[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]




           OCCUPATIONAL LICENSING: REGULATION AND COMPETITION

=======================================================================

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON REGULATORY REFORM,
                      COMMERCIAL AND ANTITRUST LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 12, 2017

                               __________

                           Serial No. 115-23

                               __________

         Printed for the use of the Committee on the Judiciary




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      Available via the World Wide Web: http://judiciary.house.gov
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                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan,
    Wisconsin                          Ranking Member
LAMAR SMITH, Texas                   JERROLD NADLER, New York
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
STEVE KING, Iowa                     STEVE COHEN, Tennessee
TRENT FRANKS, Arizona                HENRY C. ``HANK'' JOHNSON, Jr.,
LOUIE GOHMERT, Texas                   Georgia
JIM JORDAN, Ohio                     THEODORE E. DEUTCH, Florida
TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah                 KAREN BASS, California
TOM MARINO, Pennsylvania             CEDRIC L. RICHMOND, Louisiana
TREY GOWDY, South Carolina           HAKEEM S. JEFFRIES, New York
RAUL LABRADOR, Idaho                 DAVID N. CICILLINE, Rhode Island
BLAKE FARENTHOLD, Texas              ERIC SWALWELL, California
DOUG COLLINS, Georgia                TED LIEU, California
RON DeSANTIS, Florida                JAMIE RASKIN, Maryland
KEN BUCK, Colorado                   PRAMILA JAYAPAL, Washington
JOHN RATCLIFFE, Texas                BRAD SCHNEIDER, Illinois
MARTHA ROBY, Alabama
MATT GAETZ, Florida
MIKE JOHNSON, Louisiana
ANDY BIGGS, Arizona

           Shelley Husband, Chief of Staff & General Counsel
        Perry Apelbaum, Minority Staff Director & Chief Counsel

                                 ------                                

    Subcommittee on Regulatory Reform, Commercial and Antitrust Law

                   TOM MARINO, Pennsylvania, Chairman
                 BLAKE FARENTHOLD, Texas, Vice-Chairman
DARRELL E. ISSA, California          DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia                HENRY C. ``HANK'' JOHNSON, Jr.,
KEN BUCK, Colorado                     Georgia
JOHN RATCLIFFE, Texas                ERIC SWALWELL, California
MATT GAETZ, Florida                  PRAMILA JAYAPAL, Washington
                                     BRAD SCHNEIDER, Illinois
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                            C O N T E N T S

                              ----------                              

                           SEPTEMBER 12, 2017
                           OPENING STATEMENTS

                                                                   Page
The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the 
  Judiciary......................................................     3
The Honorable David Cicilline, Rhode Island, Ranking Member, 
  Subcommittee on Regulatory Reform, Commercial and Antitrust 
  Law, Committee on the Judiciary................................     3

                               WITNESSES

Ms. Maureen K. Ohlhausen, Acting Chairman, Federal Trade 
  Commission Oral Statement......................................     6
Mr. Robert E. Johnson, Esq., Attorney, Institute for Justice Oral 
  Statement......................................................     7
Ms. Sarah O. Allen, Esq., Senior Assistant Attorney General, 
  Office of the Attorney General of the Commonwealth of Virginia 
  Oral Statement.................................................     9
Ms. Rebecca H. Allensworth, Esq., Professor of Law, Vanderbilt 
  Law School Oral Statement......................................    10

              Additional Material Submitted for the Record

Responses to Questions for the Record from Robert E. Johnson, 
  Esq., Attorney, Institute for Justice..........................    30
Responses to Questions for the Record from Ms. Sarah O. Allen, 
  Esq., Senior Assistant Attorney General, Office of the Attorney 
  General of the Commonwealth of Virginia........................    34
Responses to Questions for the Record from Ms. Rebecca H. 
  Allensworth, Esq., Professor of Law, Vanderbilt Law School.....    48
Statement submitted by the Honorable John Conyers, Jr., Michigan, 
  Committee on the Judiciary. This material is available at the 
  Committee and can be accessed on the Committee Repository at:
    http://docs.house.gov/meetings/JU/JU05/20170912/106382/HHRG-
      115-JU05-MState-C000714-20170912.pdf
Testimony submitted by the Honorable Tom Marino, Pennsylvania, 
  Chairman, Subcommittee on Regulatory Reform, Commercial and 
  Antitrust Law, Committee on the Judiciary. This material is 
  available at the Committee and can be accessed on the Committee 
  Repository at:
    http://docs.house.gov/meetings/JU/JU05/20170912/106382/HHRG-
      115-JU05-20170912-SD004.pdf
Testimony submitted by the Honorable David Cicilline, Rhode 
  Island, Ranking Member, Subcommittee on Regulatory Reform, 
  Commercial and Antitrust Law, Committee on the Judiciary. These 
  materials are available at the Committee and can be accessed on 
  the Committee Repository at:
    http://docs.house.gov/meetings/JU/JU05/20170912/106382/HHRG-
      115-JU05-20170912-SD003.pdf

 
           OCCUPATIONAL LICENSING: REGULATION AND COMPETITION

                              ----------                              


                      TUESDAY, SEPTEMBER 12, 2017

                        House of Representatives

                  Subcommittee on Regulatory Reform, 
                      Commercial and Antitrust Law

                       Committee on the Judiciary

                             Washington, DC

    The Subcommittee met, pursuant to call, at 3:07 p.m., in 
Room 2141, Rayburn House Office Building, Hon. Darrell E. Issa 
presiding.
    Present: Representatives Goodlatte, Issa, Collins, 
Ratcliffe, Gaetz, Handel, Cicilline, Johnson, Swalwell, 
Jayapal, and Schneider.
    Staff Present: Ryan Dattilo, Counsel; Andrea Woodard, 
Clerk; and Slade Bond, Minority Counsel.
    Mr. Issa. The Subcommittee on Regulatory Reform, Commercial 
and Antitrust Law will come to order. Without objection, the 
Chair is authorized to declare a recess of the Committee at any 
time.
    We welcome today today's hearing on, ``Occupational 
Licensing: Regulation and Competition.'' And I now recognize 
myself for a short opening statement.
    Occupational licensing has exploded in this country over 
the last few decades without any apparent connection to the 
correlation--or correlation to public health or safety. In a 
2015 report, the Obama White House pointed out that more than 
one-fourth of Americans are required to obtain some form of 
occupational licensing. While many States' occupational 
licensing requirements would tend to promote consumer health 
and safety, others serve as barriers to competition and to 
entry and are constructed by incumbent industry interests, 
inevitably rising prices and reducing consumer choice in a 
marketplace.
    The research done on occupations newly subject to license 
reveals, that licensees often raise prices and reduce 
employment without any corresponding increase in productivity 
or service quality. A 2011 study estimated that some 
restrictions have resulted in 2.85 million fewer jobs in 
regulated industries and have cost as much as $203 billion.
    Perhaps these figures would be less troubling if effects of 
occupational licensing were confined to occupations typically 
subject to the licensing process, such as public health or 
public safety. But these net costs come from new licenses 
levied on occupations such as interior designers, shampooers, 
florists, home entertainment installers, funeral home 
attendants, and one of my favorite, casket manufacturers. 
Often, these quasi-government regulatory regimes have the 
effect of not only--of not promoting public safety but shifting 
innovation and reducing competition.
    One serious impact of occupational licensing is decrease in 
geographic mobility. And what I mean by that, as an example, in 
my district, there are 47,000 marines, almost half are married. 
Those marines travel and are redeployed every 18 to 36 months. 
Their spouses must move to another area, and most of them work. 
If they are schoolteachers, they may be subject to a multi-
State compact. If they are hair braiders or other professions, 
some of which we will discuss today, it is unlikely that there 
is any reciprocal relationship between Virginia, North 
Carolina, and California.
    This patchwork of overly burdensome occupational licensing 
laws means that, when you arrive in a new location, even after 
formal education, a licensing process, and years on the job, 
you will likely have to begin that same process over again. 
This certainly causes people to be unable to be reemployed even 
when they would be, by any reasonable definition, fully 
qualified for the position.
    That is not to say that we do not want to support and 
continue a long tradition of licensing through medical boards 
and the like, doctors, lawyers, nurses, real estate 
professionals, and, of course, people in the construction 
industry required to be responsible, such as general 
contractors.
    Before the August recess, I introduced legislation that 
would serve as a means to crack down on boards engaged in 
anticompetitive behavior while creating--and I want to stress 
this--creating a specific safe haven for certain 
environmental--and certain the environment for boards that 
serve in the public interest. The Supreme Court decision in 
North Carolina Dental case left open to interpretation what 
steps a State must take to ensure that the board--the boards 
satisfy the sanctions, that the boards it has sanctioned are 
not found liable for violation of antitrust.
    Today, the term active supervised is not defined in law but 
defined in a single court case, a course case that in many ways 
comes more than half a century after States explicitly were 
allowed to create these boards and to rely on these boards as 
antitrust exceptions. The speed with which court cases can 
resolve problems are not fast enough and certainly create a 
burden for States that do not want to have to legislate every 
part of regulation.
    The Restoring Board Immunity Act would offer States a 
certainty in exchange for the adoption of an oversight 
mechanism to ensure boards are operating in the public interest 
and not stifling competition.
    We have an excellent panel today. We have a really 
excellent panel today, and I would like to thank you for being 
here. When somebody puts together a panel, you often hope to 
get the kinds of different views and different capability, and, 
of course, different enforcement requirements that we have 
today.
    So I am delighted now to recognize the Ranking Member for 
his opening statement and get to our board.
    Mr. Cicilline.
    Mr. Cicilline. Thank you, Mr. Chairman, for calling today's 
important hearing. And welcome to the panel. I look forward to 
hearing your testimony.
    Creating economic opportunity for working Americans must be 
a national priority. It is essential that we invest in a 
stronger America that delivers good-paying jobs through 
apprenticeship programs, on-the-job training, and education, 
and a system of competition that helps workers and small 
businesses. That is why House and Senate Democrats have 
proposed A Better Deal, a bold economic agenda that will give 
workers new opportunities to get ahead.
    Right now, nearly a third of American jobs require a State 
license. This includes many jobs that have little impact on 
public health or consumer safety. And as the Obama 
administration reported last year, this threatens to, ``raise 
the price of goods and services, restrict employment 
opportunities, and make it more difficult for workers to take 
their skills across State lines.''
    Excessive licensing keeps jobs out of reach for too many 
working families who cannot afford large, upfront costs just to 
qualify for employment. For example, to work as a security 
guard, a job that typically pays less than $30,000, a Michigan 
resident must have 3 years of education and training. Other 
States require less than 2 weeks of training for the same job. 
What is worse, because these standards differ by State, 
military families are disproportionately affected because they 
are 10 times more likely to relocate across State lines.
    In response to this growing problem, the Obama 
administration issued a series of best practices for States to 
reduce licensing barriers to employment and mobility, along 
with a call to action for Governors to streamline requirements 
for service members, veterans, and spouses.
    Today's hearing is an important opportunity to consider 
whether we can do more. More than 70 years ago, the Supreme 
Court held, in Parker v. Brown, that the antitrust laws do not 
apply to a State's sovereign action. But recently, the Court 
held in North Carolina Dental that this exemption does not 
apply to State boards controlled by private parties or active 
market participants. As the Court noted, these boards have a 
structural risk of confusing their own interests with the 
State's policy goals.
    In these circumstances, States must actively supervise the 
anticompetitive conduct of these agencies to receive antitrust 
immunity. This requirement is essential to ensuring that State 
boards are serving the public interest.
    I look forward to hearing whether Congress should have a 
role in clarifying this standard.
    And, with that, I thank the Chairman for calling today's 
hearing. And again, with our esteemed panel of witnesses, thank 
you for your participation today. And I yield back the balance 
of my time.
    Mr. Issa. I thank the gentleman.
    We now recognize the Chairman of the full Committee, Mr. 
Goodlatte of Virginia, for his opening remarks.
    Chairman Goodlatte. Thank you, Mr. Chairman.
    The United States has been and continues to be a champion 
of free and open markets. An open market place cultivates 
competition among service providers and is the very foundation 
of maintaining lower prices, higher quality products and 
services, and superior innovation.
    The antitrust laws established in this country serve a 
valuable role in promoting competition, and the Judiciary 
Committee routinely exercises oversight authority to ensure 
that these laws are applied in a manner that is transparent, 
fair, predictable, and reasonably stable over time.
    All occupational licensing restrains competition to a 
certain extent by restricting who can provide certain services. 
While occupational licensing can serve the important function 
of maintaining quality and safety in key vocations, poorly 
executed licensing schemes can be detrimental. In some 
instances, control of regulatory boards by incumbent interests 
can transform the boards into market gatekeepers, limiting 
entry into regulated industries and benefiting the established 
practitioners that control the boards. Often, boards' licensing 
requirements are not proportional to the regulated occupation's 
impact on public health, making it difficult for newcomers to 
enter well-paying industries, harming consumers through higher 
prices and generally disrupting otherwise competitive 
marketplaces.
    The Federal Trade Commission and Acting Chairman Ohlhausen 
have made significant strides to fight back the tide of 
anticompetitive occupational licensing. It was an FTC 
enforcement action that led to the Supreme Court's recent 
decision in North Carolina Dental, which casts doubt on whether 
boards fall under the State action doctrine, a judicial rule 
granting antitrust immunity to State-level regulations 
restricting competition. The FTC has also issued guidance 
regarding when a State exerts sufficient active supervision 
over a regulatory board controlled by market participants such 
that it can invoke State action antitrust immunity. And the 
Commission recently launched an Economic Liberty Task Force to 
address regulatory hurdles to job growth, including 
occupational licensing.
    States around the country have also made inroads to limit 
the undesirable aspects of occupational licensing. Occupational 
licensing requirements are an often unnecessary burden on low-
income Americans and military families struggling to earn a 
living. During the most recent legislative session in Arizona, 
State Representative Jeff Weninger sponsored a bill that allows 
individuals with household incomes below 200 percent of the 
Federal poverty line to obtain an occupational license without 
paying the accompanying fee. A similar bill passed in Florida 
this year.
    Finally, Congressman Issa recently introduced the Restoring 
Board Immunity Act to address two major problems related to 
occupational licensing boards. One, the cost associated with 
onerous and arbitrary occupational licensing and, two, the 
potential that the threat of monetary damages under Federal 
antitrust law may chill the willingness of worthy individuals 
to serve as board members and officers.
    Today's hearing will help inform the committee regarding 
the recent proliferation in occupational licensing, the impact 
of the Supreme Court's decision in North Carolina Dental, and 
potential legislation to address concerns in this important 
area. I look forward to hearing the witnesses' views on these 
issues and how the FTC, Congress, and the States can work 
together to address the anticompetitive impacts arising from 
significant growth in occupational licensing.
    Today's testimony will help the Committee gain a better 
understanding of the seriousness of these issues and how they 
might be addressed. And I am pleased to welcome all of the 
witnesses here today, and especially Commissioner Ohlhausen, 
who has done great service on the FTC. I want to thank you all 
for your participation. I look forward to your testimony.
    Thank you, Mr. Chairman.
    Mr. Issa. Thank you, Mr. Chairman.
    We now recognize the Ranking Member for unanimous consent.
    Mr. Cicilline. Yes. I ask unanimous consent that the 
opening statement of the Ranking Member, Mr. Conyers, be 
introduced into the record.
    Mr. Issa. Without objection, so ordered.
    Statement submitted by the Honorable John Conyers, Jr., 
Michigan, Committee on the Judiciary. This material is 
available at the Committee and can be accessed on the Committee 
Repository at: http://docs.house.gov/meetings/JU/JU05/20170912/
106382/HHRG-115-JU05-MState-C000714-20170912.pdf
    Mr. Issa. And without objection, other members' opening 
statements will be made a part of the record.
    It is now my pleasure to introduce our panel of 
distinguished witnesses. And I would ask all the witnesses to 
please rise to take the oath. And raise your right hands.
    Do you solemnly swear or affirm that the testimony you are 
about to give will be the truth, the whole truth, and nothing 
but the truth?
    Please be seated. Let the record reflect that all witnesses 
answered in the affirmative.
    It is now my pleasure to introduce, as the Chairman just 
did, the distinguished Acting Chairwoman of the Federal Trade 
Commission, Ms. Maureen Ohlhausen, who has done great work for 
a long time. And this is not her first trip here, but we 
appreciate your return. Mr. Robert Johnson, attorney for the 
Institute for Justice. Ms. Sarah O. Allen, senior assistant 
attorney general, the Office of the Attorney General for the 
Commonwealth of Virginia. Welcome. Ms. Rebecca Allensworth, 
professor of law at Vanderbilt School.
    For those who have not been here before, you will notice 
the red, yellow, and green lights. We often muse that it is 
exactly like what you see when you are driving down the road. 
Green means go. Yellow means go like heck. And red, of course, 
means you are stuck, you are going to have to stop. So I won't 
cut anyone off mid-sentence, but let's make sure that we stick 
to that last thought being the last one, and then we will allow 
you to embellish during Q and A.

  TESTIMONY OF MAUREEN K. OHLHAUSEN, ACTING CHAIRMAN, FEDERAL 
TRADE COMMISSION; ROBERT E. JOHNSON, ESQ., ATTORNEY, INSTITUTE 
 FOR JUSTICE; SARAH O. ALLEN, ESQ., SENIOR ASSISTANT ATTORNEY 
GENERAL, OFFICE OF THE ATTORNEY GENERAL OF THE COMMONWEALTH OF 
 VIRGINIA; AND REBECCA H. ALLENSWORTH, ESQ., PROFESSOR OF LAW, 
                     VANDERBILT LAW SCHOOL

               TESTIMONY OF MAUREEN K. OHLHAUSEN

    Ms. Ohlhausen. Chairman Issa, Ranking Member Cicilline, 
Chairman Goodlatte, and members of the Subcommittee, thank you 
for the opportunity to appear before you today. I am Maureen 
Ohlhausen, the Acting Chairman of the Federal Trade Commission, 
and I am pleased to join you to discuss competition 
perspectives on occupational licensing. This has long been a 
significant area of interest for the Commission. And as 
demonstrated by H.R. 3446, the Restoring Board Immunity (RBI) 
Act of 2017, it is of interest to Congress as well.
    Competition is the cornerstone of America's economy. When 
sellers compete, consumers benefit from lower prices, higher 
quality products and services, and greater innovation. In 
furtherance of that national policy the FTC act grants the 
Commission broad enforcement authority regarding both 
competition and consumer protection matters in most sectors of 
the economy.
    The FTC has a long history with occupational licensing and 
State boards from both a policy and an enforcement perspective. 
The Commission and its staff have submitted hundreds of 
comments and amicus curiae briefs to State and self-regulatory 
entities on issues related to the intersection of antitrust and 
competition law and policy and occupational licensing.
    In these comments, we provide a helpful analytical 
framework for State legislatures when considering occupational 
licensing. In particular, we advise policy makers to consider 
five key factors. First, implement licensing only when 
legitimate health and safety issues or other public policy 
purposes justify doing so. Second, adopt licensing that will 
not have adverse effects on competition and consumers. Third, 
only consider licensing that will yield other countervailing 
consumer benefits, outweighing the costs of foregone 
competition. Fourth, narrowly tailor regulations to minimize 
the loss to competition. And, fifth, always ask if there are 
less restrictive alternatives.
    Elements of the proposed RBI Act are consistent with this 
framework and share similar procompetitive goals. By following 
this guidance, lawmakers can better avoid adopting rules that 
interfere unnecessarily with an otherwise competitive 
marketplace.
    Although the FTC typically relies on competition advocacy 
to discourage potentially anticompetitive occupational 
licensing and regulations, the Commission sometimes invokes its 
enforcement authority to challenge anticompetitive conduct by 
regulatory boards when it falls outside protected State action. 
For example, in 2010, the Commission challenged the North 
Carolina Board of Dental Examiners for issuing a series of 
cease and desist letters that successfully expelled low-cost 
nondental providers of teeth whitening services. And the case 
went to the Supreme Court, which explained that States must 
ensure that any anticompetitive actions undertaken at its 
direction by private actors pursuant to State law are, in fact, 
approved by the State as part of its policy to displace 
competition.
    In light of the Commission's longstanding interest in 
mitigating the anticompetitive effects of occupational 
licensing and our ongoing work in this area, the Commission 
supports the overall goals of the RBI legislation. At the same 
time, we note a substantial body of case law regarding the 
State action doctrine has already struck a careful balance 
between the antitrust laws and State sovereignty. Careful 
thought must be given to the details and potential unintended 
consequences of any initiatives that would alter this balance.
    Because occupational licensing and regulation affects an 
increasingly broad swath of our economy, I formed the FTC's 
Economic Liberty Task Force. One purpose of the task force is 
to study the economic effects of occupational licensing on 
competition. Toward that end, the FTC's Economic Liberty Task 
Force hosted a roundtable discussion in July and will host a 
second roundtable discussion on November 7. These programs 
involve leading economic and policy experts discussing the 
current state of economic learning, about the costs and 
benefits of licensing and its effects on workers, consumers, 
competition, and the overall economy.
    So thank you for your time today, and I look forward to 
your questions.
    Hon. Ohlhausen's written statement is available at the 
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20170912/106382/HHRG-115-JU05-
Wstate-OlhausenM-20170912.pdf
    Mr. Issa. Thank you.
    Mr. Johnson.

              TESTIMONY OF ROBERT E. JOHNSON, ESQ.

    Mr. Johnson. Good afternoon, Chairman Issa, Ranking Member 
Cicilline, and members of the Subcommittee. My name is Robert 
Johnson, and I am an attorney at the Institute for Justice, a 
national public interest law firm that for decades has been at 
the forefront of the fight against occupational licensing. We 
have represented scores of entrepreneurs subject to arbitrary 
and unnecessary licensing restrictions, from Louisiana florists 
to tour guides in Philadelphia and teeth whiteners in 
Connecticut.
    Occupational licensing is growing at an alarming pace. 
Whereas in the 1950s only one in 20 U.S. workers required an 
occupational license, today, that figure stands at almost one 
in four. Occupational licensing has spread because it helps 
economic incumbents. Licensing limits opportunities for 
workers, frustrates entrepreneurs seeking to introduce 
innovative new business models, and it also raises the prices 
paid by consumers. Licensing is particularly troublesome for 
workers at the first rungs of the economic ladder.
    Importantly, even when licensing protects against real 
dangers, it can still be abused. Take medical licensing. While 
some States allow nurse practitioners to meet rising demand for 
medical services, in other States, doctors have used licensing 
laws to strictly limit the practice of nurse practitioners, 
resulting in more profits for doctors but higher medical costs 
for everybody else.
    Now, most licensing occurs at the State and local level. 
But there is still an appropriate role here for Congress, and 
that is because licensing restrictions are often imposed by 
boards made of up of industry insiders. And when industry 
insiders use licensing laws to exclude competition, they can be 
liable under the Federal antitrust laws.
    In a 2015 decision, FTC v. North Carolina Board of Dental 
Examiners, the Supreme Court addressed this antitrust question 
and held that boards can be liable when they violate the 
antitrust laws. At the same time, the Court made clear that 
States can insulate boards from liability so long as they 
impose what the Court termed active supervision. And that, in 
turn, raised the question of just what active supervision 
entails. And, right now, nobody really knows.
    But several States have responded to that decision by 
enacting what you might call rubber-stamp supervision. And 
these States charge licensing--or charge bureaucrats with 
supervising the actions of licensing boards, but they don't 
charge those bureaucrats with any actual mandate to promote 
competition. And this kind of rubber-stamp supervision is bad 
for everybody. It is a bad bet for the States, because the 
Supreme Court, after recently deciding the North Carolina 
Dental decision, is unlikely to hold that a rubber-stamp 
supervisor actually satisfies the antitrust laws. And it is 
certainly bad for those affected by occupational licensing as 
it will not result in real reform. Result is likely to be years 
of litigation as the courts hammer out a definition of active 
supervision.
    The Restoring Board Immunity Act seeks to clear up this 
uncertainty, while also promoting reform. The Act immunizes 
State licensing boards, but it only does so if States adopt a 
meaningful version of active supervision. So to secure immunity 
under the bill, States must do two things. First, they must 
adopt a policy of using licensing only when truly necessary. 
And, second, they must adopt a procedure to ensure that boards 
follow that policy. And, notably, the bill gives States a 
choice between two procedural enforcement mechanisms: one 
administrative and one judicial. And this approach is 
consistent with principles of federalism. Since the antitrust 
laws are a creature of Congress, it is appropriate for Congress 
to clarify how they apply. And, at the same time, the bill does 
not actually require that States do anything at all. Instead, 
the bill simply rewards States that adopt beneficial reforms.
    In short, the bill promotes licensing reform, benefiting 
consumers, workers, and entrepreneurs, while also respecting 
the role of the States. The Institute for Justice is pleased to 
support this bill.
    Thank you for the opportunity to testify.
    Mr. Johnson's written statement is available at the 
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20170912/106382/HHRG-115-JU05-
Wstate-JohnsonR-20170912.pdf
    Mr. Issa. Thank you.
    Ms. Allen.

               TESTIMONY OF SARAH O. ALLEN, ESQ.

    Ms. Allen. Chairman Goodlatte, Chairman Issa, Ranking 
Member Cicilline, and members of the Subcommittee, thank you 
again for inviting me to speak with you today about this very 
important topic to the States.
    Before I start, I must reiterate the disclaimer I made in 
my written testimony that my remarks today are my opinions 
alone and do not necessarily reflect those of the Virginia 
Attorney General's Office, General Mark Herring, or any of the 
other antitrust colleagues I have that are affiliated with the 
National Association of Attorneys General.
    Even though these are my opinions alone, my remarks are 
informed by my 26 years as an antitrust enforcer, both on the 
Federal level as an alumnus of the FTC and on the State level 
at the Virginia Attorney General's Office. I do believe in 
strong antitrust enforcement and open competition. But part of 
my job at the AG's office is also to defend and advise State 
agencies and boards on antitrust issues. And in the last 3 
years, most of that advice has been on issues concerning State 
action immunity.
    One of the things that struck me when reading through the 
testimony of my fellow panelists and others who are critical of 
State boards is how widespread and profound the 
misunderstanding is of what State boards actually do. They are 
not cartels. They are not State-authorized conspiracies to 
exclude new entrants and raise prices in the market. They are 
arms of State government that are formed by sovereign State 
legislatures to perform oversight over people that the 
legislatures have chosen to include in their licensing regimes, 
not the board.
    The legislatures have chosen to license certain occupations 
and restrict competition in those markets to protect something 
they value more than open competition, which is the health, 
safety, and welfare of their citizens.
    The large majority of decisions made by State boards have 
little to no competitive impact. Instead, they are mainly 
concerned with issues, such as the proper standards of care for 
their profession, holding licensees to minimum ethics 
standards, protecting consumers from deceptive advertising or 
fraudulent billing practices, or cases involving licensees' 
mental or physical fitness to practice.
    Practitioners who are active and current in their 
professions are often the best people to judge these issues. It 
would be difficult for States to develop this kind of expertise 
in-house with bureaucrats.
    Even without active supervision, State boards must follow 
clearly articulated State policy. Private trade associations, 
to which State boards are often unfairly compared, are under no 
such restrictions.
    In addition, more boards in many States do not have 
jurisdiction over nonlicensees. So it is not possible for them 
to do what the dentistry board in North Carolina did, which is 
to overreach their statutory authority to try to shut down new 
forms of lower cost or more innovative competition.
    And many functions boards perform, such as determining if a 
particular applicant is qualified to receive a license, are 
ministerial and do not involve any discretion on the part of 
the board or the individual board members. Either the applicant 
meets the criteria for a license or she doesn't.
    The licensing regime itself may restrict competition, but 
that decision was made by the legislature, not by the board or 
the individual board members. And that highlights the biggest 
problem with the Restoring Board Immunity Act, in my opinion. 
It targets the wrong actor. The State legislature is the entity 
that is creating boards and requiring them to be overseen by 
active market participants. The boards and the individual board 
members are taking actions, for the most part, that they are 
statutorily obligated to take.
    If Congress wants State legislatures to engage in 
regulatory reforms to reduce the number of professions they 
license or to regulate them in less restrictive ways, then the 
boards are not the proper entities to defend the competitively 
restrictive decisions they did not make. And they certainly 
should not be on the hook for potential treble damage liability 
for these decisions. These cases should be for declaratory or 
injunctive relief only, and the board and its members should be 
immunized from damages liability.
    In the aftermath of the NC Dental decision requiring active 
supervision for antitrust immunity and the flurry of antitrust 
cases filed against boards and board members since the 
decision, it is getting difficult for States to find qualified 
people to serve on these boards. The potential for being sued 
for treble damages and the inability of many States to 
indemnify them for constitutional reasons has caused some board 
members to resign and many more practitioners to refuse to 
serve.
    And I am running out of time, but I wanted to wrap up by 
saying that the board would require huge revisions to States' 
legal codes and create an unfunded Federal mandate to establish 
an umbrella State agency for active supervision. The Act would 
also cause an arguable separation of powers problem by having 
an active supervisor in the executive branch or a State judge 
in the judicial branch overseeing the legislative branch.
    So at the end of the day, I think the Act is really 
unworkable for States to implement, and so they will not be 
engaging in the regulatory reform that Congress would like to 
encourage them to do. And I thank you for inviting me to speak 
here today.
    Ms. Allen's written statement is available at the Committee 
or on the Committee Repository at: http://docs.house.gov/
meetings/JU/JU05/20170912/106382/HHRG-115-JU05-Wstate-AllenS-
20170912.pdf
    Mr. Issa. Thank you.
    Professor.

           TESTIMONY OF REBECCA H. ALLENSWORTH, ESQ.

    Ms. Allensworth. Thank you, Chairman Issa, Ranking Member 
Cicilline, Chairman Goodlatte, Ranking Member Conyers, and 
members of the Subcommittee, for the opportunity to testify 
today.
    The case against excessive occupational licensing has been 
made for decades by libertarians who see it as an infringement 
on individual liberty--we have someone here on the panel today 
that would fit that description--by progressives who see 
licensing as yet another way to privilege high-status groups 
while leaving immigrants, racial minorities, and ex-offenders 
out of the labor market. And, of course, by conservatives who 
see licensing as just more governmental red tape keeping 
markets from operating freely and fairly.
    Yet in the half century since licensing first came under 
fire, it has only proliferated. Nearly a third of Americans 
need a State license to work, and the licensed professions have 
swelled to include hair braiders, casket sellers, and floral 
designers.
    How can it be that excessive occupational licensing has 
survived, even thrived, in this environment of bipartisan 
support for reform? The answer is the regulatory institution 
targeted by this bill that we are discussing today, the State-
level occupational licensing board.
    Almost a third of our workforce is regulated by a 
constellation of over 1,700 State boards, each so small and so 
politically irrelevant as to be invisible. My research has 
shown that nearly all of them, over 85 percent, are required by 
statute to be dominated by currently licensed working 
professionals. That is right, these boards are formed by law as 
cartels.
    So here you will see where my perspective differs sharply 
from Ms. Allen's. And I will pause to say, what is a cartel? A 
cartel is a group of competitors who get together, set the 
terms of entry into their profession or the things that they 
sell, determine what the kinds of competition will be allowed, 
what other kinds of competition won't be allowed. And that 
perfectly describes a State occupational licensing board. It is 
basically totally nongovernmental.
    In 2015, the Supreme Court finally recognized these boards 
for what they are: not arms of the States, but combinations of 
competitors. Until North Carolina Dental, it was widely 
believed that boards enjoyed a legal loophole that allowed them 
to operate without oversight from the States and without 
Federal accountability for their anticompetitive practices. But 
in 2015, the Supreme Court decided that boards must bow to 
either State control or Federal antitrust lawsuits. It is this 
legal development that provides new hope for meaningful reform.
    The introduction of this bill represents a promising effort 
in that direction. It offers States a carrot, a new way to 
immunize their licensing boards from the Sherman Act, if they 
adopt a policy of creating only efficient licensing laws and 
then either create an office of supervision of occupational 
boards or create a cause of action allowing individuals to sue 
to invalidate any licensing laws that do not conform to that 
policy of efficiency. Of course, States also have the option of 
doing nothing and rolling the dice with the court's existing 
State action doctrine.
    The bill's greatest strength is the first option: the 
active supervision option that encourages States to supervise 
their boards, restoring transparency and accountability to 
licensing regulation. In other words, this would make licensing 
regulation governmental again, taking the cartel--taking away 
the power of the boards to act as a cartel and putting it in 
the hands of State government.
    I advocated for a similar reform in an article I wrote last 
year, and I generally support this portion of the bill, except 
to the extent that it may give too little regulatory freedom to 
States by mandating that States use a least restrictive 
alternative test for all of their licensing regulation. The 
bill does well to require that licensing rules address only 
real threats to public health and safety, but it goes too far 
by making States show that they had no other regulatory 
alternative.
    I am less enthusiastic about the second option in the bill, 
the one that gives States immunity if they create a substantive 
right to efficient occupational regulation and a cause of 
action to enforce it. This section also has the least 
restrictive alternative analysis problem, and it has the 
additional flaw of relying on courts to balance regulatory 
alternatives and to do so in a case-by-case manner.
    This issue is too important and too complex to be resolved 
by State courts on an ad hoc basis. And the result is likely to 
be one of two undesirable outcomes: either broad deference to 
the boards or wholesale deregulation of the professions. A 
better approach, in my opinion, would be to streamline the bill 
to its first option, to offer immunity to licensing boards that 
are supervised according to the bill's terms.
    Thanks again for this opportunity to speak to you about 
this bill, and I look forward to your questions.
    Ms. Allensworth's written statement is available at the 
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20170912/106382/HHRG-115-JU05-
Wstate-AllensworthR-20170912.pdf
    Mr. Issa. I do too, I do find it interesting that a former 
clerk for Anthony Kennedy and a former, I guess, researcher for 
Elizabeth Warren when she was at Harvard are on each side of 
you, Ms. Allen. I know you are in good company and feel that 
your left and your right is properly covered.
    I am going to try and focus on Virginia for just a moment. 
Virginia is one of the States that had hair braiding regulated. 
And the legislature was lobbied in Virginia by the hair salon 
industry to make sure that if you want to be a hair braider, 
you had to be a hair salon. So although I hear what you say, 
the State of Virginia, for a period of time, based on a board/
inside--and you called it--these were government entities--took 
the advice and elevated simple hair braiding to a cartel, 
essentially, of a much higher level. You had to have a 
facility, you had to have the right chair, you had to have the 
right water, and you had to have everything to braid hair.
    Now, during Governor McDonnell's period of time, it was 
gotten rid of because it showed no public--I forget the exact 
language--evidence of public harm to get rid of it.
    I heard what you said, but I am going to ask you a simple 
question. By my standard, simple. You mentioned and somewhat 
derided trade associations. But trade associations are fully 
covered by the antitrust laws. They live in terror that two of 
their board members will say the wrong thing in a meeting. 
Having been the Chairman of a major trade association, trust 
me, I have seen it, that you are overly concerned. And yet you 
would purport that it is burdensome in Virginia, in return for 
this immunity, to have active supervision, and yet you called 
them an arm of government.
    Are they an arm of government, in your opinion, as you said 
in your opening statement?
    Ms. Allen. Yes.
    Mr. Issa. If they are an arm of government, in Virginia, 
don't you require that people not have an economic conflict of 
interest in their everyday voting? In other words, aren't you 
covered by not making decisions where you have an economic 
benefit of that decision? Isn't that true?
    Ms. Allen. I am not sure about what it would--how it 
applies to me. But I think that the situation here is that the 
many, many decisions that the board makes----
    Mr. Issa. If you were in an antitrust case and you owned 
stock in the company, would you be allowed to prosecute that 
case or would you recuse yourself?
    Ms. Allen. I would recuse myself.
    Mr. Issa. Okay. So we have established the conflicts of 
interest by government officials are critical. Additionally, 
your legislature, even though it is a part-time legislature, 
they find themselves recusing themselves if they have major 
interest in a specific entity that would be affected directly 
by a bill. True?
    Ms. Allen. I assume so, yes.
    Mr. Issa. Okay. And yet these boards have no such 
objection. So the one point I want to make, using your 
testimony, is you want them to be public entities. But you 
don't currently, nor do virtually any States, require that they 
essentially recuse themselves from self-dealing. So if you have 
got people who can self deal, such as hair salons that can rake 
in braiding, or even dentists who can bring in additional 
revenue from tooth whitening, and you don't have them live up 
to the same ethical standards, isn't that where we are stepping 
in and where this legislation, which Professor Allensworth is 
not thrilled with, she wants some changes, but that is why we 
have a requirement here, is there is an inherent conflict 
because they are acting as government entities, but they are 
not bound by the normal ethics that the FTC commissioner would 
be bound by in her government role.
    Ms. Allen. Well, to the contrary, Chairman Issa, I believe 
that the standards of ethics for many of these boards are very 
stringent. I know that the State bar has very stringent ethics 
rules and so does the Board of Medicine and so----
    Mr. Issa. Let's go through that.
    Mr. Johnson, I will go to you. And I would like to get to 
all of you quickly. Do you see that they are allowed to rule in 
areas that specifically limit competition or raise potential 
revenues that come to their industries?
    Mr. Johnson. Absolutely. That is what they exist to do.
    Mr. Issa. Okay. Professor Allensworth, do you agree?
    Ms. Allensworth. They are regulating entry--they regulate 
entry and they are regulating the terms of competition. So that 
is always going to be a conflict of interest for currently 
licensed working board members.
    Mr. Issa. Okay. And Ms. Ohlhausen--Chairman, your past work 
of the FTC is specifically for that reason, isn't it, that 
overreach by people who have an economic benefit and do so 
without a demonstrated need for what they are asking for?
    Ms. Ohlhausen. Yes, absolutely.
    Mr. Issa. So when we look--and I know Ms. Allen said that 
these things don't apply to the North Carolina Dental case, but 
hair salons in Virginia that wanted to make sure that braiding 
had to come into their establishments, isn't it really a first 
cousin, if not a direct sibling, of the North Carolina Dental 
case?
    Ms. Ohlhausen. Yes, I think it is. And the Supreme Court 
has recognized the risk of board members confusing their own 
interests with the State's policy goals.
    Mr. Issa. Okay. I want to be respectful of the clock, so I 
will now go to the Ranking Member, Mr. Cicilline.
    Mr. Cicilline. Thank you, Mr. Chairman. Thank you again to 
our witnesses.
    I would like to begin with you, Acting Chairman Ohlhausen. 
In the same way that excessive licensing hurts workers, 
entrepreneurs, limit market mobility and innovation, so too do 
non-compete agreements. According to a report by The New York 
Times, these clauses have become pervasive, unreasonably broad 
in duration and scope, and cover one in five Americans, from 
hairdressers to engineers. Leading economist Alan Krueger has 
described the prevalence of non-competes as an act to prevent 
the forces of competition to rig the labor market against 
workers. And the Treasury Department, likewise, reported last 
year that non-competes diminish workers' earnings, mobility, 
and economic opportunity.
    Through its competition enforcement, the Federal Trade 
Commission can be a leader against these structural impediments 
to open labor markets, just as it can be against occupational 
licensing. And so I would like to ask you what resources has 
the Commission dedicated to policing unreasonable non-compete 
clauses in employment contracts? And are you concerned that 
non-compete clauses are being unfairly used by businesses to 
unreasonably restrain trade in violation of the antitrust laws?
    Ms. Ohlhausen. So last year, the FTC and the Department of 
Justice put out guidelines for HR professionals. And one of the 
things that it cautioned against in there is HR professionals 
getting together and coming up collectively with terms that 
they are going to impose on employees and their businesses, 
that that could raise a competition concern, and be an 
antitrust violation.
    I think, also, as we look at all barriers to additional 
economic liberty, we can certainly look at the problem that may 
be raised by some, extensive or inappropriate noncompete 
agreements.
    Mr. Cicilline. I am also very concerned that the 
consolidation is a threat to the economic opportunity to 
working Americans. Many leading economists agree that the 
concentration of labor markets gives corporations the ability 
to hoard profits at the expense of workers. And yesterday, you 
remarked that antitrust is not suited to address economic 
problems such as income or inequality. But isn't enforcement 
and promoting competition critical to avoiding the harms of 
consolidation such as depressed wages, reduced opportunity, and 
workplace inequality?
    Ms. Ohlhausen. So I am very much in favor of enforcing the 
antitrust laws and merger guidelines against undue levels of 
concentration that could cause impacts on consumer welfare. And 
preserving a competitive market also can preserve some of these 
other values that you are talking about.
    Mr. Cicilline. Thank you.
    I would like now to turn to Professor Allensworth and ask 
you, what effect would this legislation have on the State 
action doctrine, in your judgment?
    Ms. Allensworth. So I think that there is a bit of an 
ambiguity in the way that the bill is currently drafted. I read 
it as attempting to create another option for immunity for 
boards, in addition to the State action doctrine that exists. 
But there is something especially in the preamble that seems to 
suggest that maybe this is an attempt to define active 
supervision once and for all.
    So the first reading, the one that I think is dominant and 
the one that I prefer, is the idea that occupational licensing 
is a special problem. And here we have a special solution for 
it. There is uncertainty in NC Dental following--there is 
uncertainty after NC Dental about what supervision is and about 
the State action doctrine. And so you can sort of bypass that 
by going to the options laid out in this bill for your 
occupational licensing boards.
    I think that that is a more natural reading of the bill the 
way it is written because State action doctrine applies to all 
kinds of State regulation: liquor commissions, municipalities, 
regulated utilities. And this bill really says nothing about 
how States need to supervise--those entities are subject to the 
same two-prong test under State action doctrine involving 
supervision. It says nothing about that. And so it would be odd 
to read this bill as defining supervision for all areas of 
State action doctrine.
    But I do think that it may be worth clarifying, if that is 
the intent of the drafters, that that is what this bill does. 
So, in other words, I think it would leave State action 
doctrine as it is.
    Mr. Cicilline. And your recommendation is that those 
first--the first part of the legislation act provides those two 
prongs is sufficient, it is the second part that raises 
concerns?
    Ms. Allensworth. My hesitation about the judicial review 
option?
    Mr. Cicilline. Yeah.
    Ms. Allensworth. Yeah. That is the one that I think, if 
States opt for that, I think we may not see the kind of reform 
that the bill is aimed at.
    Now, the other question is, is it better than the status 
quo? So the status quo is the antitrust liability for boards. 
That is case-by-case judicial resolution of these problems too. 
So what I am talking about is writing on a blank slate. I like 
the idea of giving this option that will really encourage 
supervision. I think that is the better way to go.
    As to whether or not this bill with its two options, 
including the one that I think is a little bit weaker, is 
better or worse than what we have, it is a closer call for me.
    Mr. Cicilline. Thank you.
    Mr. Issa. Would the gentleman yield for a second?
    Mr. Cicilline. Of course.
    Mr. Issa. I am intrigued by this. One follow-up question to 
Mr. Cicilline's.
    So, summarizing, it doesn't go far enough because it leaves 
a little too much in the way of loopholes. You would like it to 
be tougher on what it takes to qualify for immunity. Is that a 
fair statement?
    Ms. Allensworth. I think it is possible to characterize the 
lawsuit option as a loophole because I worry that courts would 
under enforce the kinds of objectives that are laid out in the 
bill. So, yes, I think a way to make it tougher is actually 
sort of addition by subtraction, is to get rid of that second 
lawsuit option. Because I think the real problem with licensing 
is who does it. Right now, it is boards that I see as cartels. 
Who do I want to do it? The State. I want the State to take 
governmental responsibility for the regulation they create.
    Mr. Issa. Thank you.
    Mr. Cicilline. So just reclaim my time.
    So that I understand your testimony, so your 
recommendation, your testimony, is if the bill had those two 
components that made it clear, that the State was going to 
engage in the supervision, that by itself is preferable to the 
bill with the second piece with respect to judicial review?
    Ms. Allensworth. That is right.
    Mr. Cicilline. Thank you. I yield back.
    Mr. Issa. Thank you.
    We now go to the Chairman of the full Committee, the 
gentleman from Virginia, Mr. Goodlatte.
    Chairman Goodlatte. Thank you, Mr. Chairman.
    Commissioner Ohlhausen, I would like to get your thoughts 
on that, but I will just make it a wider question. And that is, 
how would this bill impact your efforts with respect to 
occupational licensing both from advocacy and enforcement 
perspectives? And do you agree with Professor Allensworth's 
suggestion that we remove that provision related to the 
options?
    Ms. Ohlhausen. I think the bill would give us additional 
opportunities for advocacy. As States decided whether to adopt 
these provisions and to go through this process that the bill 
provides, it would give the FTC an opportunity to weigh in on 
whether we thought where they were drawing the lines was good 
for consumers.
    Regarding our enforcement, I think it depends on whether 
the bill is an additional option for States or whether it 
defines the field of what is active supervision. With that 
being said, I think to have the States think more closely about 
what this occupational licensing is doing and whether it is 
good for consumers or is it more restrictive than necessary, I 
would hope would reduce the incidents of States adopting, or 
boards adopting, harmful legislation.
    As for the issue of parts on part two of the bill, I don't 
actually have an opinion on that. I certainly, appreciate 
setting out a process for--a clear process for the States to 
follow. I do agree that having a case-by-case of different 
judges deciding may give a less clear and consistent answer.
    Chairman Goodlatte. Very good. Thank you.
    Ms. Allen, you note in your testimony that the RBI Act--by 
the way, Mr. Chairman, I like the baseball analogy in your 
title of your thing, because baseball itself has an antitrust 
exemption.
    But the RBI Act places a significant burden on States to 
comply. How do the requirements under the Restoring Board 
Immunity Act differ from the inherent requirements under North 
Carolina Dental or the FTC guidance?
    Ms. Allen. In several ways, actually. The active supervisor 
currently under North Carolina Dental case law merely has to be 
a disinterested State official who looks at what the board did 
in a substantive way, not just a procedural way, and determines 
whether or not the action that the board took is in keeping 
with the enabling statute that the board is operating under. 
There is no requirement of using the least restrictive 
alternative, there is no requirement that it has to be 
efficient, and there is no requirement for regulatory reform.
    If you go the judicial route, review route, the burden 
shifts quite substantially from the plaintiff to prove that 
there was an antitrust violation to the board to defend a 
decision that they didn't make. The legislature is the one that 
restricted competition. The board was following what the 
legislature instructed them to do. So I think it quite 
substantially puts a burden on the States that is different and 
more than what they have to do now to comply with NC Dental.
    Chairman Goodlatte. And, Mr. Johnson, would a Federal 
legislative solution be necessary or helpful to address this 
issue?
    Mr. Johnson. Yes, I think it would be. We are in a 
situation right now where there is a great deal of uncertainty 
as to what active supervision means. And I think that certainly 
Ms. Allen has suggested that the bar posed by active 
supervision requirement is quite low and that the States can 
meet it quite easily. On the other hand, that requirement may 
turn out to be much higher, and I think it probably will turn 
out to be much higher. But that uncertainty is going to create 
costs, it is going to give rise to litigation. And however it 
is decided ultimately by the courts may be a good result or a 
bad result.
    What we have here is an opportunity to eliminate the need 
for those costs, to eliminate the need for that litigation, and 
to assure off the bat that what is achieved is a good result 
and a result that actually advances the cause of occupational 
licensing reform. And that is what the bill tries to do.
    Chairman Goodlatte. You like this bill. Do you think this 
bill should go further? Do you envision other bills that you 
would like better? What is your overall take on what needs to 
be done to address this creeping regulatory effect of State 
licensing which obviously has grown? And I, quite frankly, 
think the need for it hasn't been justified by the amount of 
growth we have seen.
    Mr. Johnson. Well, this is obviously an area where there 
are sensitive federalism concerns. This is an area of 
regulation that historically has been one that is overseen by 
the States. This bill, I think, is sensitive to those concerns 
because it proceeds from the sort of foundation of the 
antitrust laws, which I think are sort of recognized roles for 
the Federal Government.
    Could Congress go further and explore other types of 
approaches to occupational licensing? I think it certainly 
could, and it would be an interesting conversation to have. But 
the federalism issues that would then start to arise would be 
interesting and substantial and would require a lot of 
attention.
    Chairman Goodlatte. So you would be happy with this for 
now?
    Mr. Johnson. Absolutely as a first step.
    Chairman Goodlatte. Thank you, Mr. Chairman.
    Mr. Issa. Thank you, Mr. Chairman.
    We now go to the gentleman from, more or less, Oakland, 
California, Mr. Swalwell.
    Mr. Swalwell. Thank you, Mr. Issa.
    And I just want to, before we begin, wish well my 
colleague, Hank Johnson, and others who were in Irma's path, 
their constituents, as well as Mrs. Handel, that we are for 
them and will do anything in a united way in Congress to help 
them.
    So, with that, I wanted to ask Ms. Allen, with respect to 
indemnification, it is my understanding that in some States you 
are not allowed to indemnify board members for damage liability 
associated with antitrust actions in which board members are 
specifically named as the antitrust defendant. But my fear is 
that this would be a perversion of the antitrust laws if 
counsel for an individual seeking a license or an individual 
subject to a disciplinary proceeding could contact an 
individual board member in such States and then threaten them 
with treble damages liability under the North Carolina Dental 
case if they did not refrain from acting against that client's 
interests.
    Should there be a more straight way to remove this threat 
of individual damage liability? And, I guess, I am speaking 
specifically to the RBI Act and what your thoughts are on that. 
And I guess, just thinking--I went to law school, passed the 
bar exam, appreciate the great work that the California Bar 
Association does. And these are volunteers, the board members, 
at least in the law, usually don't get paid, and you just want 
to protect against them from being personally liable unless you 
can show that they are acting maliciously. So I would be 
interested in your thoughts on that.
    Ms. Allen. Absolutely. There has been a flurry of lawsuits 
that have been filed against boards since the North Carolina 
Dental decision. And the majority of those lawsuits have also 
sued the individual board members for treble damage liability 
under the antitrust laws. And many States--some States are able 
to indemnify board members. Many States are not. They are 
constitutionally prohibited from indemnifying them over a 
certain amount of money, and it is been a problem.
    In Florida, the Chairman and a couple of other members of 
the podiatry board have resigned because of this. Many other 
people in their professions are refusing to serve because of 
this problem. And boards can't add active supervision to 
themselves. They have to wait till the legislature does it for 
them. So the problem does exist.
    And I think that one possible solution is to add an analog 
to the Local Government Antitrust Act that immunized 
municipalities from antitrust damage liability because of 
several big judgments that bankrupted some cities and towns.
    Mr. Swalwell. Do you fear that if they were not indemnified 
from treble damages, that the costs would be passed along 
either to the practitioners or--I mean, because I don't know 
who would serve without some sort of protection, and that would 
require an insurance policy. And someone would have to pay for 
it.
    Ms. Allen. Right. I mean, the Commonwealth of Virginia has 
a risk management plan that requires us to defend them, and it 
does immunize them to a certain amount. But antitrust treble 
damage liability can quite easily go over the amount of the 
risk management plan.
    Mr. Swalwell. Now, Chairman Ohlhausen.
    Darrell Issa and I are the founders and co-chairs of the 
Sharing Economy Caucus. And I was interested in your testimony 
about how smartphones have allowed the development of new ways 
for consumers to use transportation services. Particularly, 
Uber and Lyft are the most widespread platforms. You note that 
some jurisdictions have pursued regulatory approaches that 
would impede the development of new services, often without 
putting forth evidence of a legitimate consumer protection 
justification.
    Could you share some examples of the services targeted and 
the approaches that you have seen used?
    Ms. Ohlhausen. So the FTC has filed competition advocacy 
comments on some of these concerns. So we filed comments on the 
Colorado Public Utilities Commission, District of Columbia 
Taxicab Commission, the City Council of Anchorage, and the City 
Council of Chicago on allowing these kinds of new forms of 
sharing services to exist for consumers. With that being said, 
we certainly are also alert to whether there any consumer 
protection issues that regulation should address. But opening 
it up to competition, certainly, we are in favor of.
    Mr. Swalwell. Sure. So are we.
    Mr. Issa. If the gentleman would yield?
    Mr. Swalwell. I would yield.
    Mr. Issa. I liked your line of questioning. I would only 
share a question with you. If I heard correctly, according to 
Ms. Allen, many States have decided to protect their boards 
exactly as they do every employee, millions of employees that 
work for States. When they make a decision to have someone do 
something on behalf of the government and then decide not to 
treat them like employees for the purpose, wouldn't you say 
that was a decision that each State makes?
    Mr. Swalwell. Sure. And to reclaim my time. I certainly 
respect that. And I think what you are looking for is probably 
when people go outside the scope of employment, if that is the 
relationship that they have. If you go outside the scope of 
employment, then you are not covered as a State employee, and 
then you probably won't be covered on one of these boards. But 
fair point.
    Mr. Issa. I thank the gentleman. It is a good line of 
questioning.
    With that, I believe the next in line is the gentlelady 
from the air-and-water-torn State of Georgia, Mrs. Handel.
    Mrs. Handel. Thank you very much, Mr. Chairman.
    And thank you to my colleague from California for your good 
wishes for everything in Georgia. We still have quite a number 
of people without power, including our own Congressman Collins 
here, so----
    Mr. Collins. I come with my own power.
    Mrs. Handel. He does come with his own power. Believe me, I 
know.
    Thank you very much to the witnesses for being here.
    I am a former secretary of state, and as such, in that 
role, I oversaw some 40 licensing boards. So this is, even 
though I am new, this is a very interesting piece of 
legislation for me.
    So one thing I would like to get at is, for Chairman 
Ohlhausen, as you sent out the guidance on the active 
supervision, what was the response to that, and sort of, has 
there been any action taken? Specifically, what have you heard 
from secretaries of state that may have these licensing boards 
up under them?
    Ms. Ohlhausen. So we had a very productive dialogue with 
the State AGs and other officials about trying to give them the 
guidance that they were seeking post-North Carolina Dental.
    So the response has been positive on it. And as for what 
the States have done, we are actually conducting a survey right 
now to look at what every State who has taken an action, which 
States have taken an action, and what they have done in 
response to the North Carolina Dental case.
    Mrs. Handel. Do you know if secretaries of state have been 
rolled into that, or has it just been the attorneys general?
    Ms. Ohlhausen. So different States do it differently. Some 
AGs, some State legislators----
    Mrs. Handel. Okay. Great. I know, for myself, I took a very 
active role in what was happening with the licensing boards, 
and I will say there are some boards that are really, really 
good. And they come at it with the right perspective for what 
they are trying to do. And it is true that the boards, they can 
only do what they are legislatively directed and instructed to 
do.
    With that said, some did very much--your point--wander into 
what I would call attempts to barrier to entry. And I always 
took that very, very seriously.
    So, Professor Allensworth, what more do you think needs to 
be done in this piece of legislation to make sure that we have 
as open and free market possible out there?
    Ms. Allensworth. Well, I think the first goal of the 
legislation is to increase clarity for States. I think that is 
really, really important. Once States know the lay of the land, 
as made clear by this statute, then they will be able to 
balance the competitive costs of regulations themselves.
    I do think that licensing has gone too far. I think that 
there are lots of occupations that we license that shouldn't be 
licensed at all, and I also think that occupations we do 
license, like medicine, get regulated in a way that is 
inefficient. And I think that all goes back down to who is 
doing that regulation.
    I like this bill because it addresses what I think the real 
problem is, which is that regulatory infrastructure, if we fix 
that, and then we fix the ultimate problem.
    So what more does the bill need? I think I will go back to 
the comments that I said before. I think it would be stronger 
if it didn't have the option of lawsuits because, to me, that 
is not restoring governmental regulation here in place of the 
cartel. It is putting the cartel--vulnerable to a different 
kind of lawsuit and different courts, State courts rather than 
Federal courts. To me, it is sort of a step sideways whereas 
the first option, what I would call the administrative option, 
the active supervision option, actually puts the regulation 
back in the hands of the State. And that will result in, 
somewhat--it is never going to be perfect. You are going to 
have capture. You are going to have regulatory inefficiencies, 
but it is going to make it better, in my opinion.
    Mrs. Handle. Great. Thank you very much.
    To be sure, it is regulation run amuck with some of the 
licensing, but then there are those boards, to your point, that 
are very much needed to strike that right balance.
    So thank you very much. And I yield back, Mr. Chairman.
    Mr. Issa. I thank the gentlelady.
    We now go to the gentlelady from Washington, Ms. Jayapal.
    Ms. Jayapal. Thank you, Mr. Chairman.
    And I really want to thank you and our Ranking Member 
Cicilline for what I think is a very important hearing. And I 
think it has been very reassuring to hear all of the views 
across the board, which is what I have heard from my 
constituents in reaching out about this bill, but also in my 
time in the State senate, where I served on the healthcare 
Committee. We dealt a lot with these licensing issues. And I 
think, from the labor and social services side, the importance 
of licensing, particularly in the health professional--health 
arena and around quality of care and standardization of 
professions, but also then, on the other side, the studies that 
clearly show that too much licensing actually presents enormous 
barriers.
    And certainly with the population that I have worked very 
closely with, immigrant refugee population, we have really had 
to balance a lot of these cultural competency issues. So I hope 
we continue to have those discussions and the right balance 
there, and I appreciate the various perspectives that you have 
brought.
    Now, Ms. Allensworth, I wanted to ask you about Ms. Allen's 
testimony. Ms. Allen argues that our constitutional system 
vests plenary authority on States to protect their citizens 
from fraudulent or unsafe practices by unqualified 
practitioners of vital consumer services, such as medical, 
engineering, or legal services.
    Are you concerned at all that Federal reforms in this area 
might actually disrupt the role of the States in ensuring the 
safety of their citizens?
    Ms. Allensworth. To me, it is quite the opposite. It is 
putting it back in the hands of the States.
    The States have decided for various reasons to, in my 
opinion, abdicate their responsibility to regulate in this 
area. So, while it is true that States have the ability and the 
responsibility to regulate in the public interest, they also 
cannot, according to our antitrust laws, merely hand over 
regulation to self-interested regulators and walk away.
    So that is what this--that is what the North Carolina 
Dental case is about, and that is what this bill is about.
    So I don't think it is an area where the Federal Government 
is being too heavy-handed. I think this is totally appropriate.
    So Chairman Goodlatte said something about how maybe this 
was more effort than it was really worth. And I just wanted to 
say I think Federal interest in this is really appropriate. So 
we are talking about almost a third of American workers. That 
is how many people were covered by unions in the maximum level 
of unionization going back decades.
    I don't think that we would be debating about whether or 
not the Federal Government has a role in regulating how unions 
operate. I think it is a totally appropriate thing, and it 
covers--I mean, today, unions cover many, many fewer than these 
boards cover.
    Ms. Jayapal. Well, I mean, that is interesting perspective, 
and it leads to the next question I was going to ask you, which 
is, in light of the North Carolina Dental case, I mean, does it 
in any way minimize the role for the Federal Government, 
because one could argue that you do have that case, you do have 
regulation that has been set forth, essentially deriving from 
that case?
    Do you feel that the Federal Government really--why do you 
feel that the Federal Government has such a strong role to play 
here?
    Ms. Allensworth. So the Federal Government back in 1890 
created the Sherman Act. And so they are very involved in 
regulating competition, going back 120 years ago. In 1942-1943, 
I believe it was, they came up with this doctrine of immunity. 
And now, to me, this is another piece of legislation in that 
line that--1943 was not a piece of legislation. That was----
    Ms. Jayapal. Yeah.
    Ms. Allensworth [continuing]. To be sure, an interpretation 
of the Sherman Act. But I don't think it is displacing the 
Court's opinion. I think it is rather taking an opportunity to 
come back and say: This is what we mean, at least as far as it 
concerns occupational licensing, this sort of specific problem 
that has cropped up.
    Ms. Jayapal. Thank you. That makes sense.
    Mr. Johnson, Ms. Allen argues in her written testimony that 
States are best suited to determine how to best structure their 
governments and economics in order to protect their citizens. 
How do you respond to that concern?
    Mr. Johnson. Well, I think the concern and the reason that 
the antitrust law has come into play here is that these 
decisions about what to regulate and how are not being made by 
the States. They are being made by boards that are charged by 
the States with regulating their own industries. And that 
brings up huge problems where the members of these industries 
are acting as gatekeepers to competition for their own 
industry.
    Certainly the State legislature lays out a licensing law 
where they say, for instance, that dentists have to be 
licensed. But then the question becomes, well, does the 
practice of dentistry include teeth whitening? And the people 
who get to decide that, under the current system, are dentists.
    And, of course, in State after State after State, they say: 
Well, teeth whitening is dentistry, i.e., there is no health or 
safety justification for excluding unlicensed teeth whiteners. 
And the only reason is to ensure that dentists can make greater 
profits.
    So, absolutely, yes, this is an area where there is a role 
for the States and for the Federal Government. But the problem 
right now is that this is an area where regulation has been 
given to----
    Ms. Jayapal. Thank you.
    Mr. Johnson. Sorry.
    Ms. Jayapal. Thank you. I appreciate that.
    And, again, I am glad we are having this hearing.
    I yield back.
    Mrs. Handel [presiding]. Thank you very much.
    Let me next recognize the gentleman from Georgia.
    Mr. Collins. Thank you, Madam Chair. I appreciate it.
    This is an interesting hearing. I think it is one that, as 
you first look at it, I think this Committee, this Subcommittee 
in particular, has a lot more issues of jurisdiction, 
especially, Ms. Ohlhausen, from what we have talked about 
before, in not just this arena. I think this is a good opening 
to talk about it, but there is a lot more from hearings that we 
could have on truly national issues that I think that I would 
like to see moving forward here.
    I just have some interesting comments. Because being on the 
State legislator level, having--the former secretary of state, 
this is interesting because you talked about active 
supervision. If we define it in this--and the bill I think 
takes a stab at that, but several things that have come out 
sort of this rubber-stamp authorization, if they do it, and 
also this fact of the sort of the antithesis here is the dental 
and the teeth whitening, hair braiding.
    In Georgia, you can be a hair braider if you have 2 hours 
of community--or CLE or business practices, industry trends. I 
mean, what does that mean? Reading a magazine? I mean, and what 
is the health--why would a State do that? And even my own State 
of Georgia does this. But it is interesting.
    Where I want to concentrate for a second is, the majority 
of these State boards are required by State statute to be 
comprised of a majority of currently licensed professionals 
active in the very profession they were regulated in. So most 
States are doing it this way. It brings to a question; it is 
opened up. This is free for all. To determine active 
supervision, we have a secretary of state in some instances, 
but in the State of Georgia, on the very website, it says: We 
do not have any input into the decisions made by these boards.
    They are appointed in Georgia by the Governor. Many of the 
States have a similar aspect, which puts them under the realm 
of executive branch. Attorneys general are the ones, as you 
well know, as I, are the ones that take the cases and have to 
defend. This is an interesting--I know, in Georgia, they would.
    But my question is this: If we roll this back to active 
supervision, and we sort of hit at this at many different 
levels, my question is: I don't believe we need an office of 
anything in most government, State, local, Federal, in 
particular. We need a better understanding of what that means. 
Does that mean the secretary of state should, in these offices, 
if they are under them, actually give administrative support, 
that they are the active supervision, or should there be a 
change in State law? And then if that is true--and I am making 
a long question because I want to hear your answers--how can 
Congress or a State legislature be considered active 
supervision when most have no idea what goes on, or if they do, 
it is only from an outcry?
    So, Ms. Ohlhausen, if you will start, and just sort of 
everybody from there jump in.
    Ms. Allen, I know you have got a position on that but----
    Ms. Ohlhausen. Thank you. You put your finger on some very 
important factors. And in the FTC's guidance to the States 
about what constitutes active supervision, we say the 
supervisor has to obtain the information necessary for a proper 
evaluation.
    We brought a case a number of years ago where there was 
someone who just got a price list and shoved it in a drawer. 
They never looked at it. Have they looked at the substantive 
merits of the action? Did they have a written decision, and do 
they have the ability to overturn what the board has done?
    So, but it is up to the State to decide where that 
authority should lie, whether it is with the attorney general 
or whether it is a board, the only thing we say is the 
supervisor cannot be a market participant, him or herself.
    Mr. Collins. Just a quick yes/no. So, in your answer that 
is out there, I have heard basically you say a State 
legislature could not provide active supervision.
    Ms. Ohlhausen. I think it would be very difficult for a 
State legislature----
    Mr. Collins. Okay. Although they could make rules and 
laws----
    Ms. Ohlhausen. Right.
    Mr. Collins [continuing]. Could change any decision by a 
board.
    Ms. Ohlhausen. Right.
    Mr. Collins. Ms. Allen.
    That is interesting because that brings back--that is a 
whole different line of questioning, Ms. Allen.
    Ms. Allen. I agree with that answer. I don't think the 
State legislature can be the active supervisor.
    But I think, in Virginia and many other States, all the 
health profession boards are under a department of health 
profession. All the other nonhealth boards are under a 
department of professional occupational regulation.
    The directors of those umbrella agencies are State 
employees, and they could very easily be the active supervisor 
for the boards that are under their umbrella agency.
    Mr. Collins. Would they have a veto opinion on those votes?
    Ms. Allen. Yes, absolutely. To be active supervision, you 
have to be able to approve, deny, or modify a board decision. 
And they would have to be--the legislature would have to pass a 
statute to enable them to do it, but they should be able to do 
those things.
    Mr. Collins. That could throw a kink in the cartel world.
    Mr. Johnson.
    Mr. Johnson. I think it is important to understand the act 
here gives flexibility to the States to decide where to put the 
office of supervision. And then the board--or the act refers to 
an office, and they give the impression that there is a 
particular structure for that in mind. But the bill really is 
functional. And it requires that some part of the State 
bureaucracy be charged with supervision, not that it be in 
anywhere in particular in the State.
    Mr. Collins. Ms. Allensworth, a very quick comment.
    Ms. Allensworth. So I see your question, Mr. Collins, as 
basically asking, are they going to do their job? Is this 
supervisor going to help at all? And I don't have an answer to 
that, right?
    How well does this government work? You know better than I 
do, not perfectly all the time.
    Mr. Collins. Well, we could all look at that one.
    Well, but I think here is the point here, and I want to 
finish up with this, and I think--I appreciate--the comments 
have been good here. This actually goes back to a really--from 
the new sharing economy to things we don't know about yet.
    The concern is, is when it comes to the State legislatures 
or to Congress, each of these groups are a voting constituency. 
So, when it comes to that that is the active supervision part.
    And, look, I think there needs to be some licensing. I 
don't think we need as many as we probably have, but there are 
definitely some that need to be there.
    This question--I appreciate Representative Issa bringing 
this up and talking about this from his bill perspective, but I 
think one of the things that we need to do here is, what are we 
doing to actively participate in the marketplace, not restrict 
the marketplace, and find ways that I would like to talk even 
further in bigger arenas on this antitrust issue as we go 
forward. But I think this goes back to say I am very--I see the 
need for this discussion of this legislation, but also it goes 
back to--Ms. Allen, your last comment--State legislators need 
to take an active role in what they are doing, instead of just 
giving carte blanche to a lot of these things, which is, 
unfortunately, happens, due to many multitude of reasons.
    With that, Mr. Chairman, I yield back.
    Mr. Issa [presiding]. Thank you.
    I would like to hear from Mr. Cicilline. The gentleman is 
recognized.
    Mr. Cicilline. I would just ask unanimous consent that a 
statement entitled ``Occupational Licensing: Regulation and 
Competition,'' from a variety of regulatory boards be made part 
of the record.
    Mr. Issa. Without objection, so ordered.
    This material is available at the Committee or on the 
Committee Repository at: http://docs.house.gov/meetings/JU/
JU05/20170912/106382/HHRG-115-JU05-20170912-SD003.pdf
    Let me do a couple quick closing questions.
    Chairman Ohlhausen, you have seen a lot of government, and 
you worked with all kinds of agencies--EPA, OSHA, et cetera. 
Just for purposes of comparing the Federal Government with the 
State of Virginia, the Commonwealth of Virginia: Although the 
Federal Government has all kinds of boards and commissions, for 
the most part, aren't they advisory, in other words, they lack 
the ability to create regulations?
    Ms. Ohlhausen. I think that that varies. So, but I agree 
that there are a lot of advisory boards that play a role----
    Mr. Issa. And so----
    Ms. Ohlhausen [continuing]. In the U.S. Government.
    Mr. Issa [continuing]. In the executive branch of the 
Federal Government--just for purposes of making the record 
clear, and I am using you as my fellow Federal officer here for 
a moment--when you go on a board or commission, even when it is 
advisory, there is a whole slew of ethics protections, 
recusals; you have to file almost every one of these positions; 
even unpaid has to file a full financial reporting so that the 
public has the ability to see if there is a conflict of 
interest, right?
    Ms. Ohlhausen. Yes.
    Mr. Issa. And yet they do not--and we pay money to move 
them. Even if they are not being paid, we supervise them. And 
yet they don't get to create regulations. For the most part, 
the regulations that are created, that Ms. Allen is saying are 
burdensome, are created by the Federal taxpayer through their 
employees? Isn't that correct, from your experience?
    Ms. Ohlhausen. Yes. So the regulations are created through 
the appointed or elected official.
    Mr. Issa. So, when States decide, instead of having an 
advisory board that ultimately the executive branch then, 
through an agency it creates or its legislature creates, 
creates rulemaking, what they are really doing is using, for 
the most part, a volunteer, unpaid group to lower their 
economic costs but not, quite frankly, not that they couldn't 
have those boards and commissions, including the State bar. 
Those could all be advisory with a separate agency of 
government employees who would have no conflicts of interest, 
who would have all the normal requirements actually creating 
the regulations. There is nothing inherently outside of what 
States could do if they were willing to pay the tab. Is that 
right?
    Ms. Ohlhausen. That is right. I think it is up to the 
States to choose.
    Mr. Issa. Okay.
    And so, Professor Allensworth, sort of going to that, 
because you have studied both the Federal and the State, is 
there something wrong in my thinking that, because Ms. Allen 
has very carefully articulated that, although these are 
government people--and I have made clear I think in our 
conversation--that they are not held by the same set of rules 
that government people are because they, obviously, have an 
economic interest in the decisions they make--isn't it really a 
question of any time you use these outside groups you are 
lowering your burden as a State where the Federal Government, 
for the most part, does not lower its burden? It has an 
equivalent group of people, advisers from industries, but it 
doesn't allow them to legislate. It uses federally tax paid 
employees--the FCC, the SEC and so on--to actually regulate and 
then holds them to a very different standard. Is that a fair 
representation? Because I want to set the stage for why we are 
thinking that this legislation may be appropriate, and the 
Court's decision, looking at these conflicts in the North 
Carolina case, was appropriate.
    Ms. Allensworth. So I think that is absolutely right. And 
so a private association, industry association doesn't enjoy 
immunity. They are subject to the Sherman Act. And they can 
have an opinion. They can involve themselves in a rulemaking. 
We know that they do. And sometimes they can be very 
influential on what the Federal Government does.
    But that doesn't mean that they ought not to be answerable 
for the anticompetitive things that they do when they are not 
merely lobbying. And so, if we thought of these boards as 
lobbying and taking a position, that then the State listened 
to, considered, weighed, and, in their wisdom, accepted or 
rejected, that would be a very different circumstance from what 
we have now.
    Mr. Issa. Let me ask you a follow-up question, Professor.
    This part of the bill that I participate in that you seem 
to have concerns about, let me ask you as a question in the 
alternative, if we struck that altogether and there were no 
private right of action and the States had to have active 
supervision and then we discovered that they didn't have active 
supervision or somebody wanted to contest whether they have 
active supervision, you would presume that either the Federal 
Trade Commission or some other entity would sue just as they 
did in the North Carolina Dental case, right?
    Ms. Allensworth. Right. So I think your question is saying 
I am not crazy about the legal option, but doesn't it all boil 
down to legal option; doesn't it all boil down to courts making 
individual decisions in these cases? And I think that that is a 
fair point.
    Any time you have an issue where somebody has failed to 
comply with the statute, that gets worked out, whether or not 
they have or haven't typically gets worked out in a court of 
law.
    I just think that doing it in the first instance through 
the courts may be a less efficient way to get the kind of 
results this bill is looking for.
    Mr. Issa. And I am going to include Ms. Allen, because I 
have been talking around you for a moment, but final question 
for you and then others: If I were to tell you that my wish is 
that no State would choose the second option, that every State 
would look and say, ``We've given you a definition of active 
supervision, and we really wish you would choose it, but under 
the concept of federalism, if you do not do it, rather than 
automatically say, `Well, we will wait for a challenge from 
perhaps the FTC because you didn't do active supervision,' we 
are going to have this other option,'' is there something 
inherently wrong with that, presuming that we really do want 
everyone to have active supervision, but we know that, out of 
50 States, there just might be somebody who doesn't get around 
to it?
    Ms. Allensworth. So I don't think there is anything 
inherently wrong with it, and that has to do with what we have 
under the status quo. What we have under the status quo is 
ambiguous vulnerability of these boards to Federal antitrust 
lawsuits.
    And so I see the second option as being maybe as good as 
that. And that is something that I was happy to see happen in 
2015. So I am not against that. I just think this other one is 
superior.
    So your hope that everyone takes the superior one I think 
is good. I also think they are more likely to take it. The 
States are not going to want to hand over control of their 
boards to their judiciary. They are probably going to want to 
keep it within the executive round.
    Mr. Issa. Nobody is going to want to be on a board that is 
in that situation, particularly if they are in a State that 
doesn't fully indemnify them.
    Ms. Allensworth. Well, that is also true.
    Mr. Issa. Ms. Allen, your final comments.
    Ms. Allen. I think most States actually want active 
supervision following North Carolina Dental.
    I think the problem is that, even under the current case 
law, many States haven't been able to get their legislatures to 
pass a bill.
    I think this bill respectfully creates even more hurdles 
for a State to meet than they do under current case law. And so 
I think States are just going to take the option of doing the 
cost-benefit analysis and chancing it in court.
    Mr. Issa. Well, Mr. Johnson, that leaves it up to you. What 
do you think about first option, second option, and so on?
    Mr. Johnson. Well, so I do want to speak briefly in favor 
of the second option. I think that there are merits to the 
first option. I also think there are merits to the second. And 
Professor Allensworth alluded very briefly to the concept of 
regulatory capture, which is just that, when you have 
bureaucrats whose job is to regulate a particular agency, it 
often happens that those bureaucrats end up being aligned with 
the industry that they regulate. And we see that constantly.
    So the plus to an option that puts the responsibility for 
supervision in the courts is that courts are far less subject 
to regulatory capture because judges are generalists. They 
regulate everybody. They don't regulate a particular industry.
    So, as a litigator, my perspective is that you often get 
better results out of the courts than you do out of the 
legislative or--not the legislative, than you do the 
administrative process.
    I think that perhaps there are different views on that, but 
I think one of the----
    Mr. Issa. The conservative arguing for the plaintiffs' bar.
    Mr. Johnson. Yeah, one of the benefits of the bill though 
is it ultimately leaves that choice up to the States. So 
perhaps some States choose the administrative option; some 
States choose the judicial option. Well, let's see. Maybe some 
of them will have better results than the others, and then we 
will actually know which is the better way to do it.
    Mr. Issa. Thank you. I might note that, in a book I wrote 
some time ago, I noted that the father and son team that came 
aboard the Deepwater Horizon one morning and gave it a clean 
bill of health had breakfast with some of their cousins and 
then left before that ill-fated rig blew up were probably part 
of a captive entity known as the Minerals Management Service.
    So it happens. There is no question at all. And you are 
right. At least for British Petroleum, it was the private right 
of action that caused them to take steps so that it will never 
happen again, hopefully.
    Chairman, you are the one government person. You filled out 
all those financial reporting things. You have lived up to all 
those onerous things, and you have done it on a limited salary, 
so you get to close.
    Ms. Ohlhausen. Thank you so much. And what I would say is 
that I think that, to the extent the bill is giving States an 
option that will improve their oversight of these boards, I 
think it is a very positive development.
    Mr. Issa. Mr. Cicilline, any final remarks?
    The gentleman is recognized.
    Mr. Cicilline. Thank you. I just want to follow up on 
Chairman Issa's question.
    With respect to the second part of the bill, the judicial 
review part, I mean, if in fact the bill had the first 
requirement, the active supervision, and a procedure to be sure 
that it is being followed, States would either be required to 
do that or their board--I mean, that is in order to earn 
immunity. So, if they didn't do it, they would expose their 
board members to litigation and treble damages, and presumably 
that would be enough of an incentive. If you think that the 
regulatory role of this board is important, you want to 
actually be able to staff the board with individuals.
    So I do wonder whether the judicial component will invite 
more uncertainty. And to Professor Allensworth's point, maybe 
it will be no worse than the current situation in terms of 
ambiguity. But having a clear requirement in the legislation 
that says, ``You must provide supervision in this way and a 
system to ensure it is happening in order to get the immunity, 
and if you don't, you don't get the immunity,'' it is sort of 
very clear. And isn't that a better system than inviting a 
whole judicial review subject to all kinds of hopes, dreams, 
and advocacy? Both you, sir, and Professor Allensworth.
    Mr. Johnson. I think, from the perspective of the antitrust 
laws, either option provides clarity. From the perspective of 
the antitrust laws, if the State has satisfied the requirements 
of section 5 or the requirements of section 6, either way, the 
State is entitled to immunity under the antitrust laws, and 
that is kind of case closed.
    The sort of uncertainty is, well, if you go with the 
bureaucratic administrative option, will it work? If you go 
with the judicial option, will that work? And that is sort of 
the devil is in the details. It depends on how the States 
implement it.
    But my prediction would be that the States that go with the 
judicial option will actually see better results. Perhaps 
Professor Allensworth's prediction is the opposite.
    I think that is an interesting experiment. I would rather 
see that experiment run than to not give the States the option 
to choose.
    Ms. Allensworth. I agree, especially with the last couple 
things that Mr. Johnson said. We do have different priors on 
this as to which works better, but I also think it is an 
interesting experiment and maybe would like to see it run.
    I would like to add one more comment about the judicial 
review option. And here is where my objection to that kind of 
dovetails with my objection to the least restrictive 
alternative analysis.
    So that itself is very uncertain. The least restrictive 
alternative sounds great. Can we do the same thing with less 
injury to competition? But it is almost never true that the 
alternative does the exact same thing as the first thing. And 
so this least restrictive alternative analysis is a bit 
unwieldy, and it is difficult for courts to do, especially on 
an ad hoc kind of basis.
    Mr. Cicilline. Thank you. I yield back.
    Mr. Issa. Thank you. To be continued.
    What I heard today was you would all like legislation; 
perhaps some less. But I think, even for Ms. Allen, I didn't 
hear that the status quo is delightful in the current 
environment.
    So, recognizing that I have three who like the legislation, 
at least partially, and one who would like legislation but 
perhaps not this legislation, I look forward to getting Mr. 
Cicilline onto this bill with such modifications as may be 
necessary to get his buy-in.
    And, with that, we stand adjourned.
    [Whereupon, at 4:37 p.m., the Subcommittee was adjourned.]
    
    
    
    
    
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