Kentucky’s War On The Little Guy…And Nevada’s…and Missouri’s…

Sunday at 10pm Eastern, Fox News will be rebroadcasting John Stossel’s special, War On The Little Guy, which includes a segment about my lawsuit on behalf of Kentucky entrepreneur Raleigh Bruner.

Some years ago, Raleigh started a moving business in Lexington called Wildcat Moving. What he didn’t know was that if you want to start a moving company in Kentucky, the law requires you to basically get permission from all of the state’s existing moving companies.

The law, called a Certificate of Necessity or CON law, works this way: to run a moving company, you need a license. But when you apply for a license, the law requires you to notify all the state’s moving companies and give them the chance to file an objection. And when an objection is filed, you have to go to a hearing and prove to the government that “existing moving services are inadequate,” and that a new moving company would be consistent with the “present or future public convenience and necessity.” What do these phrases mean? Nobody really knows. In fact, the chief lawyer for the state’s Transportation Cabinet testified under oath that there are “no objective criteria” for deciding what services are “inadequate.” And it’s hard to imagine how bureaucrats can predict “future public convenience.”

But one thing is clear: the law gives bureaucrats almost unlimited power to decide who can and who cannot run a moving business. In the past five years, there have been 39 applications for new moving licenses. Of those, 19 were subjected to protests by one or more existing moving companies, giving a total of 114 protests. You can see an example of a protest here. Note that it doesn’t even suggest that the applicant is unqualified or unsafe or untrustworthy. That’s typical; in fact, since 2007, no protest has ever alleged that an applicant was a danger to the public. Instead, all of them have asserted as grounds for protest that the new company would “directly compet[e] with” the existing company and “result in a diminution of [its] revenues.”

It gets worse: since 2007, not a single protested application for a moving license has ever been granted. If a protest is filed, the Transportation Cabinet always rejects that application, without regard to the applicant’s qualifications. Take the case of Michael Ball. He’d been in the moving business for 35 years when he filed an application for his own license so he could start his own company. But existing companies protested that he would compete against them, so his application was denied in a written opinion that acknowledged he was safe and qualified—but a new moving company wasn’t “necessary.”

The pattern is different when a person applies for permission to buy a license from an existing moving company. There, the existing firms don’t face the same competitive threat, so they don’t file protests. Those applications are easily granted. In one case, an applicant asked for a new license, and was denied, in part because she’d operated illegally without a license before filing her application. But only a year and a half later, she reapplied for permission to buy a license from an existing company—and that was approved, in a decision that remarked favorably on her long experience in the moving industry!

It’s not just Kentucky. As I explain in an article in the next George Mason Civil Rights Law Journal, the pattern was the same in Missouri, where the Pacific Legal Foundation also challenged a CON law for moving companies. Between 2005 and 2010, there were 76 applications for moving licenses in Missouri: 17 sought authority to operate statewide, and all were subjected to one or more objections by existing firms, for a total of 106 interventions. The other 59 only wanted to operate either within a “commercial zone” (exempt from the licensing rules) or in an isolated or rural area, where they presented little competitive threat to existing firms—and none of them were ever protested.

All of the 106 objections were filed by existing moving companies that already had licenses, and all stated as the sole grounds for objection that allowing a new moving company would cause “diversion of traffic or revenue.” None ever alleged any danger to public. In 14 of the 17 protested cases, the applicant simply gave up—knowing how expensive and time-consuming it would be to try to prove a “public necessity” for a new moving company—and either withdrew their applications or asked for a smaller operating radius (in which cases, the existing companies always withdrew their objections, proving again that they were not concerned with public safety). Only three times did an applicant insist on seeking statewide authority. And of these, one decided to buy an existing license instead (all objections were then dropped); one was denied a license on the grounds that he would compete against existing movers—and the other was approved on the grounds that competition is a good thing!

When we challenged the constitutionality of the Missouri law, the legislature backed down and repealed it. The results were stark. Previously, the state Department of Transportation reported an average wait time of 154 days on a moving license application. After repeal, that dropped to 19 days.

That isn’t the worst of it. By far the nation’s most oppressive licensing law is Nevada’s Certificate of Necessity law. There, the law explicitly declares that it is the state’s policy to bar competition in the moving business, and requires bureaucrats to decide whether a new moving company would “foster sound economic conditions”–a term that the state’s chief transportation official has admitted he cannot define. (Our lawsuit challenging that law is currently pending in the Ninth Circuit.)

It ought to be so easy to run a moving business. You should be able to get a truck, paint the word MOVER on the side, and go from there. But Certificate of Public Convenience And Necessity laws—which were invented in the late 19th century to regulate railroads—now bar entry into a wide variety of industries: everything from taxis and limos to moving companies and even hospitals! These are normal, competitive industries that should not be restricted in this way. When they are, the result is to create cartels that raise prices for consumers and deprive hard-working entrepreneurs of their right to earn a living.

Remarkably, every time the Supreme Court has considered the constitutionality of laws like these, it has struck them down. And the Court has made clear that the government may only restrict entry into a trade or profession if its grounds for doing so are related to a person’s “fitness or capacity to practice the profession.” But Certificate of Necessity laws have no relationship at all to a person’s fitness or qualifications. Moreover, the Sixth Circuit—which governs Kentucky—has made clear that the Constitution forbids states from using licensing laws simply to protect established businesses against legitimate economic competition. Yet Kentucky laws explicitly forbid competition, simply to prop up existing firms. And not only do Kentucky bureaucrats deprive hard-working entrepreneurs like Raleigh Bruner of their right to earn a living—but while his federal civil rights lawsuit was going forward, they tried to shut down Raleigh’s business by suing him in state court! Fortunately, the federal judge put a stop to that. Here’s hoping the courts also put a stop to the Bluegrass State’s unconstitutional favoritism.