ARTICLE CARTELS BY ANOTHER NAME: SHOULD LICENSED OCCUPATIONS FACE ANTITRUST SCRUTINY? AARON EDLIN† & REBECCA HAW†† It has been over a hundred years since George Bernard Shaw wrote that “[a]ll professions are a conspiracy against the laity.” Since then, the number of occupations and the percentage of workers subject to occupational licensing have exploded; nearly one-third of the U.S. workforce is now licensed, up from five percent in the 1950s. Through occupational licensing boards, states endow cosmetologists, veterinary doctors, medical doctors, and florists with the authority to decide who may practice their art. It cannot surprise when licensing boards comprised of competitors regulate in ways designed to raise their profits. The result for consumers is higher prices and less choice, as licensing raises wages by eighteen percent and bars competition from unlicensed workers. For African-style hair braiders, the result is either an illicit business or thousands of hours of irrelevant training imposed by a cosmetology board. For lawyers, the result is less competition from tax accountants, paralegals, and out-of-state lawyers. The Sherman Act’s great accomplishment has been to make cartels per se illegal and relatively scarce—unless the cartel is managed by a professional licensing board. Most jurisdictions consider such boards, as state creations, exempt from antitrust scrutiny by the state action doctrine, leaving would-be competitors and consumers no recourse against their cartel-like activity. † Richard Jennings Professor of Law and Professor of Economics, University of California, Berkeley; Research Associate, National Bureau of Economic Research; J.D., Stanford University; Ph.D., Economics, Stanford University. †† Professor of Law, Vanderbilt University Law School; J.D., Harvard University. We thank Einer Elhauge, Prasad Krishnamurthy, and Carl Shapiro for helpful comments. We also thank James Blumstein for comments on a previous draft and Sean Ryan for excellent research assistance. (1093) 1094 University of Pennsylvania Law Review [Vol. 162: 1093 We contend that the state action doctrine should not prevent antitrust suits against state licensing boards that are comprised of private competitors deputized to regulate and to outright exclude their own competition, often with the threat of criminal sanction. At most, state action should immunize licensing boards from the per se rule and require plaintiffs to prove their cases under the rule of reason. We argue that the Fourth Circuit’s recent decision, soon to be reviewed by the Supreme Court, to uphold a Federal Trade Commission (FTC) antitrust suit against a licensing board—denying state action immunity to a licensing board and thereby creating a circuit split—was a step in the right direction but did not go far enough. The Supreme Court should take the split as an opportunity to clarify that when competitors hold the reins to their own competition, they must answer to Senator Sherman. INTRODUCTION ............................................................................ 1095  I. OCCUPATIONAL LICENSING BOARDS: THE NEW CARTELS ....... 1102  A. The Scope of Professional Licensing: Big and Getting Bigger ............ 1102  B. The Anticompetitive Potential of Occupational Licensing ................. 1104  1. The New “Professions” ..................................................... 1104  2. Old Professions, New Restrictions ...................................... 1107  II. THE ROAD TO PROFESSIONAL CARTELIZATION ....................... 1111  A. The Economics of Licensing .......................................................... 1111  1. The Costs of Licensing: Higher Prices, Lower Quantity ..... 1112  2. The Benefits of Licensing: Improved Quality? .................... 1116  B. The Legal Landscape of Professional Licensing ................................ 1118  1. Twin Immunities Shield State Licensing Boards from Antitrust Liability ............................................................. 1118  a. Parker and State Action Immunity ................................... 1119  b. Noerr and Petitioning Immunity ....................................... 1121  c. Immunity for Professional Licensing Boards Under Parker and Noerr ........................................................... 1121  2. The Common Route to Challenging State Licensing Restraints: Due Process and Equal Protection .................... 1127  III. THE NORMATIVE CASE: WHY SHERMAN ACT LIABILITY FOR STATE LICENSING BOARDS IS A GOOD IDEA ............................ 1131  A. Antitrust Liability for Professional Licensing: An Economic Standard for Economic Harm ................................... 1131  1. Sherman Act Policy and the Competitive Harm of Licensing: A Close Fit ....................................................... 1132  2. Constitutional Suits and Their Limited Ability to Protect Consumers ............................................................ 1134 2014] Cartels by Another Name 1095 B. Antitrust Federalism: Its Modern Justifications and Applicability to Sherman Act Liability for Licensing Boards .................................... 1136  1. The Parker Debate: Accountability Is Key ........................... 1136  2. State Licensing Boards: Self-Interested and Unaccountable Consortiums of Competitors ....................... 1139  IV. THE MECHANICS OF ANTITRUST LIABILITY FOR STATE LICENSING BOARDS ................................................................ 1144  A. Imagining a New Regime ........................................................... 1145  1. The Standard: Rule of Reason as Applied to Licensing ...... 1145  2. The Parties: Standing to Sue and Available Damages ......... 1150  3. The Defense: Boards as Single Entities? ............................. 1153  B. Possible State Responses and Their Likely Effects ............................ 1154  1. Actively Supervising Board Activity .................................. 1154  2. Changing Board Composition ............................................ 1155  3. Moving Licensing to the Interior of State Government ...... 1155  CONCLUSION ................................................................................. 1156  APPENDIX: FLORIDA ...................................................................... 1157  APPENDIX: TENNESSEE ................................................................. 1161  “All professions are conspiracies against the laity.” George Bernard Shaw The Doctor’s Dilemma (1906) INTRODUCTION The Sherman Act has had one principal success: cartels and their smoke- filled rooms, where competitors agree to waste economic resources for their own industry’s benefit, are unambiguously and uncontroversially illegal in the United States1—unless that industry is a profession and that cartel is a state licensing board. Although often overlooked, licensing boards have become a massive exception to the Act’s ban on cartels. Licensing boards are largely dominated by active members of their respective industries who meet to agree on ways to limit the entry of new 1 15 U.S.C. §§ 1–7 (2012) (“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”). The loud and lively debate about the Sherman Act’s reach beyond this uncontroversial core tends to obscure this simple yet powerful success of § 1. 1096 University of Pennsylvania Law Review [Vol. 162: 1093 competitors.2 Some boards use their power to limit price competition or restrict the quantity of services available.3 But professional boards, unlike cartels in commodities or consumer products, are sanctioned by the state— even considered part of the state4—and so are often assumed to operate outside the reach of the Sherman Act under a line of Supreme Court cases starting with Parker v. Brown.5 When only about five percent of American workers were subject to licensing requirements during the 1950s,6 the anticompetitive effect of these state- sanctioned cartels was relatively small. Now, however, nearly a third of American workers need a state license to perform their job legally, and this trend toward licensing is continuing.7 The service sector—the most likely to be covered by licensing—has grown enormously, with its share of nonfarm employment growing from roughly 40% in 1950 to over 60% in 2007.8 Some recent additions to the list of professions requiring licenses include lock- smiths,9 beekeepers,10 auctioneers,11 interior designers,12 fortune tellers,13 tour guides,14 and shampooers.15 Many boards have abused their power to insulate incumbents from com- petition. Cosmetologists, for example, are required, on average, to have ten 2 See Morris M. Kleiner, Occupational Licensing, 14 J. ECON. PERSP. 189, 191 (2000) (defining occupational licensing and explaining the composition of state licensing boards); see also infra text accompanying notes 49-50 and Appendix. 3 See MORRIS M. KLEINER, LICENSING OCCUPATIONS: ENSURING QUALITY OR RE- STRICTING COMPETITION? 65-96 (2006) (discussing occupational regulations’ ability to restrict supply and the implications of practitioner earnings). 4 See Benson v. Ariz. St. Bd. of Dental Exam’rs, 673 F.2d 272, 275 (9th Cir. 1982) (explaining that the Board of Dental Examiners is “a state agency” due to state statutes that, among other things, “establish the Board”). 5 317 U.S. 341, 351 (1943) (“The Sherman Act makes no mention of the state as such, and gives no hint that it was intended to restrain state action or official action directed by a state.”). 6 KLEINER, supra note 3, at 1. 7 See Morris M. Kleiner & Alan B. Krueger, Analyzing the Extent and Influence of Occupational Licensing on the Labor Market, 31 J. LAB. ECON. S173, S198 (2013) (estimating that, as of 2008, 29% of U.S. workers were licensed and noting that licensing is a growing phenomenon in the U.S. economy). 8 See Marlene A. Lee & Mark Mather, U.S. Labor Force Trends, POPULATION BULL., June 2008, at 3, 7, available at http://www.prb.org/pdf08/63.2uslabor.pdf. 9 Stephanie Simon, A License to Shampoo: Jobs Needing State Approval Rise, WALL ST. J., Feb. 7, 2011, at A1. 10 Walter Gellhorn, The Abuse of Occupational Licensing, 44 U. CHI. L. REV. 6, 6 (1976). 11 Dick Carpenter & Lisa Knepper, Op-Ed., Do Barbers Really Need a License?, WALL ST. J., May 11, 2012, at A13 12 Clark Neily, Op-Ed., Watch Out for that Pillow, WALL ST. J., Apr. 1, 2008, at A17. 13 Emily Sweeney, Town Rebuffs Fortune-Teller, Citing Residency Law, BOS. GLOBE, May 9, 2004, at W1. 14 J. Freedom du Lac, Regulating the Right to Talk to Customers?, WASH. POST, Sept. 27, 2010, at B1. 15 Simon, supra note 9. 2014] Cartels by Another Name 1097 times as many days of training as Emergency Medical Technicians (EMT) must have.16 In Alabama, unlicensed practice of interior design was a criminal offense until 2007.17 In Oklahoma, one must take a year of course- work on funeral service (including embalming and grief counseling) just to sell a casket, while burial without a casket at all is perfectly legal.18 Even traditionally licensed occupations, the so-called learned professions, use licensing restrictions to repress competition. For example, all states impose some restrictions on lawyer advertising, and some even prevent truthful claims about low prices.19 In many states, dentists cannot legally employ more than two hygienists each, a restriction that raises demand for den- tists.20 And in some states, nurse practitioners must be supervised by a physician,21 even though studies show that nurse practitioners and physicians provide equivalent quality of care where their practices overlap.22 16 See DICK M. CARPENTER II ET AL., INST. FOR JUSTICE, LICENSE TO WORK: A NATIONAL STUDY OF BURDENS FROM OCCUPATIONAL LICENSING 29 (2012) [hereinafter LICENSE TO WORK], available at http://www.ij.org/images/pdf_folder/economic_liberty/occupational_licensing/ licensetowork.pdf (reporting that states require an average of 33 days of training for EMTs, but 372 days for cosmetologists). Arkansas, for instance, requires 28 days of training for EMTs and 350 days for cosmetologists. Id. at 42-43. 17 Neily, supra note 12. 18 See Powers v. Harris, 379 F.3d 1208, 1211-13 (10th Cir. 2004) (outlining the regulatory scheme for the funeral industry in Oklahoma). 19 See LEXISNEXIS, 50 STATE SURVEYS OF STATUTES & REGULATIONS: ATTORNEY ADVERTISING (Mar. 2013) (“Every state regulates the advertising of its attorneys.”); see also OHIO RULES OF PROF’L CONDUCT R. 7.1 cmt. 4 (2012) (“Characterization of rates or fees chargeable by the lawyer or law firm such as ‘cut rate,’ ‘lowest,’ ‘giveaway,’ ‘below cost,’ ‘discount,’ or ‘special’ is misleading.”). 20 See J. NELLIE LIANG & JONATHAN D. OGUR, BUREAU OF ECON. STAFF REP. TO THE F.T.C., RESTRICTIONS ON DENTAL AUXILIARIES: AN ECONOMIC POLICY ANALYSIS 6 & n.6 (1987), available at http://www.ftc.gov/sites/default/files/documents/reports/restrictions- dental-auxiliaries/232032.pdf (noting that restrictions generally allow dentists to employ between one and three hygienists). 21 See SHARON CHRISTIAN & CATHERINE DOWER, CAL. HEALTHCARE FOUND., SCOPE OF PRACTICE LAWS IN HEALTH CARE: RETHINKING THE ROLE OF NURSE PRACTITIONERS 3 (2008), available at http://www.chcf.org/~/media/MEDIA%20LIBRARY% 20Files/PDF/S/PDF%20ScopeOfPracticeLawsNursePractitionersIB.pdf (noting that thirty states require at least some degree of physician supervision or collaboration); Tracy A. Klein, Scope of Practice and the Nurse Practitioner: Independent, Collaboration, Supervision: How Is Your Scope Regulated?, MEDSCAPE, http://www.medscape.org/viewarticle/506277_5 (last updated Oct. 19, 2007) (“[Twenty-three] states require no physician involvement for the licensed [Nurse Practitioner] to diagnose and treat, while the remainder of states require some degree of written or formal physician involvement in [Nurse Practitioner] practice.”). 22 CHRISTIAN & DOWER, supra note 21, at 6 (listing multiple studies finding no material difference in quality of care); Morris M. Kleiner et al., Relaxing Occupational Licensing Require- ments: Analyzing Wages and Prices for a Medical Service (Nat’l Bureau of Econ. Research, Working Paper No. 19906, 2014), available at http://www.nber.org/papers/w19906. 1098 University of Pennsylvania Law Review [Vol. 162: 1093 Labor economists have shown that the net effect of licensing on quality is equivocal.23 What is not equivocal, according to their empirical studies, is the effect of licensing on consumer prices. Morris Kleiner, the leading economist studying the effects of licensing on price and quality of service, estimates that licensing costs consumers $116 to $139 billon every year.24 And consumers are not the only potential losers, since more licensing means fewer jobs.25 All this said, we do not claim that all licensing rules are harmful. Some no doubt improve service quality and public safety enough to justify the costs. Our point is that many do not. Thanks in part to a spate of stories in mainstream news outlets like The New York Times,26 The Wall Street Journal,27 NPR,28 and even The Daily Show,29 politicians are taking notice of the growing problem with licensing. In early 2013, Massachusetts Governor Deval Patrick announced a set of “common-sense changes in the Division of Professional Licensure” designed to improve the business climate in the state.30 Governor Patrick only proposed modest changes,31 perhaps because an attempt at more dramatic licensing reform by Florida Governor Rick Scott failed in 2011.32 The White 23 See CAROLYN COX & SUSAN FOSTER, BUREAU OF ECON., FTC, THE COSTS AND BENE- FITS OF OCCUPATIONAL REGULATION 21-27, 40 (1990), available at http://www.ramblemuse.com/ articles/cox_foster.pdf (“The empirical findings indicate that mandatory entry requirements of licensing cannot necessarily be relied upon to raise the quality of service or decrease the overpre- scription of treatment.”). 24 KLEINER, supra note 3, at 115. 25 See Kleiner & Krueger, supra note 7, at S178 (noting studies that have found that licensing restricts the supply of workers). 26 See Jacob Goldstein, So You Think You Can Be a Hair Braider..., N.Y. TIMES MAG., June 17, 2012, at 20 (discussing the burdens of licensing requirements on certain low- to moderate-income occupations). 27 See Simon, supra note 9 (citing the efforts of cat groomers, tattoo artists, tree trimmers, and other specialists to increase regulations in their fields). 28 Why It’s Illegal to Braid Hair Without a License, NPR (June 12, 2012), http://www.npr.org/ blogs/money/2012/06/21/154826233/why-its-illegal-to-braid-without-a-license (telling the story of one Utah woman who was forced to abandon her business). 29 The Braidy Bill, DAILY SHOW WITH JON STEWART (June 3, 2004), http:// www.thedailyshow.com/watch/thu-june-3-2004/the-braidy-bill (parodying the potential harm from “illegal braiders”). 30 Press Release, Massachusetts Office of the Governor, Governor Patrick Builds on Regula- tory Reform Successes; Files Legislation to Improve Business Climate for Licensed Professionals (Jan. 7, 2013), http://www.mass.gov/governor/pressoffice/pressreleases/2013/0107-regulatory-reform.html. 31 Governor Patrick proposed merging the electrology and barbering boards and eliminating the Board of Radio and Television Technicians. Id. 32 See Chip Mellor & Dick Carpenter, Op-Ed., Want Jobs? Cut Local Regulations, WALL ST. J., July 28, 2011, at A15 (criticizing the Florida legislature for rejecting Governor Scott’s proposal to deregulate twenty occupations). Michigan Governor Rick Snyder has made similar proposals. See Carpenter & Knepper, supra note 11 (referencing Governor Snyder’s April 2012 proposal to abolish eighteen occupational licenses and eliminate nine licensing boards). 2014] Cartels by Another Name 1099 House has also taken a stand against excessive licensing. In 2011, President Obama named Alan Krueger, a labor economist whose empirical work highlights some of the anticompetitive effects of licensing, as Chair of the President’s Council of Economic Advisers.33 Krueger has written that licensing has gone too far and become a way to restrict labor supply.34 First Lady Michelle Obama has successfully lobbied twenty-two states to approve legislation that recognizes out-of-state licenses held by military spouses as a part of her “Joining Forces” initiative.35 Even Congress has started to pay attention. In 2010, Congress commissioned a report on the effect of healthcare worker licensing on the affordability of care; the report advised streamlining license requirements and allowing for interstate reciprocity.36 Despite wide recognition of the potential for economic harm associated with allowing professions to control their licensing rules and define the scope of their art, real reform is elusive. Part of the reason is that, in the professional licensing context, the most powerful legal tool against anticom- petitive activity appears unavailable. Most jurisdictions interpret antitrust federalism to shield licensing boards from the Sherman Act despite the fact that the boards often look and act like § 1’s principal target. Other avenues for reform, including constitutional suits asserting the rights of would-be professionals, have done little to slow or reverse the trend toward cartelized labor markets. Last year, in North Carolina State Board of Dental Examiners v. FTC,37 the Fourth Circuit upheld an FTC decision finding a state licensing board liable for Sherman Act abuses, becoming the only appellate court to expose a licensing board to antitrust scrutiny and thereby creating a circuit split. The case is a step in the right direction, but it does not go far enough because the court could be seen as relying on the method of appointment to 33 See Press Release, White House, Remarks by the President in Announcing his Nomination of Alan Krueger for Chair of CEA (Aug. 29, 2011), http://www.whitehouse.gov/the-press- office/2011/08/29/remarks-president-announcing-his-nomination-alan-krueger-chair-cea. 34 See, e.g., Alan B. Krueger, Do You Need a License to Earn a Living? You Might Be Surprised at the Answer, N.Y. TIMES (Mar. 2, 2006), http://www.nytimes.com/2006/03/02/business/yourmoney/ 02scene.html. 35 See EXEC. OFFICE OF THE PRESIDENT, MILITARY SKILLS FOR AMERICA’S FU- TURE: LEVERAGING MILITARY SERVICE AND EXPERIENCE TO PUT VETERANS AND MILITARY SPOUSES BACK TO WORK 20-21 (2012), available at http://www.whitehouse.gov/ sites/default/files/docs/veterans_report_5-31-2012.pdf (detailing the scope of the problem and the White House’s response). 36 U.S. DEP’T OF HEALTH & HUMAN SERVS., HEALTH LICENSING BOARD REPORT TO CONGRESS 31 (2010), available at http://www.hrsa.gov/ruralhealth/about/telehealth/licenserpt10.pdf. 37 717 F.3d 359 (4th Cir. 2013). 1100 University of Pennsylvania Law Review [Vol. 162: 1093 the board—not just on the identity of its members as competitors.38 The Supreme Court has now granted certiorari; we urge the Court to take this opportunity to hold boards composed of competitors to the strictest version of its test for state action immunity, regardless of how the board’s members are appointed. In particular, the Court should make clear that, just like the wine producers in Midcal, competitor-dominated boards that regulate their own competition and the entry of competitors will be treated as private actors and subject to antitrust review unless their acts are both (1) pursuant to the state’s clearly articulated purpose to displace competition and (2) subject to active state supervision.39 Where a board fails either prong of this test, courts should subject the board’s actions to antitrust scrutiny under a modified rule of reason. Our proposal recognizes the potential benefits of licensing—preventing charlatanism and injury to the public—but rejects the idea that the potential benefits justify total antitrust immunity for licensing. We advocate for an approach that uses the potential benefits to influence how restrictions will be reviewed, not whether they will be reviewed at all. Although our proposal involves a shift in the dominant interpretation of state action doctrine, it does not require any change in Supreme Court precedent, and the Supreme 38 The majority in North Carolina State Board of Dental Examiners agreed with the FTC that “state agencies ‘in which a decisive coalition (usually a majority) is made up of participants in the regulated market,’ who are chosen by and accountable to their fellow market participants, are private actors and must meet both Midcal prongs.” Id. at 368. The majority did not explicitly decide whether a board should be treated as private actors if a “decisive coalition . . . is made up of participants in the regulated market” but chosen by the governor, for example, as is true of the vast majority of boards we survey in our Appendix. And, in fact, elsewhere in the opinion, the majority leaves out the method of appointment. Id. at 375. (“At the end of the day, this case is about a state board run by private actors in the marketplace taking action outside of the procedures mandated by state law . . . .”). Judge Barbara Keenan, in contrast, makes clear in her concurrence that, as she understands the court’s decision, the selfish financial interest of the board members as market participants would not alone make them private actors subject to antitrust review; instead, according to the concurrence, the court’s holding “turn[ed] on the fact that the members of the Board, who are market participants, are elected by other private participants.” Id. at 376 (Keenan, J., concurring). Our reading, however, is that the majority was careful not to decide a case that was not before them, such as a case in which a financially interested board is appointed by a governor, rather than elected by other financially interested market participants. If the majority had decided that the dental board’s method of appointment were critical, the majority could have been explicit about that and thus eliminated the need for a concurrence. The best reading is that the majority simply did not decide this important question because it did not need to in the case before the court. That said, under the Fourth Circuit’s opinion in North Carolina State Board of Dental Examiners, there is ample room for boards to argue that they are not private actors so long as they are appointed by the state without any election. 39 Cal. Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980) (ex- plaining the two standards—namely, state articulation and supervision—for antitrust immunity). 2014] Cartels by Another Name 1101 Court’s unanimous opinion last term in FTC v. Phoebe Putney Health System, Inc. demonstrated its appetite for stopping cartel-like abuses of antitrust immunity.40 The time is right to take action. This Article proceeds in five parts. Part I details the expansion of licensing in the United States and gives examples of its excesses. Part II explains how the current crisis arose, first summarizing the economics of licensing and then surveying the legal landscape that allowed its relatively unfettered expansion. Part III makes our normative case for imposing Sherman Act liability on state licensing boards, arguing that there is a logical fit between antitrust policy and the economic harm of heavy-handed licensing require- ments. We also address antitrust federalism, claiming that deference to state decisionmaking is especially difficult to justify in the context of occupational licensing. Part IV details the mechanics of the alternative system we pro- pose. We suggest that in the licensing context, the rule of reason should be modified to allow defendants to justify their restraint with the argument that less competition (of certain kinds) benefits consumers in the regulated labor market because it will improve public safety and the quality of service provided, an argument that is traditionally out of bounds in § 1 cases. Part 40 133 S. Ct. 1003 (2013). In Phoebe Putney, a local government entity (the Hospital Authority of Albany-Dougherty County) purchased a hospital, changing the local market from one with two competing hospitals to one with a single monopolistic provider of acute-care hospital services. The purchase was possible because the state of Georgia had granted the Hospital Authority a variety of powers, including the power to buy hospitals. Because Town of Hallie v. City of Eau Claire previously held that sub-state governmental entities do not require supervision to trigger antitrust immunity, 471 U.S. 34, 43 (1985), the question in Phoebe Putney was whether the state had clearly articulated a policy of displacing competition through an anticompetitive merger when it granted the Hospital Authority the power to buy hospitals. 133 S. Ct. at 1009. The Court held that the state had not done so, reasoning that although the Authority was entrusted with providing medical care and acquiring the means to provide medical care (which may involve purchasing hospitals), those powers can be exercised without raising competitive issues. Id. at 1012. Therefore, the grant of those powers did not implicitly and necessarily contemplate anticompetitive use. Id. at 1014. The Court also emphasized that state action exemptions should be disfavored, quoting its prior language from FTC v. Ticor Title Insurance Co., to this effect. Id. at 1010 (“[S]tate-action immunity is disfavored, much as are repeals by implication.” (quoting FTC v. Ticor Title Ins. Co., 504 U.S. 621, 636 (1992))). To the extent that licensing board cases are about supervision, which is our focus here, Phoebe Putney’s relevance to state action immunity for licensing boards is indirect. The case mainly demonstrates an appetite for narrow readings of the state action doctrine and a reiteration of Ticor’s language that state action immunities are disfavored. We argue, however, that the FTC’s success in arguing that the “clear articulation” prong was not met would be much more difficult in the context of professional licensing. Unlike the authority to purchase hospitals, the state-granted ability to restrict professional entry and practice will almost always have an anticompetitive effect. Thus, we do not see Phoebe Putney as widening the path for challenges to licensing board immunity. Rather, the battleground in the case of occupational boards remains the supervision prong under Midcal. Still, Phoebe Putney is in the spirit of narrowing state action immunity and reiterates that state action immunity is disfavored. In that sense, it accords with our thesis. 1102 University of Pennsylvania Law Review [Vol. 162: 1093 IV then discusses the parties, damages, and defenses that would be involved in a licensing board suit and speculates about likely state responses to the new system. I. OCCUPATIONAL LICENSING BOARDS: THE NEW CARTELS Once limited to a few learned professions, licensing is now required for over 800 occupations.41 And once limited to minimum educational require- ments and entry exams, licensing board restrictions are now a vast, complex web of anticompetitive rules and regulations. The explosion of licensing and the tangle of restrictions it has created should worry anyone who believes that fair competition is essential to national economic health. A. The Scope of Professional Licensing: Big and Getting Bigger State-level occupational licensing is on the rise. In fact, it has eclipsed unionization as the dominant organizing force of the U.S. labor market. While unions once claimed 30% of the country’s working population, that figure has since shrunk to below 15%.42 Over the same period of time, the number of workers subject to state-level licensing requirements has doubled; today, 29% of the U.S. workforce is licensed and 6% is certified by the government.43 The trend has important ramifications. Conservative esti- mates suggest that licensing raises consumer prices by 15%.44 There is also evidence that professional licensing increases the wealth gap; it tends to raise the wages of those already in high-income occupations45 while harming low-income consumers who cannot afford the inflated prices. The expansion of occupational licensing has at least two causes. First, as the U.S. economy shifted away from manufacturing and toward service industries, the number of workers in licensed professions swelled, accounting for a greater proportion of the workforce. Second, the number of licensed 41 KLEINER, supra note 3, at 5. 42 Kleiner, supra note 2, at 190. 43 Kleiner & Krueger, supra note 7, at S176, S177 fig.1, S182. 44 Id. at S179 (“[E]stimates of . . . state licensing’s influence on wages with standard labor market controls show a range from 10% to 15% for higher wages associated with occupational licensing.”). 45 See Kleiner, supra note 2, at 194-96 (calculating the extent to which licensing affects wages); see also Timothy R. Muzondo & Bohumir Pazderka, Occupational Licensing and Professional Incomes in Canada, 13 CAN. J. ECON. 659, 666 (1980) (performing a regression analysis and finding that licensing restrictions confer benefits to employees in educated professions); Robert J. Thornton & Andrew R. Weintraub, Licensing in the Barbering Profession, 32 INDUS. & LAB. REL. REV. 242, 248 (1979) (finding that minimum education requirements may “exclud[e] significant numbers from entering the trade”).