April 24, 2005

Salary-Fixing and the Voluntary Trade Council

In my earlier post on salary negotiations, I urged doctors to push the envelope in their salaries (for a number of reasons). I received an e-mail from Skip Oilva, President of the Voluntary Trade Council. He informed me that the Federal Trade Commission has apparently been very aggressive - libertarians would say 'tyrannical' - in keeping physicians from negotiating above-market salaries. The Voluntary Trade Council opposes this sort of nonsense, and in the e-mail he explained what else the FTC does to fix doctors salaries.

Apparently the FTC tightly controls the business relationship of doctors and insurers. Beyond that, they've prosecuted, according to the VTC, more than two dozen physician groups (meaning roughly 12,000 physicians) because they negotiated above market salaries. Yes, trying to make more money in contract negotiations is now a prosecutable offense. Further, the VTC President tells me that refusing to sign a contract can be deemed illegal if the insurer complains and that signed contracts have been invalidated on the grounds that the insurers were coerced by the physicians' negotiating for higher salaries.

As far as I can tell, this power seems to extend from the antitrust authority of the FTC, though how doctors can appropriately qualify for antitrust action, even when organized into groups, is beyond me. I wasn't amenable to antitrust legislation anyway (the government always seems to be the biggest obstacle to entry in a market) but I didn't realize it was being used so broadly.

Sorry, Tanto. If the insurers and the doctors agreed to the salary, I don't see the coercion. Insurers shouldn't get special favors from the FTC (nor should doctors) but it seems another under-monitored part of the federal bureaucracy is expanding its powers. And you thought the elected politicians were bad. At least most of their time is spent chasing cameras, thus keeping them busy and unable, if only temporarily, to wreak more legislative havoc.

So what's the VTC? Excellent question.

    The Voluntary Trade Council (also known as Citizens for Voluntary Trade) is a nonprofit research and education organization that develops practical solutions to the problems caused by violent state intervention in free markets. The VTC focuses on the harm caused to individuals and businesses by the enforcement of antitrust and other “competition” laws. Through publications, filings with government agencies, and the Internet, the VTC applies the principles of free market economics and rational ethics to contemporary antitrust policies and cases.
This sounds like an important task; it sounds like a role that is desperaely needed. For all the experience and observation we can gain from simply watching the abysmal failures of the old Soviet Union price control boards, the FTC is either willfully ignorant of them or stubbornly trying to defeat the laws of supply and demand. Let's all wish the Voluntary Trade Council the best of luck in limiting these abusive and unnecessary exercises of power.


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