March 4, 2013

Fake reform delivers nothing for New Mexico entrepreneurs

By Fake reform delivers nothing for New Mexico entrepreneurs

The New Mexico legislature is currently debating a bill, HB 194, which would reform that state’s cumbersome Public Utility Commission. Sadly, some reform advocates mistakenly think it would “reduce or remove the barriers preventing new taxi, shuttle, bus, limo, and moving companies from opening.” In fact, it would do no such thing. While the bill would reword some of that state’s anti-competitive rules governing taxicabs, moving companies, and other businesses, most of the reforms are merely cosmetic, and would accomplish little in terms of protecting the right to earn a living, or lowering the cost of transportation services in the state.

As with so many states—including Kentucky and Nevada, which we’re currently targeting in lawsuits—New Mexico only allows people to operate taxicab or moving companies if they get a “certificate of need” or “certificate of public convenience and necessity” from the Commission. Whenever a person applies for a certificate, the Commission allows existing companies to object, and when an objection is filed, the applicant must prove to the Commission that they won’t really compete that much. The whole scheme is designed to protect established businesses against fair competition—not to protect the consumer.

Sadly, while HB 194 would eliminate some of the language that allows established companies to object and bar competition, other portions of the bill would still guarantee the power of existing companies to outlaw their own competition.

For example, current law provides that before it grants a certificate, the Commission must “consider…whether granting the permit would endanger or impair the operations of motor carriers to an extent contrary to the public interest,” and that the Commission “shall not issue a permit to an intrastate contract motor carrier of persons if it finds that the authority sought will impair the provision of transportation services by a certificated intrastate common motor carrier of persons then serving the same territory.” HB 194 would strike out this provision—which seems good. But the bill still would required the Commission to deny an application to run a taxi company “if it finds after hearing that the grant of the application presents a reasonable potential to impair, diminish or otherwise adversely affect the existing provision of full-service passenger service to the public in the full-service territory or if the application is otherwise contrary to the public interest in the full-service territory.”

Although the bill says that competition “shall not…be sufficient grounds for denying the application,” it makes an exception to that prohibition which says that the Commission can prohibit competition whenever an existing company makes “a showing that the diversion [i.e., competition] presents a reasonable potential to affect the provision of full-service passenger service to the community.” What is “a showing”? What is a “reasonable potential”? What sort of “effect” is sufficient to ban a person from the right to compete? The bill is silent on these matters. This means that a fully qualified, safe, competent business could be denied the right to operate solely because consumers would prefer to hire the newcomer, if they were free to choose.

If passed, HB 194 would still allow New Mexico bureaucrats to choose who is and isn’t allowed to run a taxi company or a moving company in the state—not to protect customers against fraud or incompetence, but solely to protect established businesses against having to compete fairly. Worse; the law actually requires these bureaucrats to give special privileges to existing companies regardless of their competency. This sort of “reform” makes no economic sense in a job-hungry economy—and turns a deaf ear to the constitutional right of entrepreneurs to start their own business free of government favoritism.

For more on the perverse logic and deleterious consequences of Certificate of Necessity laws, check out my article here.

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