No jobs for old professions? Disruptive innovations in professional services Ania Thiemann Head of Global Relations Competition Division Presentation to the International Society of Dental Regulators Westminster, London 5 October 2017
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No shortage of dramatic predictions
QUICK DETOUR: WHAT IS DISRUPTIVE INNOVATION?
Defining disruptive innovation New products, processes or business models that redefine a market and displace incumbent firms. Come from outside a market s value network May introduce new technology, or new business models (AirBnB, P2P energy supply, Uber)
Disruptive vs. incremental innovation Incremental Disruptive
WHAT S HAPPENING IN PROFESSIONAL SERVICES?
What is underlying these bold predictions? A few broad trends (not all of them new) Ubiquitous communication technology, AI, automatisation and robotics Accessibility of knowledge regarding user needs and service provisions Fee and affordability pressure
These trends have given rise to: Online service delivery Availability of information regarding professional quality from rankings and reviews Automation Service unbundling/ end of the black box
Some examples
How are the professions responding?
WHAT S HAPPENING WITH PROFESSIONAL SERVICES REGULATION?
Stepping back: why are professions regulated? (1)
Stepping back: why are professions regulated? (2) Information asymmetries Inability to assess quality (credence/experience good) Use of alternative indicators of quality Moral hazard Externalities Other policy objectives Imposition of additional costs due to poor quality Positive externalities from good quality Regional fairness Accessibility of services at low incomes Legal principles (attorney-client privilege)
The scope of regulatory restrictions Qualitative entry Quantitative entry Fees Advertising Partnerships, ownership, management Legal Many aid are enforced through self-regulation (i.e. dental associations, bar associations)
Regulatory reform is trending France (Loi Macron) UK (alternative business structures, Legal Services Board) European Commission Recommendations on the liberalisation of professions European Parliament Hearing July 2017 Korea (licensing procedures) Reform may be coming to a jurisdiction near you.
Regulation can stifle growth by hampering productivity Increase in multi-factor productivity compared to regulatory stance Faster growing More regulated Source - Arnold, J., Nicoletti, G. and Scarpetta, S. (2011). Does anti-competitive regulation matter for productivity? Evidence from European firms. IZA Discussion Paper No. 5511.
NOTICE ANY MISMATCH BETWEEN POLICY OBJECTIVES AND REGULATIONS?
Does the rationale still apply? Information asymmetries Externalities Other policy objectives Inability to assess quality (credence/experience good) Use of alternative indicators of quality Moral hazard New relationship due to online research, reviews, new competition, commoditisation Imposition of additional costs due to poor quality Positive externalities from good quality Could go either way Regional fairness Accessibility of services at low incomes Legal principles (attorney-client privilege) Some no longer apply
Implications issues for debate The current regulatory framework rests on several foundations which may be under stress Exclusivity Is it necessary or desirable anymore? Quantitative entry restrictions Do they make sense? Qualitative entry restrictions Are they necessary and enforceable? Selfregulation Conflicts of interest? Consumer protection and other regulations Have any new issues arisen?
What can (competition) authorities do? Limited enforcement issues (keep an eye out for self-regulators) Advocacy encouraging regulatory assessment (if only there were a toolkit )
OECD Competition Assessment Toolkit MANUAL 2007: Toolkit published to assist officials in competition assessment of new or existing laws and regulations 2009: OECD Council Recommendation, endorsing use 2010: Updated Vol 1 and 2 2015: Hands-on Manual Now available in three volumes, in 17 languages Competition Assessment Toolkit
Types of barriers identified in selfregulated professions in Portugal Entry barriers Entry exams/qualifications Long internships High cost (tuition fees, registration fees, exam fees) Exclusive rights Attribution of titles Reserved work Restrictions on advertising Restrictions on organisational forms No provisions for multi-disciplinarity Prohibitions on sharing with other professions
Possible solutions Legislate for output rather than the professional (e.g. building safety rules) Refer to existing framework conditions or guarantees (hygiene rules, health and safety norms, professional standards) Enable new technology make regulation future proof
THANK YOU ANIA.THIEMANN@OECD.ORG