Anastasia Boden, a lawyer with the Pacific Legal Foundation, represents Arty Vogt in his challenge to West Virginia’s “competitor’s veto” law for the moving industry.
Before Starbucks, there was Peet’s , and before Google, there was Yahoo. But what if Starbucks and Google had to ask their predecessors’ permission before starting up? We’d likely have neither of these iconic brands — to the detriment of their ingenious founders and the world’s tens of millions of coffee-drinking Googlers.
Yet, incredibly, that is exactly the scenario facing many start-up businesses across the country. In more than 30 states, new businesses in a number of fields need an okay from their potential competitors before they can open their doors.
Found in industries that include transportation, some utilities and even some medical services, it is technically known as a “certificate of need” licensing system. But “competitor’s veto” is the more accurate term for these restrictive, exclusionary laws. They give business insiders the power to veto and blackball new companies with help from compliant regulators.
Typically, these laws work like so: An entrepreneur who wants to enter an industry files an application with the relevant state board. The applicant must notify all existing businesses in the industry, and any one of them is permitted to file a protest. A protest triggers a Kafkaesque regulatory process, in which the applicant must “prove,” in advance, that the proposed start-up business is “necessary” to the public.
Of course, this is an impossible demand. The only way to find out whether a business meets a consumer need is to allow it to open its doors and find out. Even the best businesspeople cannot know for certain that after they open up shop, the public will sustain them. But what makes the United States great is that, in theory, we allow them to try.
Not surprisingly, competitor’s-veto laws mainly serve entrenched commercial cartels, securing them from challenges to their market share.
Occupational licensing laws in general have come under fire recently from legislators, policy analysts and even the White House for being anti-competitive job-killers. Competitor’s-veto laws are an especially pernicious example of this misuse of regulatory power. By definition, they have nothing to do with protecting the health or safety of consumers. Even the most responsible and safety-conscious start-up can be denied a license to operate simply because it would create competition that some regulator labels not “necessary” for the marketplace. Rather than helping consumers, these laws are anti-consumer; they restrict the public’s options and stifle the competitive pressures that spur businesses to provide better and cheaper service.
What’s worse, these laws tend to be most prevalent in industries, such as taxi, bus and moving services, that can offer some of the greatest business opportunities for people of modest means. Starting a moving company requires little more than a truck and some muscle. A taxi business should require no more than a car and knowledge of the community. But competitor’s-veto laws deprive budding entrepreneurs of these opportunities to earn a living just to protect existing firms from having to work harder for customers.
The stories of hopeful entrepreneurs who have been blocked by these laws are heartbreaking. Take small business owner Arty Vogt. On graduation from college, Arty accepted a job with Lloyd’s Transfer, a small Virginia-based moving company with a decades-long record of satisfying customers. Eventually, he and his wife, Stephanie, saved up enough money to buy the company in 2005.
Based in Berryville, near the West Virginia line, the eight-person business often gets calls from West Virginians seeking help with in-state moves. But West Virginia’s competitor’s veto law stands in the way.
When the Vogts applied for a West Virginia license, their application was challenged by the largest moving company in the state. The Vogts spent a year and $10,000 in legal fees responding to the challenge. They were denied on the grounds their business was not “necessary.”
Stephanie died last year, but Arty is continuing the fight they started by recently filing a federal lawsuit challenging the competitor’s-veto law. I represent him through the Pacific Legal Foundation, a nonprofit legal organization that defends the rights of entrepreneurs and small-business owners to earn a living free of arbitrary restrictions.
The state’s lawyers argue that the competitor’s-veto law is “rational.” But that makes little sense to Arty. “People are flabbergasted when we tell them we cannot do a move within the state of West Virginia,” he said. “I can move you to Brazil, I can move you to Wisconsin. But for no good reason, I’m not allowed to do a move in West Virginia, 11 miles from my office. . . . On behalf of everyone’s right to engage in honest free enterprise, I am determined to get this un-American law struck down.”
Like Starbucks and Google, Arty just wants the opportunity to let consumers, not competitors, decide whether he should be able to serve the public.If his lawsuit is successful, it will be a victory not just for economic liberty in West Virginia, but also for the nationwide campaign against restrictions that promote cartels and crony capitalism by vetoing consumer choice and free enterprise.
The writer, a lawyer with the Pacific Legal Foundation, represents Arty Vogt in his challenge to West Virginia’s “competitor’s veto” law for the moving industry.
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