FTC Staff Comment to the Hon. Glen Repp Concerning Texas H.B. 252 to Establish a System to Voluntarily License Electricians and Electrical Contractors

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UNITEI) STATES 01" AMERICA
FEDE}(J\J, TRADE COMMISSION
DALLA~ RECIONAL O\o·YI<.:&
V890034
COMMISSIUN 	AU"fhO~ilb.:
Offtce of the Reiional l>ireetot
Karch 	13, 	1989
The Honorable Glenn Repp
House 	of 	Representatives
State of 	Texas
P.o. 	Box 	2910
Austin, 	Texas 	78769
»ear Mr. 	Repp.
We are 	pleased to 	respond 	to 	your 	invitation to comment 	on
Texas 	House 	Bill 	252, 	the 	"Electrician and Electrical Contractor
Licensinq Act." 	This 	proposed 	legislation, 	if enacted, 	would
establish a 	state electrician and electrical 	contractor
licensing 	board 	and provide 	for 	the voluntary testinQ and 	state
licens!nq of 	electricians 	and 	electrical 	contractors. 	Under 	the
bill, 	municipalities 	may continue 	to 	require 	an electrical
practitioner's 	license 	and 	to 	offer 	licenses. 	However, 	any
license 	applicant 	who 	passes 	the voluntary 	state-administered
examination or 	a 	city-administered examination 	that 	is 	state-
board 	approved would be exempt 	from 	any additional 	testing by
other municipalities.
In qeneral, 	we believe 	that 	enaotment of H.B. 	252 would
probably eliminate some of 	the 	barriers 	to 	practice 	that
currently exist, 	and possibly benefit consumers 	by 	reducing
prices 	and 	increasing consumer choices. 	In Part 	I 	of 	these
comments, 	we 	~d.ntify 	the 	intereat 	and experience of 	the
Commissionls 	staff 	in 	the 	area 	of 	oocupational 	regulation. 	In
Part 	II, 	we 	describe 	the current 	municipal 	licensing 	program 	for
electricians 	and electrical 	contractors 	in Texas. 	In Part 	III,
we examine 	the 	specific 	provisions 	of H.B. 	252.
I. 	Intereat 	And ExPOrten..&. of 	tbg 	Federal 	Trade Copiesion
The Federal 	Trade 	Commission 	is 	charged by statute with
preventing unfair methods 	of 	competition and unfair 	or deceptive
practices 	in or affecting commerce. 	15 	O.S.C. 	S 45. 	Under 	this
1 	These comments 	repre8ent 	the views 	of 	the 	staff 	of 	the
Dallas 	Regional 	Office 	and the 	Bureau of 	Competition of 	the
Federal 	Trade Cornmi88ion 	and do not 	necessarily represent 	the
views 	of 	the Commission or any 	individual 	Commis.ioner.

The Honorable Glenn Repp
statutory mandate, 	the Commission 	s.eks 	to 	identify 	re.trictions
that 	impede competition or 	increase 	costs 	without offering
countervailing benefits 	to 	consumers. 	The Commission 	has 	aouoht
to 	improve 	consumer access 	to pro~essional services 	by 	initiating
antitrust enforcement 	proceedinos 	and conduoting studies
concerninq v!rlous 	facets 	of 	the 	regulation 	of 	lioensed
professIons. 	In 	addition, 	the Commissionls 	staff 	has 	submitted
comments 	to 	state 	legislatures 	and 	administrative 	agenci~s on
various 	issues 	of 	occupational 	licensing and regulation.
II. 	TbA e»rrent Mu n 1c1pol LiCeDllDg ·ProgrAM in To_OI
Currently, 	municipalities 	in Te~as issue 	licenses 	to
electricians 	and electrical 	contractors 	who wish 	to do 	business
within 	their boundaries. 5 	Municipalities 	generally require 	that
2 	SAA, 	A.~., 	Massachusetts 	aoard of Registration 	in
Optometry, 	[PTC 	Complaints 	and Orders 	Transfer Binder] 	5 Trade
Reg. 	Rep. 	(CCH) 	22,555 	(June 	21, 	1988)1 	Rhode 	leland Board of
Accountancy, 	107 	F.T.C. 	293 	(1986) 	(consent order)J 	Louisiana
State Board of 	Dentistry, 	106 	F.T.C. 	65 	(1985)A~foAeent order) 1
American Medical 	Assln, 	94 	F.T.C. 	701 	(1979), 	I, 	638 	P.2d 443
(2d Clr. 	1980), 	,(fld mem. 	b~ AD eguo11¥ divided 	court, 	455 	U.S.
676 	(1982), 	American Dental 	Assln, 	94 	P.T.C. 	403 	(1979),
modified, 	100 	F.T.C. 	448 	(1982), 	101 	F.T.C. 	34 	(1983) 	(oonsent order).
3 	saa, 	~.g" 	Jacobs at 41., 	Cleveland Regional 	Office 	and
Bureau of 	Economics, 	Federal 	Trade Commi8sion, 	Improvinq Consumer
Acces8 	to 	Legal 	Servicesl 	The 	Case 	for 	Removin9 Restrictions 	on
Truthful 	Advertising 	(1984), 	Hailey, 	Bromberg, 	and Mulholland,
Bureaus 	of 	Consumer Protection 	and Economics, 	Pederal 	Trade
Commiesion, 	A Comparative Analysis 	of Cosmetic 	Lens 	Pitting by
Ophthalmologists, 	Optometrists, 	and Optioians 	(1983)1 	Bond,
!woka, 	phelan, 	and Whitten, 	Bureau of 	Economica, 	Federal 	Trade
Commission, 	Effects 	of 	Restrictions 	on Advertising 	and Commercial
Practice 	in 	the 	Professional 	The CaBe of 	Optometry 	(1980).
4 	In 	the P~Bt few 	years, 	Commission 	etaff 	have 	commented on
rules 	of profe.sional 	conduct or regulations 	governinq
architects, 	attorneys, 	chiropractors, 	dentists, 	dry cleaners,
funeral 	directors, 	interior 	designers, 	optometrists, 	pharmacists,
physical 	therapists, 	physicians, 	real 	estate 	brokers, 	and others.
5 	It 	appears 	that 	the 	great ma,ority 	of 	all 	munioipalities
in Texas 	currently 	have 	licensing requirements 	for 	electricians.
It 	does 	not 	appear that 	licensing 	is 	required or certification 	is
available 	for 	electricians 	who practice 	in 	unincorporated areas.

~he Honorable Glenn Repp
applicants 	pas_an examination prior to 	receiving 	a 	lican.e. 6
Consequently, 	an electrician or electrical 	contractor who vants
to 	provide 	services 	in a 	number of 	cities may be obligated to
take 	a 	serles 	of 	different 	examinations. 	While 	80mecities 	in
Texas 	have 	reciprocal 	licensing agreements 	(~, 	they 	recognize
licenses 	obtained by electricians 	and electrical contractors 	in
other cities), 	many 	cities, 	including Houston and Austin, 	have
not 	entered into 	such 	agreements. 	Moreover, 	tho8e 	cities 	that
have entered 	into 	such 	licensing agreements 	presumably may at
their discretion opt out 	of 	them. 	.
III. 	analytl. g~ H.B. 	252
The 	provisions 	contained 	in H.B. 	252 	establish the Texas
State 	Electrician and 	Electrioal 	Contractor Licensing Board and
provide 	for 	the vol~ntary _tate 	licensing 	and regulation 	of
electricians 	and electrical contractors 	in Texas. 	Under 	the
bill, 	state 	licensing 1s 	not mandatory, 	and 	individuals 	who do
not 	obtain a 	lice988 	are 	not 	barred by the 	state 	from 	practicing
their 	profession. 	They may, 	however, 	be 	so 	barred by
individual municipalitie••
H.B. 	252 	permits 	municipalities 	to continue 	to 	require 	that
electrician. and electrical 	contractors 	hold 	licenses.· 	However,
H.B. 	252 	would eliminate 	some 	of 	the 	barriers 	to practioe noted
above 	which exist under 	the 	current municipal 	licens1no
procedures. 	Under H.B. 	252, 	any electrician or contractor who
passes 	the voluntary state-administered examination or a 	city-
administered examination that 	is 	state-board approved would
receive 	a 	state 	license 	and 	thereby be exempt 	from 	any 	additional
municipal 	testing 	requirements. 	Further, 	under 	Section 	160£ 	the
bill, 	the 	state 	licensing board may enter 	into 	reciprocal
licenainq agreements 	with other 	states 	and grant Texas 	licenses
to 	individuals who 	are 	license holders 	in 	those 	atates.
A determination of 	the 	appropriate 	level 	of 	occupational
licensing 	is 	beyond 	the 	scope 	of 	this 	comment. 	However, 	you may
6 	The 	fees 	charged by municip~lltie_ for 	taking 	the
licensing examinations 	appear 	to be relatively nominal. 	Por
example, 	the 	fee 	in Ft. 	Worth 	for 	taking 	the 	journeyman
electrician's 	licensing examination 	i_ 	$10, 	while 	the 	fee 	for
taking 	the master electrician's 	examination 	ia 	$25. 	In Austin,
the 	fee 	for 	taking either examination il 	$25. 	In Houston, 	the
fee 	for 	the 	journeyman electrician'S examination 	i. 	$30, 	and the
fee 	for 	the master electrician'. 	examination 	is 	$55.
7 BAA Section 	17 of 	the 	bill.

•
The Honorable Glenn Repp
**** 1680 	8 729 7030 	P.05
P~ge 4
wish 	to oonsider 	that 	aome 	studies 	have 	shown that 	restrictive
licensing of 	electricians 	was 	associated with 	a 	higher 	rate 	of
death by electric 	shock, 	apparently because more 	consumers
resorted 	to 	aelf-help.8 	In this 	reqard, 	in a recent 	study, 	it
was 	found 	that 	up 	to ten times more 	Accidental 	electrocutions
occurred 	in 	the 	seven states which 	have 	the most 	restrictive
licensing requirements 	for 	electrioians. 9 	Although we 	are 	not
technical 	experts 	in 	the 	field 	of 	electrical 	contracting and
although the current Texas 	licensing 	scheme 	is 	not 	reetrictive 	in
the 	same manner as 	the 	seven most 	restrictive 	8tates,lO 	this
study 1s 	indicative of 	the 	unintei~ed consequences 	which may
result 	from excessive 	regulation. 	.
Moreover, 	incompetent 	aelf-administered work by 	oonsumers
could 	impose costa 	on third parties. 	For example, 	incompetent
electrical work may 	lead to 	tires 	whioh could damage 	not 	only 	the
building 	in which 	the 	work was 	performed but 	the 	adjoining
struotures 	as 	well. 	The overall 	result 	in many 	instances 	of
restrictive occupational 	licenaing 1s 	that 	"the lower middle
classes 	and the 	poor 	• 	• 	• 	tend to 	be 	short-chanoed 	and 	offered
low quality or no 	service 	at 	411."12
8 SeA Carroll 	& Gaston, 	OQCu~AtionAl Restriction. 	and 	the
Quality of 	Service Begeiyeda 	Som- 	Byid@nge, 	47 	Seuth. 	Beon. 	J.
959 	(1981); 	Carroll' Gaston, 	Qccupat1QDol 	L1cen.ingl 	Fiool
Bepp~t (1977). 	aaa generally Carroll' 	Gaston, 	CccypAtioDAl
Ljcen,lng and 	th. 	Qualitr of 	Servicel 	An OVerview, 	7 Law 	& Hum.
Behav. 	139 	(1983)1 	Hogan, 	The Recommendations, 	7 Law, 	Hum.
Behav. 	117 	(1983).
9 Tho Rogpmmendat1ons, 	supra not. 	8, 	at 	123.
10 The 	restrictiveness 	was 	gauged by the magnitude of 	the
requirements 	for 	prior occupational 	experience 	and 	oral
examinations 	(the 	two most 	significant variables) 	and 	for
schooling, 	age 	limitations, 	and skill 	testing. 	The moet
restrictive 	state8 	also 	had 	8tate"wide 	licensing 	requirements,
while Texas 	has 	licensing on a 	city-by-city basia.
11 	Other studies 	have 	ahown 	that 	houses 	tended 	to 	remain
unsold 	for 	longer periods 	in areas 	with 	restrictive 	licensing of
real 	estate 	brokers. 	sea Occupational 	Licenq1ng P1no1 	Report,
supra 	note 	8. 	The 	increased duration of 	availability 	for 	sale
is 	correlated with 	a 	lower 	ratio 	of 	brokers 	to 	the 	population.
SeA Oc~ppAtignAl 	Restriction., 	aupro 	note 	8, 	41 	South Econ. 	J.
at 	970-73.
12 OCCupAtional 	LigenBlnq And 	tbe 	Quality of 	sery~, aupra
note 	8, 	at 	145.

The 	Honorable Glenn Repp
· ,4. ~.,
Page 	5
Thus, 	under 	H.D. 	252, 	although citiss 	retain 	lioensing
authority, 	the bill eliminate. 	80me barriers 	to 	entry 	into 	the
market 	for 	electrical 	services 	in Texas 	by eliminatinq the 	need
to 	obtain multiple 	licenses 	to provide 	services 	in munioipal
jurisdictions 	that do 	not 	have 	reciprocal 	lioensing agreements.
Lowering barriers 	to 	entry may 	increase competition, 	including
price 	competition. 	In' this 	way, 	the proposal may 	benefit
consumers 	by reducing 	prices 	and 	increasing consumer choices.
IV. 	CODgluaigo
In 	8ummary, 	the 	adoption 	of House 8111 	252, 	the 	lIElectrician
and 	Electrical 	Contractor Licensing Aot,· 	would probably
eliminate 	Borne of 	the existing barriers 	to practice and 	thereby
benefit Consumers. 	We are 	pleased to have 	this 	opportunity to
present 	our views. 	Please do 	not 	hesitate 	to 	oontact 	us 	if you
have 	any questions 	or would 	like 	further 	information.
Sinoerely,
--,.~.;:'"
#~..G~
Thoma. S. 	Carter
Direct.or
Dallas 	Regional 	Office