Licensing rules that protect competition and startups
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Startups face enough challenges when it comes to creating, launching, and growing a business. You have to develop an idea, raise capital, attract and train a talented staff, and that’s just the beginning. New and small businesses shouldn’t have to worry on top of everything else about being shut out of the market by their competitors with the backing of their state governments.

Unfortunately, state licensing boards often do just that. These panels, usually made up of incumbent companies, often impose unnecessary licensing requirements on everyone from florists to dance instructors to fortune tellers. According to one estimate, nearly a third of U.S. workers need a license from one of these boards to operate, and another study found that U.S. states require licenses for an average of 92 occupations.

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It’s true that there are many cases where it’s necessary to have rigorous licensing regimes guided by experts in the field to protect consumers. But it’s also true that some occupational licensing boards just allow big companies to band together to keep innovative startups out of the market. Usually, this type of behavior is a violation of antitrust law, but state licensing boards are typically immune from antitrust prosecution if they are subject to active supervision by the state.

Recently, the Supreme Court, in North Carolina State Board of Dental Examiners v. FTC, questioned what kind of supervision of these boards is really required by the state to ensure that regulated occupations and industries remain competitive. Instead of reforming the anti-competitive licensing boards, some states have responded by adding an extra layer of superficial oversight to these boards, merely adding more bureaucracy to a system that already frustrates nimble and innovative startups. 

Luckily, a bill from California Republican, and former entrepreneur, Rep. Darrell Issa would set clear rules to determine whether an occupational licensing board is actively supervised by its state governments. The Restoring Board Immunity Act, H.R. 3446, and its Senate companion, S. 1649, introduced by Sen. Mike LeeMichael (Mike) Shumway LeeSenators pledge action on Saudi journalist’s disappearance Bernie Sanders: US should pull out of war in Yemen if Saudis killed journalist Senators warn Trump that Saudi relationship is on the line MORE (R-Utah), would give state governments two options to be considered sufficiently involved with their occupational licensing boards to qualify for the antitrust exemption.

Under the first option, the state would create an office to oversee the day-to-day operations of these boards and conduct periodic review of the board’s regulations. Under the second option, the state would make it easier for individuals to challenge a licensing board’s rules in court.

Legislation like the Restoring Board Immunity Act would make it easier for the licensing boards operating in good faith to determine whether they’re exempt from federal antitrust law, and it would make it easier for startups and other new businesses to enter the market without having to jump through unnecessary and costly hurdles set up by their competitors. We hope to see Congress act on this legislation soon and open up more pathways for entrepreneurs to bring their innovative ideas to consumers.

Wolbers is policy director of Engine.


The views expressed by this author are their own and are not the views of The Hill.