August 21, 2013

Can states use licensing laws simply to prevent competition?

By Can states use licensing laws simply to prevent competition?

In 2008, PLF attorneys won an important victory for the constitutional right of entrepreneurs to earn a living without unreasonable government interference. In that case, Merrifield v. Lockyer, the Ninth Circuit Court of Appeals ruled that while states can use licensing laws to protect the general public from fraud or from dangers to public health, they can’t use licensing simply to bar competition against existing businesses. “Mere economic protectionism for the sake of economic protectionism,” said the court, “is irrational with respect to determining if a classification survives rational basis review…. [It] cannot be said to be in furtherance of a legitimate governmental interest.”

In making that ruling, the court rejected the Tenth Circuit’s decision in Powers v. Harris, a 2003 case in which that court held that government can block people from entering a trade simply in order to protect the private market share of those businesses that are already operating. Although PLF urged the Supreme Court to take the Powers case and resolve this conflict, the justices declined.

Now the state of Louisiana has asked the Supreme Court to take up the case of St. Joseph Abbey v. Castille, in which the Fifth Circuit Court of Appeals struck down a Louisiana licensing law that prohibits people from selling coffins unless they are licensed funeral directors. That’s a serious burden, since you can’t get a license unless you get a lot of expensive education and training and then pass a difficult test—even though you’re only selling coffins, and not officiating at funerals. Relying on the Merrifield decision, the Fifth Circuit struck down that law, holding that “neither precedent nor broader principles suggest that mere economic protection of a particular industry is a legitimate governmental purpose.”

In a brief filed today with the Supreme Court, we’ve urged the justices to take up the case—and to make clear that the Fifth and Ninth Circuits were right. Protecting the private interests of established businesses is not a proper constitutional role for the government. For more than 400 years, British and American courts have consistently held that licensing requirements are only justified if they protect the general public from some kind of harm—not simply to prevent economic competition. When government indulges in such abuses, the result is to bar economic opportunity to those who need it most—the newcomer, the immigrant, the entrepreneur who doesn’t have the kind of political influence necessary to preserve his constitutional right to compete.

You can read the brief here. For more on the abuse of occupational licensing, check out my book, The Right to Earn A Living.

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