In her essay “Anti-Competition Regulation,” Anne Fleming explores the history and political economy of “certificates of public convenience.” For most regulation, repression of competition is an unfortunate side effect—something to be traded off for a safer, healthier, and more equal society. But for certificates of public convenience, repression of competition is itself the goal. Free competition can yield bad results, for consumers or firms (arguments emphasize one or the other depending on the ideology of the time). Certificates cut to the heart of the problem by limiting new entry into a market only when, as one early statute put it, new entry would “promote the convenience and advantage of the community.”Footnote ¹

Fleming's history of these certificates takes us from their origins in state laws of the Progressive Era limiting competition in railroads and banking. She traces the appearance of similar statutes at the federal level in the 1930s, applied to highway transportation and telecommunications. After a close brush with invalidation during the twilight of the Lochner era, they remained viable at the federal level until the great deregulation of the 1970s and 1980s. Yet, as Fleming points out, the demise of certificates of convenience did not end when they fell out of fashion at the federal level; they persist in state law in many important sectors of the economy.

Fleming's history illuminates the rise and (partial) fall of a particularly problematic form of regulation, and for that reason alone it is a significant contribution. But the article does more than tell the story of certificates of convenience. Fleming speculates about the political and ideological forces that allowed their proliferation, precipitated their demise, and prevented them from being eradicated altogether. Her article is compelling, both because of what it says about markets and ideology and because of the contrast she draws between politics at the state and federal levels.

Certificates of need began in the states as a solution to “ruinous competition,” the notion that free competition results in inefficient and wasteful production or—to use an expression commonly invoked by industry—in firms cutting their own throats. The early history of certificates saw a particular emphasis on the “ruin” inflicted on firms, not consumers, by the invisible hand. It is no surprise that industry itself was the strongest proponent of legislation—in the form of certificates of convenience—that saved firms from themselves by limiting competitive entry.

Importing certificates to the federal arena would require something more than industry approval: an economic crisis, a New Deal, and the maturation of an economic school of thought that cast consumers as the primary victims of competition. Fleming notes that certificates proliferated at the federal level “when economic thinking on competition aligned closely with the self-interest of industry” (p. 711). That economic thinking identified consumers, not industry, as the primary victims of competition; where state certificates kept businesses from cutting their throats, federal certificates were touted as preventing “Americans from continuing to be ‘crucified on the cross of competition.’”Footnote ²

When one of these twin forces weakened in the 1970s—the Progressive Era idea that excessive competition could harm consumers—many of the federal certificate programs fell away. Yet at the state level, that ideological shift toward laissez-faire had a more modest impact on certificate laws. Today, state certificate requirements abound in healthcare, transportation, and banking.

Fleming's article raises, but does not entirely answer, the following question: Why were federal certificates more vulnerable to the ideological shift toward laissez-faire in the 1970s and 1980s than their state-level counterparts? Or, to ask it another way, why was industry more successful in retaining these certificates in the states than in federal law?

One possible answer among many is that state certificates of convenience tend to be administered through a process that amounts to industry self-regulation rather than through an administrative system overseen by bureaucrats. Take, for example, one of the most well-known and controversial state certificate programs still in effect: the “certificate of need” (CON) requirement most states impose on new hospitals.Footnote ³ These certificates are administered in many states by boards that include representatives from incumbent healthcare providers.Footnote ⁴ In contrast, federal certificates were typically issued by large agencies comprised of bureaucrats, not industry members, and operated under more public scrutiny than any given state board.Footnote ⁵

De facto self-regulation may have made state-level certificate programs stickier because it leads to especially tenacious industry opposition to deregulation. What is even more valuable than a bureaucrat reining in your competition? Holding the reins yourself. Additionally, states can save money by using volunteers from industry rather than state employees as regulators. Even in states where industry does not formally hold seats on a CON board, capture is rampant; some statutes even require states to reach out to competing firms for input in the CON review process.Footnote ⁶ Why would a state abolish a certificate program that costs it almost nothing, when doing so would wake the bear of industry opposition?

These speculations are beyond the scope of Fleming's essay, but they illustrate the value of her historical approach. By tracing the trajectory of certificates and the various influences on their popularity, she enables us to think more deeply about how and why some kinds of regulation endure ideological attack. Whether that endurance is a good thing is another question altogether.