August 4, 2017

Licensed out: occupational licensing hurts, not helps

By Anastasia P. Boden Attorney

When Arty Vogt purchased a moving business with his wife Stephanie, he never thought that running it would be easy.  But he certainly didn’t think that he’d be shut down simply because the existing businesses didn’t want to compete with him.

Unfortunately, Arty operated in West Virginia, which required movers to obtain a “Certificate of Need.”  The way Certificate of Need laws (the acronym, “CON law,” is apt) work is that not only must you apply for permission to run your business, you also have to prove to the government’s satisfaction that there’s a public “need” for your business.  Worse, the government allows existing businesses to testify that they can serve any existing demand.  That amounts to asking a kid whether she wants to share her cookie or have it all to herself.  Almost without fail, businesses say that new competition is unnecessary, and the government then denies the application.  That’s why CON laws are sometimes called the “Competitor’s Veto.”

Although Competitor’s Veto laws mostly exist in the transportation industry, and are an egregious example of occupational licensing laws, absurd restrictions on the right to earn a living are not uncommon.  Nearly a third of Americans need a license to do their job.  Getting a license often entails investing serious resources in satisfying educational requirements, putting in time gaining experience under a licensee, taking exams, and paying large fees—even to go into innocuous occupations like moving, floristry, or make-up artistry.  The sad result is that people are shut out of work not because they are unqualified or present a threat to the public, but because they cannot afford the start up costs to break into an entry level job.

Many times the government’s justifications for licensing laws are so ridiculous that they can’t pass the laugh test.  A court upheld Louisiana’s florists license law on the theory that florists need to undergo training and pass exams so that consumers won’t prick their fingers on the wiring used to tie arrangements together.  (FWIW, in all my years as a flower aficionado, I’ve never seen this happen).  In a case PLF brought challenging an anti-competitive growler ban meant to protect commercial breweries from competition with small breweries, the government argued that growlers should be outlawed because, otherwise, drunk drivers “could honestly say, if asked by a spouse, friend, or police officer about their drinking, that they had only had ‘one beer.’”

But there’s hope for economic liberty, yet.  A growing consensus is emerging that occupational licensing is anti-competitive, overly burdensome, and often times outrageous.  In a 2015 report, the Obama White House acknowledged the need to address abusive licensing laws, and the FTC recently established an Economic Liberty Task Force dedicated to the same goal. PLF’s Economic Liberty Project is devoted to challenging these laws in court, but due to the public’s support for reform, we’ve also been able to secure victories in the legislature.  After we filed a lawsuit on behalf of Arty Vogt, the West Virginia legislature repealed it’s anti-competitive Competitor’s Veto law in the moving industry.

In this video, PLF attorney Jonathan Wood and I discuss occupational licensing and the potential for restoring economic opportunity to would-be entrepreneurs across the country.

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