Comments Regarding Occupational Licensing in North Carolina

Choosing not to impose licensing on a particular profession does not mean that consumers are left without means to learn about local businesses and professionals that they may choose to use. Reputational feedback mechanisms—buyers’ and sellers’ abilities to rate one another and share information about their interactions—can help correct these information deficiencies better than traditional regulatory approaches. In fact, the Internet has opened the door to developing and dispersing better information by a variety of methods including professional online reviews and ratings, average consumer ratings and reviews of businesses, and two-way or interactive review and rating.

Continuing to enforce these regulations in light of changes in the market fails to serve consumers. In fact, many consumer protection regulatory regimes run the risk of diminishing consumer welfare because the regulations could be “captured” by the affected interests—those groups can then abuse their regulatory advantage. This results in barriers to entry and innovation as well as higher prices, lower product quality, fewer choices, or a combination of the above.

While it is certainly true that current market participants have incurred expenses to meet licensing requirements, this is not a sufficient justification for continuing to impose these standards on new entrants. Leveling the playing field between established competitors and new entrants is a legitimate policy problem. However, policymakers should not try to remedy the problem by punishing new entrants and extending the old regulatory regimes. Instead, policymakers should level the playing field by “deregulating down” to put similarly situated competitors on an equal footing, not by “regulating up” to achieve parity.

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