FTC Staff Comment to the Hon. O.H. Harris Concerning Texas S.B. 454 to License Interior Designers

'. 	V890045
'00 N. e-. E.",_y
Suite 500
0aIIu. TX 75201
(214) 787·5503
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
DALLAS REGIONAL OFFICE
May 	3, 	1989
Office of the Regional Director
The Honorable 	O.H. 	Harris,
Chairman
Senate Economic 	Development Committee
State 	of Texas
P.O. 	Box 	12068
Austin, 	Texas 	78711
Dear 	Senator Harris:
COMMISSION AUTHORIZED
We 	are 	pleased 	to 	respond 	to 	the 	invitation 	of 	the 	Senate
Economic 	Development 	committee 	to 	comment 	on 	Texas 	Senate 	Bill
454, 	the 	WInterior 	Designers 	Licensing 	Act."l
The 	proposed 	legislation, 	if 	enacted, 	would 	establish a
State 	Board 	of 	Interior 	Design 	and provide 	for 	the 	licensing 	of
interior designers. 	The 	proposed 	law would 	prohibit 	certain uses
of 	the 	title 	Winterior designer W by unlicensed 	persons, 	although
unlicensed 	individuals 	could 	perform 	interior design 	services.
The 	type 	of 	voluntary 	licensing scheme 	contained 	in 	the 	proposed
legislation 	can benefit consumers 	by providing useful 	information
concerning 	service 	quality. 	In 	the 	case 	of 	interior designers,
however, 	such 	information may be 	available 	through private
certification organizations 	and, 	indeed, 	the 	proposed 	legislation
incorporates 	some 	of 	these 	organizations' 	certification
standards. 	Consequently, 	you may wish 	to 	consider whether 	state-
operated 	certification would provide 	net 	benefits 	to 	consumers.
I. 	Interest and 	Experience 	of the 	Federal Trade 	Commission
The 	Federal 	Trade 	Commission 	is 	charged by 	statute with
preventing 	unfair methods 	of 	competition 	and 	unfair 	or deceptive
practices 	in or 	affecting 	commerce. 	15 	U.S.C. 	§ 	45. 	Under 	this
statutory mandate, 	the 	Commission 	seeks 	to 	identify 	restrictions
that 	impede 	competition 	or 	increase 	costs 	without 	offering
countervailing benefits 	to 	consumers. 	The 	Commission has 	sought
to 	improve 	consumer 	access 	to 	professional 	services 	by 	initiating
1 	These 	comments 	represent 	the views 	of 	the 	staff 	of 	the
Dallas 	Regional 	Office 	and 	the 	Bureau 	of 	Competition 	of 	the
Federal 	Trade 	Commission 	and do 	not 	necessarily 	represent 	the
views 	of 	the 	Commission 	or 	any 	individual 	commissioner.

antitrust enforcement proceedings. 2 	The 	staff 	of 	the 	Commission
has 	studied the 	regulation 	of 	licensed professions 3 and 	has
submitted comments 	to 	state 	legislatures 	and 	administrative
agencies 	concerning various 	issues 	of 	occupational 	licensing 	and
regulation,4 	including 	the 	licensing 	of 	interior 	designers.
2 	See,~, 	Massachusetts 	Board 	of Registration 	in
optometry, 	[FTC Complaints 	and Orders 	Transfer 	Binder] 	5 Trade
Reg. 	Rep. 	(CCH) 	, 	22,555 	(June 	21, 	1988); 	Rhode 	Island 	Board 	of
Accountancy, 	107 	F.T.C. 	293 	(1986) 	(consent 	order); 	Louisiana
state 	Board 	of 	Dentistry, 	106 	F.T.C. 	65 	(1985) 	(consent 	order);
American Medical 	Ass'n, 	94 	F.T.C. 	701 	(1979), 	affirmed, 	638 	F.2d
443 	(2d 	cir. 	1980), 	affirmed memo 	by 	an 	equally 	divided 	court,
455 	U.S. 	676 	(1982); 	American 	Dental 	Ass'n, 	94 	F.T.C. 	403 	(1979),
modified, 	100 	F.T.C. 	448 	(1982), 	101 	F.T.C. 	34 	(1983) 	(consent
order).
3 	~,~, 	Jacobs 	et 	al., 	Cleveland 	Regional 	Office 	and
Bureau 	of 	Economics, 	Federal 	Trade 	Commission, 	Improving 	Consumer
Access 	to 	Legal 	Services: 	The 	Case 	for 	Removing 	Restrictions 	on
Truthful 	Advertising 	(1984); 	Hailey, 	Bromberg, 	and 	Mulholland,
Bureaus 	of Consumer 	Protection 	and 	Economics, 	Federal 	Trade
commission, 	A Comparative Analysis 	of 	Cosmetic 	Lens 	Fitting 	by
Ophthalmologists, 	Optometrists, 	and 	opticians 	(1983); 	Bond,
Xwoka, 	Phelan, 	and Whitten, 	Bureau 	of 	Economics, 	Federal 	Trade
Commission, 	Effects 	of 	Restrictions 	on Advertising 	and 	Commercial
Practice 	in 	the 	Professions: 	The 	Case 	of optometry 	(1980).
4 	Within the 	past 	few 	years, 	Commission 	staff has 	submitted
comments 	on 	rules 	of 	professional 	conduct 	or 	regulations
governing 	architects, 	attorneys, 	chiropractors, 	dentists, 	dry
cleaners, 	electricians 	and 	electrical 	contractors, 	funeral
directors, 	optometrists, 	pharmacists, 	physical 	therapists,
physicians, 	real 	estate brokers, 	and 	others.
Among 	other 	comments 	submitted during 	the 	current 	Texas
legislative session, 	we 	have 	submitted a 	comment 	at 	the
invitation 	of Representative 	Glenn Repp 	on H.B. 	252, 	the
proposed 	-Electrician and 	Electrical 	Contractor Licensing Act."
Letter 	from Thomas 	B. 	Carter, 	Director, 	Dallas 	Regional 	Office,
Federal 	Trade 	Commission, 	to 	the Honorable Glenn 	Repp, 	Texas
state 	House 	of Representatives 	(March 	13, 	1989).
5 	Letter 	from 	Jim Moseley, 	Director, 	Dallas 	Regional
Office, 	Federal 	Trade 	Commission, 	to 	the 	Honorable Garrey
carruthers, 	Governor of 	New Mexico 	(March 	18, 	1987).
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II. 	Analysis 	of Senate 	Bill 	454
If 	the 	bill 	is 	enacted, 	persons 	qualified 	by 	six years 	of
combined 	professional 	education 	and 	experience 	and 	satisfactory
completion 	of 	an 	examination 	prescribed by 	a 	state 	Board 	of
Interior Design 	could 	seek 	licenses 	to 	practice 	Winterior
design.· 6 	The 	principal 	competitive 	effect 	of 	the 	bill 	would 	be
that 	persons 	not 	holding 	licenses would 	be barred 	from 	using 	the
term 	Winterior designer· 	on 	any 	card, 	sign, 	telephone 	directory
advertisement, 	or 	other 	form 	of 	identification but would 	be
permitted to 	perform 	interior design 	services.
The 	proposed 	legislation provides 	for 	a 	voluntary 	licensing,
or certification, 	program. 	Under 	certification programs, 	only
persons who meet 	specified 	requirements may 	identify themselves
as 	being members 	of 	a 	particular profession, 	or as 	certified 	in 	a
particular occupation. 	Noncertified 	persons 	are 	not, 	however,
barred 	from 	practicing the 	profession. 	In 	contrast 	to what 	is
proposed, 	under 	a 	mandatory 	licensing 	system, 	only 	individuals
who 	obtain a 	license 	from 	the 	state may 	lawfully 	engage 	in 	the
practice 	of 	the 	licensed 	occupation. 7
A certification program 	can benefit 	consumers. 	In 	some
cases, 	consumers 	may 	not 	have 	the 	technical 	qualifications 	to
evaluate 	the 	quality 	of 	service 	provided 	by 	a 	specialized
professional. 	For example, 	a 	consumer may 	be 	unable 	to 	determine
whether her 	investment 	failed 	because her 	financial 	planner was
incompetent 	or of 	for 	some 	reason 	that 	did 	not 	reflect 	on 	the
quality 	of 	the 	planner, 	such 	as 	the 	limitations 	of 	economic
predictions. 	If 	consumers 	cannot 	evaluate 	quality, 	producers
may provide 	lower quality 	services 	than 	consumers 	desire. 	A
certification program can 	benefit 	consumers 	by providing useful
information 	about 	quality 	in 	a 	form 	that 	most 	consumers 	can
readily 	understand.
Private 	certification programs 	can provide many 	of 	these
benefits. 	For example, 	private 	certification mechanisms 	for 	many
medical 	specialties provide 	useful 	information 	to 	consumers 	by
identifying specialists who 	have 	met 	certification 	criteria.
Consumers who value 	board 	certification may 	choose 	practitioners
on 	that 	basis, 	but 	noncertified 	persons 	are 	not 	significantly
.6 	The 	state 	certification board would be empowered 	to
revoke 	licenses 	if 	fraud 	or 	other abuse 	occurred, 	keep 	files 	of
addresses 	of 	practitioners, 	receive 	consumer 	complaints, 	and
require 	continuing education 	for 	practitioners.
7 	This 	distinction was 	first 	covered 	in depth 	in M.
Friedman, 	capitalism and 	Freedom 	144-49 	(1962). 	By 	excluding
unlicensed 	persons, 	mandatory 	licensure 	inhibits 	entry 	into 	the
profession 	and 	thereby 	restricts 	competition.
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hindered 	in 	their 	ability 	to 	practice 	the 	specialty.
Consequently, 	private 	certification offers 	some 	benefits 	to
consumers 	and 	imposes 	virtually 	no 	costs 	on 	society.
A state-certification mechanism 	can 	offer the benefits 	of 	a
private program, 	but 	it 	also may 	impose 	costs 	on 	consumers. 8
The program proposed 	in S.B. 	454 	may 	impose 	costs because
noncertified 	interior designers 	would 	not 	only 	be prohibited 	from
holding 	themselves 	out 	as 	certified 	(or 	licensed) 	interior
designers, 	but 	they would 	be 	prohibited 	altogether 	from
identifying 	themselves 	as 	interior 	designers. 	To 	the 	extent 	that
the 	term 	-interior 	designer" 	is 	a 	widely 	used 	phrase 	that
consumers 	commonly 	associate 	with 	providers 	of 	interior design
services 	and 	no 	substitute 	term 	exists 	to 	provide 	the 	same
information 	to 	consumers, 	the prohibition may 	diminish 	the
ability 	of noncertified 	designers 	to 	compete 	and 	increase 	the
search 	costs 	of 	consumers who 	desire 	to 	use 	the 	potentially 	lower
quality 	and 	lower priced providers 	of 	interior design 	services.
When a 	private 	certification mechanism already 	provides 	the
quality 	information 	that consumers may 	value, 	the 	additional
benefit 	of a 	state 	program may be 	quite 	limited, 	and 	the 	program
-may 	therefore 	impose 	costs 	that 	are 	greater 	than 	its 	benefits.
We 	urge 	you 	to 	consider whether S.B. 	454 	offers 	consumers
significant benefits 	in view 	of 	the 	existence 	of 	organizations
such 	as 	the 	American 	Society of 	Interior 	Designers 	(ASID) 	and 	the
Institute 	of 	Business 	Designers 	(IBD), 	each 	of which 	limits
membership 	to 	individuals meeting 	criteria 	that 	include
education, 	professional 	experience, 	and 	satisfactory 	completion
of 	an 	examination prepared by 	the 	National 	Counsel 	for 	Interior
Design 	Qualification 	(NCIDQ).9 	Both ASID and 	IBO are 	nationally
recognized 	professional 	associations.
III. 	Conclusion
The 	benefits 	of voluntary 	licensing by 	the 	state 	may 	be
quite 	limited where 	the 	state 	program 	is 	duplicative 	of 	private
8 	Government 	certification programs may 	reduce 	consumer
information, 	if 	they 	displace 	private 	certification programs 	that
would 	gather 	and 	provide greater 	information.
9 	section 	14 	of 	the 	proposed 	legislation 	establishes
standards 	for 	education and 	experience 	that 	are 	no more
stringent than 	the 	standards 	employed 	by ASIO 	for 	certification.
Additionally, 	Section 	15 	of S.B. 	454 	provides 	that 	-The board may
adopt 	by 	rule the 	examination 	of 	the 	National 	Council 	for
Interior 	Design 	Qualification or 	a 	comparable 	examination." 	This
suggests 	that 	state 	certification would 	not 	offer benefits 	in
addition 	to 	those 	of the 	private program.
4

certification mechanisms. 	S.B. 	454 	also may 	increase 	consumers'
search 	costs 	by 	preventing unlicensed 	professionals 	from
identifying themselves 	by 	a 	term that 	consumers 	associate 	with
the 	profession 	and 	for 	which 	no 	common 	substitute 	exists. 	You
may wish 	to 	consider whether 	the 	costs 	of 	S.B. 	454 	exceed 	its
benefits 	in 	light 	of 	the 	availability 	of 	private 	certification
programs 	for 	interior designers.
Sincerely,
crA~.6.~
Thomas 	B. 	Carter
Director
Dallas 	Regional 	Office
5