[This post was originally published in American Thinker magazine on Feb. 11, 2016]
In considering the current crop of presidential candidates, economic libertarians and others who place a high value on property rights, the right to earn a living, and the right to open a business will find no better friend than Texas Senator Ted Cruz. Cruz demonstrated his commitment to these values when he was a senior official at the Federal Trade Commission during George W. Bush’s Administration. Significantly, his work at the FTC established a foundation on which the cause of economic liberty progresses still today.
Leading a team of senior FTC lawyers, Cruz used his considerable advocacy skills to fight relentlessly against state laws conferring privilege on politically and economically powerful interest groups. Many of these laws do little more than protect entrenched incumbents from small entrepreneurs seeking to open a business and earn a living. Cruz and his team vigorously opposed unjustified state government privilege in such diverse occupations as attorneys, funeral directors, opticians, and mortgage brokers. The goal was always to open up markets to entry by anyone with the talent and desire to compete on a level playing field.
The legal theories that Cruz and his team developed from 2001 – 2003 continue to pay dividends. For example, last year those theories helped secure economic rights for small entrepreneurs providing teeth whitening services in North Carolina shopping mall kiosks and similar venues. These entrepreneurs entered this service market coincident with the growing popularity of teeth whitening in the mid-2000s. Practicing dentists in the state also offer teeth whitening services, but generally at much higher prices than the small operators. As a result, the new competitors began taking business away from the incumbent dentists.
In response to this emerging competition, the North Carolina State Board of Dental Examiners (NCSB), a North Carolina state-sanctioned agency controlled and elected by practicing dentists and charged with regulating the practice of dentistry, sent letters to the small operators threatening them with potential criminal liability for the unauthorized practice of dentistry. The letters effectively closed down the new competitors. Significantly, North Carolina law did not include teeth whitening in the statutory definition of dentistry, nor was there credible evidence that non-dentists offering whitening services created a significant health or safety hazard.
In 2010, the FTC filed an antitrust complaint against the NCSB charging it with unlawful collusion to exclude the non-dentists from the teeth whitening market. After an administrative hearing, in 2011 the full Commission found the NCSB’s tactics to violate antitrust law. Key to that finding was that the NCSB did not conform to proper procedures under North Carolina law and was largely motivated by a desire to protect incumbent dentists’ economic interests. The FTC ordered the NCSB to stop sending the threatening letters, to send new letters to previous recipients admitting error and rescinding the earlier threats, and to notify prospective non-dentist teeth whiteners that they would not be violating the law.
Relying on a 1943 Supreme Court decision holding that state actions to suppress competition are immune from the federal antitrust laws under the constitutional principle of federalism, which provides for both state and national sovereignty, the NCSB went to federal court arguing that, as a state agency, it had sovereign immunity and therefore was not bound by the FTC’s findings. Armed with the legal theories that Ted Cruz and his team developed, which were later memorialized in a formal Report, the FTC defended the constitutional legitimacy of its antitrust suit all the way to the Supreme Court. In an opinion handed down just a year ago, the Court held that, although a creature of the state, the NCSB nonetheless was a non-sovereign body, being controlled by private parties and elected by market participants, and acted without significant state supervision. It therefore did not enjoy state action immunity from the federal antitrust laws. The FTC’s prior finding of unlawful anticompetitive conduct thus stood, as well as its order enjoining the NCSB from prohibiting non-dentists from competing in the North Carolina teeth whitening market. In other words, property rights, the right to earn a living, and the right to open a business prevailed.
Without Ted Cruz’s earlier efforts to develop the legal theories used by the FTC to defend the constitutionality of its antitrust suit, it is doubtful that these important values could have been protected in the face of politically powerful local interests. What’s more, this important clarification of the law has led to increased scrutiny of state-sanctioned boards in other states, thus further securing economic liberty rights against the politically connected.
For example, just last month, relying on the FTC’s 2015 win, an antitrust action was filed against the Nevada State Board of Pharmacy, an administrative agency of the state. The complaint contends that that the Board exceeded its authority in finding direct shipment of pet medicines unlawful. The effect was to exclude the plaintiff, a direct shipper, from competing with incumbent pharmacists, allegedly because such competition would mean a loss of business for the incumbents. Similarly, resting on the NCSB decision, a Texas telemedicine business brought an antitrust suit against the state’s medical board, alleging that the board promulgated a rule for the unlawful purpose of protecting state-licensed physicians against competition from telemedicine providers. The rule prohibits doctors from treating people over the telephone. The court issued a temporary injunction requiring the medical board to suspend the rule pending the outcome of the litigation. In North Carolina, after the NCSB decision, LegalZoom settled a long-running dispute with the N.C. State Bar over whether its online provision of certain legal documents constitutes the unauthorized practice of law. The settlement permits LegalZoom now to offer these documents, subject to certain conditions.
What all these developments say is that Ted Cruz’s FTC legacy continues to have positive results in advancing the cause of economic liberty. Much work, however, remains to be done, as government privilege persists at both the state and federal level. Contrary to maintaining the status quo, a Cruz Administration will assuredly expand the fight for economic liberty by using all legitimate means to challenge such government privilege. Based on Ted Cruz’s history, economic libertarians can be confident of that commitment and would do well to support the Texas Senator in his presidential quest.
[Full Disclosure: Senator Cruz and I were colleagues at the FTC from mid-2001 to 2003.]