Ending the “Competitor’s Veto” in Kentucky

March 21, 2014 | By TIMOTHY SANDEFUR

Last month, we won a crucial victory for economic freedom when a federal court struck down Kentucky’s licensing law for moving companies. That law said that if you wanted to run a moving business, you first had to get a license—but when you applied for a license, you had to first notify the state’s existing moving companies and give them the chance to object. If an objection was filed, you were required to attend a hearing (often requiring you to hire a lawyer) and prove to a group of bureaucrats that existing moving services were “inadequate” and that your new moving company would satisfy the “present or future public convenience and necessity.” What these terms meant, nobody really knew—in fact, the government admitted that there were “no objective criteria” defining these phrases. But, of course, what this law really did was create a “Competitor’s Veto,” by which existing moving companies were allowed to block their own potential competition from entering the industry.

Our case proved that in the five years before we filed our case, there were 39 applications for new moving licenses, of which 19 were protested by one or more existing companies—for a total of 114 “protests.” Of those protests, none even alleged, let alone proved, that the applicant was unqualified or dishonest. Instead, every objection did so simply because a new moving company would compete against them. Most applicants, understandably, chose to abandon their applications if a protest was filed, rather than go through the expensive and futile effort of attending the hearing. After all, since 2007, the state’s Motor Carriers Division had rejected every applicant who tried going through a hearing. In one case, an applicant who had worked as a mover for more than 30 years for his father’s company, was denied a license to run his own business, because the government said that existing moving services were “adequate.” And even more telling, whenever an applicant sought permission to buy a license from someone who already had one, nobody ever objected, and such applications were always granted—even if the applicant had just recently been denied a new license!

The judge found that this law had nothing to do with protecting the public health and safety. On the contrary, the government was simply “providing an umbrella of protection for preferred private businesses while blocking others from competing, even if they satisfy all other regulatory requirements.” The law was existed solely to “protect[] existing moving companies—regardless of their quality of service—against potential competition.” It was therefore unconstitutional.

Now the Kentucky legislature is taking steps to repeal this senseless and unconstitutional requirement. Today, it passed SB 23, a bill to repeal the unconstitutional requirement and replace it with a rule that grants a license to “any qualified applicant” who has the required insurance and operates safely. That bill has now been sent on to Governor Beshear for his signature.