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Monday, February 10, 2014

The FTC: Unpopular champion of the free market

By Dr. Matthew B. Candelaria

Most of us in the United States believe in the values of the free market. We believe that the "invisible hand" of competition can help keep prices low and supply high for quality goods and services.

However, when the invisible hand of competition isn't doing its job, it's up to the very visible hand of the Federal Trade Commission (FTC) to step in and promote fair competition on a more level playing field. However, these actions rarely make the FTC any friends, and often get it labeled as a fascist organization.

So, not letting music teachers compete is a "free" market?

FTC decisions are thought to reduce free market competition
FTC music teacher hiring ethis are controversial
One of the FTC's recent actions that got it labeled "fascist" is its legal complaint against the Music Teachers National Association (MTNA). The FTC took issue with the organization's language in its code of ethics stating, "The teacher shall respect the integrity of other teachers’ studios and shall not actively recruit students from another studio." This language was added to the code of ethics in 2004, and, according to the FTC, stifles competition among music teachers.

On the face of it, this seems pretty clear. If you can't see it, consider a similar code that said Wal-Mart wasn't allowed to market to Target customers. Pretty clear limitation of competition, right?

But that isn't the way many in the blogosphere saw it. Here's how Kim Strassel at the Wall Street Journal described the situation: "Every month, it seems, brings a new story of this presidency leveling the intimidating powers of the federal government against some law-abiding citizen. Now comes a terrifying tale of how the Federal Trade Commission, a governmental Goliath, crushes an average David—because it can."

Bloggers in less high places had even harsher things to say, "This is how our country is being turned into a police state. One group at a time. Now it is the piano teachers who teach our kids. Why not lock them up? Come on guys, just do it."

It's also worth noting that in a similar action, the FTC also targeted the California Association of Legal Support Professionals, which said its members couldn't offer discounts when soliciting business from another firm, speak disparagingly of other members, or try to hire someone working at another firm without first notifying the firm. This action didn't seem to ruffle anyone's feathers.

FTC "hypocrisy" and teeth whitening action

The FTC recently made a high-profile action against a dental regulatory board that its claims overstepped its bounds by telling non-dentists they couldn't offer teeth whitening procedures because these were considered dentistry. The North Carolina State Board of Dental Examiners (NCSBDE) sent letters to people offering teeth whitening and even those considering opening a teeth whitening business to attempt to prevent them from opening their business.

The FTC ruled that this was an attempt to stifle competition and keep prices high, citing that salons offered teeth whitening for $100 to $150, compared to the $300 to $700 that dentists charge.

The real issue here should be, of course, whether teeth whitening is actually a dental procedure and there are health reasons why it should be restricted to dentists (something the North Carolina state legislature has yet to define), but bloggers took this occasion to point out the FTC's hypocrisy here: "When a non-FTC body engages in such monopolistic behavior, it's anticompetitive; when the FTC does it, it's for the good of consumers."

What is the FTC's monopoly here? What is its product? What makes the FTC different in these cases is that it doesn't have a product and doesn't make a profit. By sitting outside the market the FTC is charged with making decisions that are intended to increase competition. The FTC might accurately be accused if it were alleged that it did profit from these actions, but that's never brought up because it doesn't.

Of course, you might say that the FTC makes "profit" for the administration by increasing its popularity for the next election cycle--but it's pretty clear that would be a losing strategy. The FTC's job is a thankless one, but necessary.

About the author: Dr. Matthew B. Candelaria (PhD, U of Kansas 2006) is a freelance writer from Denver, Colorado. He has a wife, two kids, two cats, and innumerable toys that make it very hard to focus on his writing.
Image license: FTC, US-PDGov