Tech Startups Could Benefit From FTC Focus on State Licensing

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By Alexei Alexis

Technology startups could be among the beneficiaries of Washington’s sharpened focus on whether states’ occupational licensing requirements are anticompetitive, antitrust and economic analysts told Bloomberg BNA.

State regulators are increasingly clashing with “sharing economy” startups that allow consumers to connect — usually through an app — with people offering car rides, short-term lodging, and other services.

Ride-hailing company Uber Technologies Inc. successfully took on both the taxicab industry and state regulators across the country on the way to becoming a worldwide phenomenon. But newer startup firms continue to face barriers from more established businesses, and federal regulators are starting to notice.

“I think it’s all coming to a head,” Christopher Koopman, director of the technology policy program at George Mason University’s Mercatus Center, told Bloomberg BNA. “You’re seeing more professions being licensed. At the same time, more and more industries are becoming disrupted by technological innovation.”

FTC Priority

The issue is a top priority for acting Federal Trade Commission Chairman Maureen Ohlhausen. When she took over the agency after President Donald Trump was sworn in, she set up an agency task force to work with state and local government officials to push for occupational licensing changes. She wants to make sure the licensing doesn’t get in the way of newcomers to the market.

The move could make a big difference for tech startups. “Occupational licensing reform can be important for digital platforms where services are provided by professionals who are licensed at the state level,” Lisa Kimmel, senior counsel at Crowell & Moring LLP, told Bloomberg BNA.

“Telehealth is a good example,” Kimmel said. “The complex web of state licensing laws increases the costs of creating a national platform and can be used to protect incumbent providers from new health care delivery models.”

Sen. Mike Lee (R-Utah) has introduced legislation designed to encourage states to minimize the use of licensing for occupations ranging from real estate to dog sitting. Such licensing costs consumers $200 billion every year and deprives an estimated three million prospective professionals of job opportunities, he said in a July 27 statement unveiling the bill.

Lee introduced less sweeping legislation on the same topic in the last Congress, but it didn’t see any action. Rep. Darrell Issa (R-Calif.) introduced a companion bill in the House this year.

Legal Battle

Occupational licensing was at the center of a legal battle last year between the Texas Medical Board and Teladoc Inc., a leading provider of telemedicine services.

At the heart of that dispute were rules imposed by the state’s medical board that prohibited Teladoc physicians from establishing patient relationships without having an in-patient visit. The company brought a private antitrust action in federal court, claiming the medical board was actively attempting to keep it and other telemedicine providers from gaining a foothold in Texas.

The FTC started its own investigation into the matter. It dropped the probe once a new state telemedicine law passed, saying its concerns had been addressed.

Koopman said both the FTC actions and Lee’s bill show that occupational licensing is becoming a high-profile issue at the national level.

“I think the reform moment has arrived,” he said. “A lot of people have talked about occupational licensing for a long time. But now it finally seems like folks in Washington are putting their money where their mouth is.”

Still, states could push back on the federal government’s efforts to curb their actions. “At the end of the day, it should be left up to the states to decide how to structure their economies, how to structure their governments, and how to provide for the health, safety, and welfare of their citizens,” Virginia senior assistant attorney general Sarah Oxenham Allen said Aug. 9 at an occupational licensing discussion hosted by the Federalist Society.

To contact the reporter on this story: Alexei Alexis in Washington at aalexis@bna.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bna.com

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