by Jon Guze
Senior Fellow, Legal Studies, John Locke Foundation
During the progressive era, federal antitrust enforcement agencies were known as "trustbusters." They were usually depicted as righteous warriors courageously fighting to rescue helpless ordinary citizens from the machinations of rich and powerful monopolists. In reality, federal trust busting has not generally lived up to that romantic image, but the Federal Trade Commission’s action against the N.C. Board of Dental Examiners that I discussed in last week’s newsletter came pretty close. The FTC really did rescue a group of helpless citizens (the beauticians, mall kiosk operators, and other non-dentists who wanted to provide teeth whitening) from the machinations of rich and powerful monopolists (the dentists). Nevertheless, the FTC’s action departed from the typical image in one important way. Whereas the usual object of a federal antitrust action is a private company like Microsoft or Google that has achieved market dominance by out-performing its competitors in a free market, here the FTC went after a true monopolist, one that had been using the coercive power of the state to persecute its competitors and drive them out of business.
It’s nice to see the FTC attacking a state-sponsored monopolist for a change, and it’s probably a good thing that the Supreme Court decided to uphold the FTC’s power to make such an attack. However, as I explained last week, the FTC’s power to go after professional licensing boards remains limited. Moreover, as I also explained last week, instead of protecting "the little guy," federal antitrust enforcement has generally had the effect of establishing and protecting cartels. All of which means that people whose livelihoods are threatened by state-sponsored professional monopolies cannot rely on federal trustbusters to come to their rescue. Fortunately, they don’t have to. They have other options, including an approach that was taken by one of the many organizations that filed amicus briefs in N.C. State Bd. of Dental Examiners v. F.T.C.
Most of those amicus briefs were filed by organizations that have what might be called "abstract" interests in the outcome. Thus, many state licensing boards, many individual states, and the national associations of state governors, state legislatures, and state governments all filed briefs in support of the Dental Examiners. And many academic and public interest lawyers and scholars filed briefs in support of the FTC. However two briefs were filed by organizations with a more direct and concrete interest in the outcome: the North Carolina State Bar and LegalZoom.Com.
Since 2007, the State Bar and LegalZoom have been involved in a dispute that started out like the one that led to the FTC’s action against the Board of Dental Examiners, but then went in a much different direction. Just as North Carolina dentists were annoyed when non-dentists began offering low-cost teeth whitening services, North Carolina lawyers were annoyed when LegalZoom began offering low-cost, self-help, online legal document preparation services. And just as the Board of Dental Examiners attempted to stop the non-dentist teeth whiteners by sending cease and desist letters, the State Bar attempted to stop to LegalZoom by sending a letter in which it declared that LegalZoom’s self-help document preparation service was "illegal and must end immediately" and threatened both civil and criminal action if LegalZoom failed to comply.
Unlike the non-dentist teeth whiteners, LegalZoom was not intimidated. It responded with a letter of its own challenging the Bar on factual and legal grounds. And it went right on providing its online service in defiance of the Bar’s threats.
The State Bar never responded to LegalZoom’s letter, nor did it take any steps to carry out its threats. On the other hand, it did not withdraw the cease and desist letter either. The letter remained on the record and was cited by the press, by other state bars, and by a group of Missouri lawyers who filed a class action lawsuit against LegalZoom in an effort to drive it out of their state. And when, in 2010, LegalZooom attempted to register one of its new prepaid legal services plans in North Carolina, the Bar itself cited the letter as one of its reasons for withholding certification.
Obviously, LegalZoom had to do something to overturn the findings in the State Bar’s letter. It made several attempts to reach an administrative resolution with the Bar. Then, when these failed, it filed a complaint in Wake County Superior Court in which it accused the Bar of "commercial disparagement" and of violating the Monopoly and the Law of the Land clauses of the North Carolina Constitution. Among other forms of relief, LegalZoom asked the Court to declare that it is "not engaged in the unauthorized practice of law by providing a ‘self help legal document service’ through the internet."
The case has been tied up for more than three years in a long series of motions, and the outcome is uncertain. The Court may find against LegalZoom, or it may find for the company without reaching the constitutional allegations. And whoever wins, there will no doubt be appeals. Perhaps this case will end up at the U.S. Supreme Court as well. In the meantime, however, it shows that people whose livelihoods are threatened by state-sponsored professional cartels do not have to wait passively for federal trustbusters to come to their rescue. They can challenge the professional cartels and defy their orders. If needs be, they can sue their persecutors under state law, as LegalZoom has done. And if that fails, they can sue under federal law — citing, perhaps, the provisions of the 14th Amendment that I discussed last week.
Of course, like all legal processes, civil litigation is complicated, time consuming, and expensive, which is, no doubt, why people whose livelihoods are threatened by professional licensing abuse seldom resort to it. Ironically, however, it is also why so many individuals and businesses across the US and around the world have turned to LegalZoom — it provides them with a convenient and inexpensive way of coping with the burden of legal processes — and why LegalZoom has rapidly grown from a tiny start-up to a large multinational corporation. LegalZoom does not yet offer low cost, online, self-help civil litigation services, but it’s probably only a matter of time!
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