Managing Competition in Professional Services and the Burden of Inertia
Arruñada, Benito (2006), “Managing Competition in Professional Services and the Burden of Inertia,” in Claus-Dieter Ehlermann and Isabela Atanasiu, eds., European Competition Law Annual 2004: The Relationship between Competition Law and the (Liberal) Professions, Hart Publishing, Oxford, 51-71.
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Professional services are characterized by information asymmetries, economies of scope and externalities. To resolve conflicts of interest, they require special organizational formulas, based on deferred and variable compensation, self-selection and, when positive externalities are necessary, competitive restraints. In principle, a set of criteria and organizational design patterns could be used for assessing, managing and regulating all types of professional organization, whether public or private, competitive or monopolistic.
Competitive restraints, however, entail substantial risks, one of the main ones being that they tend to outlast their useful life. This point is illustrated here by examining pharmacists and conveyancers, two professions for which the existing restraints may today be dysfunctional to the extent that the services that might have made such restraints necessary are provided by other public and private agents. Greater liberalization is therefore advisable, especially for standard services, and not only from a public interest perspective but also from the private interest perspective of the professions themselves.
If my argument is correct, liberalization would encourage professionals to quit providing trivial services and focus on those which make efficient use of professionals’ knowledge and add greater value to users, what nowadays seems to be the only sustainable strategy in a dynamic society.
“For an interesting critique on the need to modernise the two professions of pharmacists and notaries to meet modern demands — especially in relation to the most standard services — see paper by Prof. Benito Arruñada, ‘Managing Competition in Professional Services and the Burden of Inertia’, 2004 EU Competition Law and Policy Workshop Proceedings” (Commission of the European Communities, “Progress by Member States in reviewing and eliminating restrictions to Competition in the area of Professional Services,” Commission Staff Working Document, SEC(2005) 1064, Brussels, September 5, 2005, p. 15, n. 25).