Professional cartels and scale fees: chiselling on the celtic fringe?

Abstract

Since Friedman and Kuznets (1945) economists have been highly critical of the self- regulation of the professions. It has been argued that the professions act as cartels. Academic commentators and competition authorities have argued that scale fees have been used as a means of restricting competition in markets in which professions operate. Indeed competition authorities have argued that even where such a scale of fees is merely a recommendation it will have the effect of restraining competition. This view of 'professional cartels' is in contrast to the general view expressed by economists (notably in micro-economics texts) that cartels are unstable and where many members are involved subject to 'chiselling'. The present paper examines empirical evidence on the use of scale fees for conveyancing transactions in Scotland and Ireland. The data for Scotland relates to the early 1980's whilst that for Ireland relates to 1994. In both cases the evidence rejects the view that recommended scale fees restrict competition. Evidence is found of statistically significant variations in fees across geographical and thereby casts doubt on the view that recommended fees are tantamount to mandatory fees. Caution is urged in assuming that professional self-regulation automatically generates cartel-like behaviour.