Self-regulated professions

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Conclusion

Self-regulated professions have the lawful power to impose restrictions on the entry and conduct of their members. The need for regulation of this sort may be justified in the presence of market failure—that is, when markets are unable to function efficiently on their own. The main causes of such market failures can and do exist in the professions the Competition Bureau examined for this study. The most important of these causes is asymmetric information, which is essentially a knowledge gap between consumers and professionals that results in consumers being, or likely being, unable to assess the quality of professional services. Faced with asymmetric information, consumers of professional services may not be able to determine what is in their best interests and may depend on regulation to provide some signal of quality.

However, self-regulating professions must acknowledge that the private interest of its members will inevitably be at odds with the common good at some times. Therefore, it follows that regulators—comprising provincial and territorial governments and self-regulating organizations—must follow certain principles to ensure regulation is in the overall public interest, based on well-defined and specific objectives, subject to regular and ongoing review, and not unnecessarily restrictive of freely competitive markets.

It also follows that regulators must develop the expertise necessary to properly assess competition issues as they relate to the profession in question. A number of valuable aids to this have been developed, including some key principles and tools put forward by the Organization for Economic Co-operation and Development.

Building on its extensive review of restrictions in six areas (as summarized below) the Bureau puts forward recommendations that it believes are opportunities for regulators to seize to ensure that they are balancing the potential public safety benefits of regulation with the various advantages of a dynamic, competitive market.

Entering the profession

Most professions maintain substantial entry qualifications, coupled with continuing education requirements. The Bureau found that these qualifications are, in some instances, noticeably uneven across the country.

In general, the Bureau supports the need for entry requirements to assure quality in the provision of professional services. However, any proposed increase to required entry qualifications should be justified as being the minimum that will reasonably ensure consumer protection. Furthermore, jurisdictions that maintain higher standards than others should look to the outcomes of the jurisdictions with fewer restrictions when defining the minimum necessary level of qualification.

Mobility

With respect to interprovincial mobility, the Bureau has the sense that the professions are moving in the right direction, possibly spurred by the requirements of Chapter 7 of the Agreement on Internal Trade, which include a series of obligations intended to ensure that workers qualified to work in one province or territory have access to employment opportunities in any other part of the country. (Under the Agreement, regulators must comply with these obligations by April 1, 2009.) The majority of provinces in each profession studied have signed a mutual recognition agreement to remove unnecessary barriers to mobility of qualified professionals and establish the conditions under which professionals licensed in one jurisdiction may have their qualifications recognized in another.

The Bureau is encouraged by the existence of such agreements; however, drafting and signing them is only the first step. These agreements must be implemented effectively and be consistently respected in practice.

In terms of international mobility, the Bureau applauds those professions that have developed a process for recognizing the credentials of international practitioners solely structured around an assessment of qualifications. Such programs are important to ensuring that domestic professionals are not using foreign accreditation programs as a means to erect unnecessary barriers to entry to protect themselves from competition.

The Bureau is particularly supportive of professions in which all provincial regulators have agreed on one international bridging program. Such programs are encouraging, since they clarify the qualification process for international practitioners. When assessing foreign qualifications, there should be no discrimination between domestic and foreign-qualified applicants for registration other than on the grounds of competence and language requirements.

Overlapping services and scope of practice

The Bureau has identified a number of instances in which professionals who provide overlapping services are requesting that their scope of practice be expanded to include one or more activities currently beyond their authorization.

While the Bureau does not have the expertise to identify the appropriate areas into which service providers could safely expand their scope of practice, it recommends that regulators (who do possess such expertise) conduct a thorough assessment of the overall effect of any proposed expansion. A full evaluation should take into account both the potential costs, in terms of public safety, and the potential benefits, in terms of lower prices, increased choice and enhanced access to professional services.

From a competition perspective, expanding the scope of practice of a profession is favourable when it can be accomplished safely and effectively. Scopes of practice that can be expanded safely benefit consumers by increasing the choice of service providers and intensifying competition between professionals that provide similar services. As Canada's aging population puts increased pressure on the supply of certain professional services (namely, health care services), it becomes ever more important to ensure that all types of professionals within fields facing increased future demand are being used to their full potential. As long as consumers are informed of the distinction between the roles, functions and qualifications of overlapping professionals and the services that each offers, all professionals who can safely offer a service should be authorized to do so.

Advertising

In all the professions studied, the Bureau identified numerous restrictions that appear to go beyond what is necessary to protect consumers from false or misleading advertising and, as a result, limit consumers' access to legitimate information that greatly benefits competition.

Legislation to protect consumers from misleading advertising already exists in the form of the Competition Act ; however, the Bureau recognizes that regulators may be in a unique position to evaluate what exactly constitutes false or misleading advertising within their fields.

The Bureau is particularly concerned by restrictions on comparative advertising. Such restrictions obstruct competition between service providers and make it difficult for new entrants to advertise any distinctive features of the services they offer, protecting incumbents from the full forces of competition. The Bureau recommends that regulators in every profession review existing restrictions on advertising and remove those that go beyond prohibiting false or misleading advertising.

Pricing and compensation

Some regulators publish suggested fee guides, which they claim to be non-binding. Fee guides that are purely voluntary in nature, while unquestionably preferable to any mandatory directive, remain a source of unease from a competition perspective, since they risk facilitating overt or tacit collusion.

The Bureau did not discover any minimum price regulation in its research; however, some maximum price regulation was identified. While the anti-competitive potential of minimum price regulation is far greater, maximum prices also have the potential to restrict competition when they reduce the willingness of members of the profession to supply their services or improve quality, or act as a point on which prices converge.

Given the negative effect of tacit or overt collusion on consumer welfare, the Bureau urges regulators to look to less intrusive means to achieve the informational benefits of suggested fee guides. In addition, regulators should ensure that any maximum prices do not function in practice as fixed prices.

Business structure

Most of the restrictions on business structure the Bureau identified are justified by regulators as ensuring that outside parties do not influence professionals to act in any way but in the best interests of consumers.

The Bureau is of the view that certain restrictions in this vein, namely restrictions on multidisciplinary practices between complementary service providers, have the potential to seriously reduce the benefits of competition, including efficiencies that would likely remain unrealized by service providers working separately.

Therefore, the Bureau recommends that regulators consider less intrusive mechanisms than the prohibition of multidisciplinary practices to circumvent possible conflicts of interest, such as the requirement for all parties to collaborative arrangements to adhere to similar rules of conduct.

In summary, a number of common themes arose during the course of this study: regulate only when necessary; keep the net public benefit in mind, weighing all the potential costs and benefits of regulation; and use regulatory tools that restrict competition to the minimum extent possible. As regulators review existing restrictions and develop new ones, they would do well to keep these themes in mind, along with the guiding principles for effective regulation set out in Chapter 2.

The professions in general, and those reviewed for this study, currently face a situation that is rich with opportunities to benefit from increased competition. These benefits will accrue not only to the professions themselves but also, and perhaps more importantly, to Canada and Canadians. This study is, as such, only a starting point. There is ongoing work for regulators to do. For the Competition Bureau's part, it plans to review in two years whether the professions have addressed the recommendations this study presents.

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