Competition Bureau challenges SROs to prove that regulations serve the public interest

This item addresses the 2007 report, Self-regulated professions Balancing competition and regulation , from Canada’s competition watch dog, the Competition Bureau:   The Bureau has also indicated that it plans to release a follow-up report in 2009.

The challenges

This report challenges all regulators of professions and occupations to prove that regulations serve the public interest more than they stifle competition and the benefits that consumers derive from fair competition in the marketplace. Foremost, it challenges regulators (particularly SROs) to be clear about what public interest is being protected by regulation.  Is it really public interest or the self interest of the profession that is being protected?  The Bureau’s view is that unnecessary regulation stifles the marketplace. The report is also clear that it is not about deregulation — it’s about unnecessary regulation.  In this category of unnecessary regulation the Bureau presents many challenges; here are three examples:

  1. Prove the merit of advertising restrictions on professional services since these restrictions prevent the public from learning about and differentiating services and making better choices;
  2. Prove the merit of overly restrictive entry to practice conditions that act as barriers to qualified newcomers who would otherwise add zest to a marketplace that is perhaps too comfortable for established incumbents;
  3. Prove the merit of practice exclusivities and too broadly defined scopes of practice that limit work that can be competently performed by assistants or other professionals at lower cost.

The overall challenge is this, prove that your regulations serve a greater public interest because unnecessary regulations have a damaging effect on competition and in the aggregate, masses of unnecessary regulation damage overall productivity in the economy.

Concern about low productivity is driving this

On this theme, the report opens with this zinger, followed by a solid economic analysis:

Despite comprising a significant part of the service economy in Canada, perhaps as much as one fifth, the professions comprise one of the overall economy’s least productive sectors.

The economic analysis makes it clear that the costs associated with professional services find their way into every other product and service in the economy; hence the concern about low productivity.

Mission clarity is important

Harm reduction or protecting the public interest is the core mission of regulation and it’s reasonable that there needs to be clarity about the primary mission–about what public interest is being protected. Taking a cue from risk management, clarity about the objective is the starting point.  What harm are we to prevent or mitigate and what good are we trying to foster? For a regulator, it’s all about the public interest. If the public interest involves crime prevention, a safety issue, then the public interest is likely quite clear. Regulations are put in place to prevent theft, personal injury or worse. However, in some areas of social regulation or economic regulation, the idea of the public interest becomes harder to define–but nevertheless, important to define.  Regulators need to define the public interest or be vulnerable to the criticism of creating unnecessary regulations that damage another public interest–a healthy marketplace.

Defining the public interest

Standards are useful in establishing public interest-especially if they have been developed through an open process of stakeholder consultation. Public expectations are also useful if there is a systematic and reliable method of establishing this: perhaps through an analysis of complaints, surveys or media reports.

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