Professions

Like all consumers, consumers of professional services benefit from competition, and if competition to provide such services is restrained, consumers may be forced to pay higher prices or accept services of lower quality. Professional/non-professional competition benefits consumers, particularly when there is no evidence that consumers have been harmed by non-professional service providers.

Professionals (or licensed professionals) may try to prevent competition from non-professionals through the adoption of excessively broad restrictions by the government. Some proposals may be overt attempts by professionals to eliminate competition from alternative service providers, while others may be good faith efforts to protect consumers that have not been tailored narrowly enough to avoid unnecessary harm to competition.

Restrictions on competition in the professions may be in the public interest if they are justified by a valid need – such as preventing significant consumer harm from the provision of services by providers who lack required knowledge and training – and are narrowly drawn to minimize their anticompetitive impact.

Professional restrictions based on required knowledge, training, or skills can protect consumers. However, consumers also benefit when non-professionals compete to provide services that do not require the requisite knowledge, training, or skills. Allowing non-professionals to provide such services permits consumers to select from a broader range of options, considering for themselves such factors as cost, convenience, and the degree of assurance about the quality of the service.

Professional bodies have, since their creation, presented problems from a competition perspective. This is because of some basic charactierstics of professions:

  • They establish entry barriers to an area of work under the auspices of consumer protection
  • They work in services with significant information asymmetries: consumers are rarely able to judge the value or quality of a service provided by a professional
  • Many important areas of work are regulated, to some degree, by professional groups from healthcare to the law.

Many professions also have a very long history of self-regulation and indeed many self-regualtory bodies have been in existence in some form for centuries. The role of the Guild system in the Middle Ages in Europe provided an early indication of the importance of professions and the struggles that other authorities would have in regulating them in the wider public interest. This is because while professional groups may profess to promote the public interest they are also there to act in a similar way as a trades union – to protect members and enhance their earning opportunities.

 

Resources:

There have been a number of general studies of professional services and their interaction with competition policy.

  • The OECD, Competition in Professional Services, 2000, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=318763 found that ‘(t)he regulation of the quality of professional services has, for a long time, created headaches for competition policy-makers and law enforcers. Where markets fail to provide adequate quality levels and where the consequences of poor quality are severe, policymakers typically step in to regulate quality of professional services, typically through licensing, standard-setting and quality monitoring. These functions are often delegated to the profession itself, which has an incentive to limit entry into the profession to restrict competition. This roundtable discussed competition policy problems raised by the self-regulation of professional service providers and the means for dealing with them, from law enforcement to advocacy. It also describes how changes in international regulation can promote competition by increasing the possibility of trade across borders for professional business services such as accounting, law and engineering.’ More support for this approach is found in Competition in professions, A report by the Director General of Fair Trading, Office of Fair Trading, March 2001, OFT328, http://www.oft.gov.uk/shared_oft/reports/professional_bodies/oft328.pdf

Studies in particular professional service sectors

There have been a number of more specific studies targeted at the competition issues in particular professional areas. For instance;

  • In healthcare OECD, Policy Roundtables, Enhancing Beneficial Competition in the Health Professions, 2004, http://www.oecd.org/regreform/sectors/35910986.pdf surveyed the work of competition authorities in the healthcare field, across a range of professions.
  • OECD, Policy Roundtables, Competitive Restrictions in Legal Professions, 2007, http://www.oecd.org/regreform/sectors/40080343.pdf debated competitive restrictions in legal professions; while the  European Commission Project Regarding Competition in Professional Services http://www.personal.psu.edu/faculty/l/s/lst3/Terry_EU_competition.pdf took the view that ‘(l)awyer regulation has been under assault. Antitrust officials around the world have taken aim at the regulatory systems of the legal profession. This includes European antitrust officials, who have concluded that some lawyer regulators are affected by the “weight of tradition,” “fail to see how things can be done differently,” and do not regulate in the public interest.’
  • The OECD also took a close look at Competition and Regulation in Auditing and Related Professions 2009 http://www.oecd.org/daf/competition/44284186.pdf; arguing that ‘(a)ccounting professions provide key services for ensuring the smooth operation of market economies. Maintaining access to quality accounting work at a reasonable price is crucial for increasing transparency of publicly held companies. While many practices may serve to protect consumers who are not otherwise able to assess the company accounts, there appear to be many areas in which there is restricted competition, particularly as a result of a string of mergers between large accounting firms. Accounting firms often face conflicts of interest arising from the multiple business segments in which they operate. The major policy challenge is to identify and remove the restrictions which are unnecessary or disproportionate to achieve public interest goals. Competition law and advocacy can play a major role in this respect, either by challenging anti-competitive activity as illegal or advocating changes to laws and regulations.’