S. labor market. While unions once claimed 30% of the country’s working population, that figure has since shrunk to below 15%. Over the same period of time, the number of workers subject to state-level licensing requirements has doubled; today, 29% of the U.S. workforce is licensed and 6% is certified by the government. The trend has important ramifications. Conservative estimates suggest that licensing raises consumer prices by 15%. There is also evidence that professional licensing increases the wealth gap; it tends to raise the wages of those already in high-income occupations while harming low-income consumers who cannot afford the inflated prices.As one starts trolling through specific examples of occupational licensing, state-by-state, a number of examples at least raise the question of whether the rules are more about protecting higher prices for some providers than providing services for consumers. Here are some examples from Edlin and Haw's discussion:
"Where licensing was once reserved for lawyers, doctors, and other “learned professionals,” now floral designers, fortune tellers, and taxidermists are among the jobs that, at least in some states, require licensing. ... In Louisiana, for example, all flower arranging must be supervised by a licensed florist. . . . Minnesota (along with several other states) now defines the filing of horse teeth as the practice of veterinary medicine, a move that has redefined an old vocation as a regulated profession subject to restricted entry and practice rules. . . .Several states even prohibit the sale of caskets by anyone other than licensed funeral directors. . . . And although Louisiana restricts the sale of caskets, it does not regulate the design of caskets or even require that bodies be buried in a casket at all. . . .
State cosmetology boards have responded to competition from two increasingly popular practices—African-style hair braiding and eyebrow threading—by demanding that braiders and threaders obtain cosmetology licenses before they can lawfully practice their craft. Neither practice requires sharp instruments or chemicals, and neither involves a significant risk of infection. Now manystate cosmetology boards want braiders and threaders to attend two years of school (with a price tag of $16,000) to learn cosmetology procedures and techniques irrelevant to their practice, pass an exam, and pay yearly dues to maintain a license in cosmetology—a profession they have no interest in
practicing. . . .
For example, in many states, dental licensing boards restrict the number of hygienists a dentist can hire to two.72 The anticompetitive effects of this restriction are well known; in 1987, the FTC published a policy paper showing that dentist-to-hygienist ratios tend to raise prices but not quality. . . .At least one state has taken the hygienist restrictions further. In 2001, the South Carolina Board of Dentistry required that exams performed by a licensed dentist accompany all cleanings. The rule frustrated the state legislature’s attempt to extend in-school dental cleanings to rural and other underserved children. ....
Nurse practitioners and physician assistants are trained in some of the same skills as family practice physicians but need not learn the more advanced skills essential to obtaining a medical degree. . . . For many procedures, outcome studies reveal that the extenders’ services are as safe and effective as that of physicians. Extenders have been essential to low-cost convenience clinics like CVS’s MinuteClinics and public health initiatives aimed at serving low-income individuals with restricted access to medical care. Undoubtedly influenced by powerful lobbying from the American Medical Association (AMA), twelve states (including more populous states such as California, Texas, and Florida) require physician supervision over all nurse practitioner activity. Several states prohibit nurse practitioners from prescribing medication. . . . In addition, many states define title certification and abstraction as the “practice of law,” which effectively inflates demand for legal services by requiring attorney representation at all real estate transactions.Other "recent additions to the list of professions requiring licenses include locksmiths, beekeepers, auctioneers, interior designers, fortune tellers, tour guides, and shampooers." Of course, the standard argument in favor of occupational licensing is that it protects consumers by assuring that they will receive higher-quality services. In many cases, this argument seems very unlikely to be true. For example, there didn't seem to be any evidence that the non-dentist teeth whitening services in North Carolina were ineffective or harmful to consumers. Consumers wouldn't seem to be at any particular health or safety risk from unlicensed flower arrangers. And if you don't like the service provided by a hair-braider or an interior designer, well, just like if you don't like a certain restaurant or movie theater, you can exercise your power as a consumer not to give them any more business.
But the connection between occupational licensing and quality of service can also be examined more systematically. These rules about what services need an occupational license vary considerably across states. In practical terms, this variation across states is part of what helps licensing to restrict competition from those in other states: indeed, Michelle Obama has advocated policy changes so that states would recognize certain out-of-state licenses held by military spouses. In research terms, the variation across states has allowed a wave of studies to confirm that occupational licensing is often quite effective at raising prices, but the quality benefits are often difficult to find in the data.
Edlin and Haw take a middle ground here. They argue that occupational licensing may have benefits for consumers in some cases, but they also argue that when those who are licensed start setting the rules for what those who are not licenses are allowed to do--like the nondentist teeth whiteners in North Carolina--then the competition authorities like the Federal Trade Commission should be allowed to challenge these rules. They write: "Our proposal recognizes the potential benefits of licensing—preventing charlatanism and injury to the public—but rejects the idea that the potential
benefits justify total antitrust immunity for licensing."
