The Competitor's Veto: Absurd and Unconstitutional
PLF is announcing its new nationwide campaign against “Certificate of Convenience and Necessity” laws. We call these laws the “Competitor’s Veto,” because they allow existing businesses to veto their own competition. When an entrepreneur applies for a license to run a business, established companies can protest the application and force the would-be entrepreneur to attend a lengthy and expensive hearing where he/she must prove to state bureaucrats that there is a “public need” for his/her business. If officials decide new competition isn’t necessary, they can deny a person the right to start a new business, no matter how skilled or qualified the entrepreneur may be.
Competitor's Veto Attorneys
Staff Attorney, PLF Headquarters Staff Attorney & Liberty Clinic Director
E-Mail: firstname.lastname@example.org E-Mail: LSalzman@pacificlegal.org
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Roadblock To Economic Freedom
Cronyism in the state of West Virginia has put Arty Vogt's small moving business in jeopardy. A 19th century law requiring a certificate of need has allowed Arty's competition, more that 100 miles away, veto moves that his company van make within West Virginia. All Arty wants is to continue his business in the state to keep his employees working and his loyal customers served.
West Virginia Small Business Owner Falls Victim To Competitor's Veto
PLF Director of Communications Harold Johnson hosts a conversation with PLF attorney Larry Salzman and his client Arty Vogt about an economic liberty case that is limiting Arty's moving business in West Virginia. Because of an old certificate of need law in the state, a competiting moving company located more than 100 miles away was allowed to veto his certificate of need, denying Arty's company to make moves for his loyal customer base within the state of West Virginia.
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Those concerned about public safety have little to fear from scaling back occupational licenses. In practice, many laws serve not to protect the public, but to protect existing businesses from competition.
Throughout the country, state “Certificate of Necessity” (CON) laws govern a variety of industries, from moving companies and taxicabs to hospitals and car lots. A legacy of economic thinking in the early 20th century, CON laws restrict economic opportunity and raise costs for products and services that consumers need.
Unlike traditional occupational licenses, Certificate of Necessity (CON) laws are not meant to protect consumers or the general public by requiring practitioners of a trade to demonstrate expertise or education. Instead, their purpose is to restrict competition and boost prices established companies can charge. This cartel system prevails in most states and in a variety of industries, from moving companies to taxicabs to hospitals and car lots.
This article looks at the political economy and constitutionality of “Certificate of Public Convenience and Necessity” or “Certificate of Need” (CON) laws, which require a business to obtain approval from a government agency before beginning operations.
A small Reno limousine company and a California-based moving company have filed a lawsuit in U.S. District Court in Las Vegas challenging the Nevada Transportation Authority’s system of approving transportation operating certificates. If successful, the challenge could change the way Nevada regulators approve certificates for taxi operations and tow trucks as well as limousine and moving-and-storage companies.
In his 2015 State of the State speech, Gov. Steve Bullock asked Montanans to "identify opportunities for economic growth – and where government stands in the way." Republicans agree: In his response to Bullock, Sen. Eric Moore stressed the importance of the private sector in creating "jobs, prosperity and real opportunity."
Ask the people building Tesla Motors’ new factory near Reno, or practically anyone who works in economic development: Nevada is a business-friendly state. Steve Saxon, a Sacramento businessman trying to expand across the state line, isn’t buying the idea that Nevada is a wide-open free-market frontier.
Imagine what would have happened if, in 1992, the owners of then-little-known Starbucks had been required to prove that the United States “needed” a new chain of coffee shops.
Unfortunately, many entrepreneurs soon run into a barrier even the best can’t get past: licensing laws called “Certificate of Public Convenience and Necessity” or “Certificate of Need” laws.
Losco v. Powelson Vogt v. Ferrel Underwood v. Mackay
Losco v. Powelson
- Pennsylvania makes entrepreneurs ask for permission before starting a moving business -
Summary: PLF is representing entrepreneurs Cosmo and Mary Anne Losco in a constitutional challenge to Pennsylvania’s Certificate of Public Convenience law (66 Pa. C.S.A. § 1103, et seq.), which allows existing moving companies to protest applications for new moving licenses. We call these laws the “competitor’s veto,” and we’ve challenged successfully in Oregon, Missouri, Kentucky, and Montana. If a protest is filed, the applicant must attend a government hearing and prove to the state that their business is “necessary or proper” to “the service, accommodation, convenience, or safety of the public.” Not one of those terms is defined in the law, such that regulators are free to deny applications simply to protect existing businesses. This case is a follow-up to PLF’s other economic liberty cases, which have established that the government cannot restrict your right to earn a living for the sole purpose of protecting existing firms.
Status: Complaint filed in the U.S. District Court for the Eastern District of Pennsylvania on May 19, 2015. After filing, the Pennsylvania Public Utilities Commission voluntarily overturned their Competitor’s Veto law, and PLF withdrew the complaint.
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Arty Vogt and Vogt Ventures LLC v. Ferrel, et al.
- Razing government roadblocks to competition in the moving business -
Summary: West Virginia forces entrepreneurs to prove a “need” for additional moving services before they are allowed to operate. PLF is challenging this roadblock to new competition — called a “Certificate of Necessity” law — on behalf of Arty Vogt, owner of Lloyd’s Transfer & Storage, in Berryville, Virginia. Vogt’s business was blocked from expanding 10 miles across the border into West Virginia by the unconstitutional law. The lawsuit argues that the restriction is unconstitutional because it burdens interstate commerce in violation of the U.S. Constitution's Commerce Clause and because it is not rationally related to a legitimate government interest, in violation of the Fourteenth Amendment. West Virginia’s Certificate of Need law exists solely to protect established companies from legitimate competition.
Status: Complaint filed on May 19, 2016.
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Underwood v. Mackay
- Moving roadblocks to competition and free enterprise in Nevada -
Summary: Nevada has the most anti-competitive licensing law for movers — a law written for the express purpose of blocking free enterprise. Nevada’s licensing law for moving companies, NRS 706.391. In challenging this law, we represent Maurice Underwood, an entrepreneur in Reno, Nevada, owner of Reno Movers, LLC (dba “Man With Van”). Underwood got into the business in 2004 after running a small house-cleaning company, when he discovered that many of his customers were in need of moving services. Only after operating for some time did he learn that state law requires him to get a Certificate of Public Convenience and Necessity (CPCN) before Man With Van can operate as a full-service company. (Without a CPCN, he and his six employees may load and unload trucks, but not drive them.) Yet the rules governing CPCNs in Nevada are so severely anticompetitive that there are only 40 licensed moving companies in the entire state, including only two in Reno.
Status: The appellants appealed to the Ninth Circuit Court of Appeals. Briefing on appeal was completed Dec. 6, 2013. Oral argument scheduled for May 14, 2015. The Ninth Circuit Court of Appeals issued an adverse decision on June 11, 2015.
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Pabst Bruner Sweet Munie
Tracie Pabst v. Montana Public Service Commission
- Montana violates the Constitution by roadblocking new taxi and shuttle firms -
Summary: Big Sky businesswoman Tracie Pabst challenged Montana’s “competitors’ veto” law that allows existing transportation businesses to prohibit her from opening her own taxi business and competing against them. The law at issue — called a “Certificate of Public Convenience and Necessity” law — requires a person to get a Certificate before starting a taxi, limo, or moving company. Whenever a person applies for a Certificate, existing businesses are allowed to file a “protest.” If they do, the applicant is then required to prove to the state’s Public Service Commission that a new business would serve the “public convenience and necessity” — a term that isn’t defined in the law. Montana Governor Steve Bullock signed SB 396 into law on May 8, 2015, getting rid of the state’s competitor’s veto law.
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Bruner v. Zawacki
- Moving state-created roadblocks to free enterprise -
Summary: R.J. Bruner entered the moving business in 2010 after working at a Lexington chemical plant to put himself through the MBA program at the University of Kentucky. His business, Wildcat Movers, headquartered in Lexington, started by advertising on craigslist.com, and now operates four trucks and employs 31 people. But then, Bruner was sideswiped by a state law that restricts competition and robust free enterprise in the moving business. With PLF's defense, the court granted Plaintiffs' motion for summary judgment on Feb. 3, 2014. PLF is now awaiting decision on Defendants' motion to alter/amend/clarify judgment and opinion.
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Sweet v. Kroger
- Oregon unfairly, and unconstitutionally, bars entry into the moving business -
Summary: PLF attorneys represented Adam Sweet and his brother, owners of a small moving company in Portland, Oregon. They provide a range of moving services to both residential and commercial clients, including furniture deliveries, packing and loading, and full service moving with trucks. They had been in business for two years; they owned one truck and leased two trucks “on demand.” They had two full-time employees, and four who were part-time with three who were on-call. Sweet wished to enter into the tightly regulated moving services market in the Portland region. But Oregon’s certification statute required that any person wanting to operate a moving company must obtain a certificate. In response to PLF's lawsuit, the state of Oregon repealed the law on June 24, 2009. The legislature passed a bill removing the anti-competitive aspects of the movers' licensing law and the governor signed the bill into law on June 25, 2009.
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Munie v. Skouby
- Anticompetition laws collide with the Constitution -
Summary: As it happens, Michael Munie, who is 43, has been in the moving business since he was 16. But after operating his company for 20 years, he was told that he was required to have a license under Section 390.061 of the Missouri Statutes. That statute provides that when a person seeks a permit to run a new moving company, the Department of Transportation shall notify existing moving companies, and permit them to intervene in the application process and object to a new application on the basis that a new company is "inconsistent with the public convenience and necessity." After Munie filed his permit application, several existing moving companies objected that a new company would compete with them and diminish their business. PLF filed suit on behalf of Michael Munie, and the state of Missouri repealed the law on June 10, 2012.
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