December 19, 2013

PLF argues government can't enact laws solely to protect existing businesses from legitimate competition

By Anastasia P. Boden Attorney

Milwaukee resident Ghaleb Ibrahim simply wants to own and operate his own taxicab.  But that city’s ordinance denies him the right to earn a living as a taxicab driver—not because he is unqualified, but because Milwaukee capped the amount of available permits in 1992.  That cap wasn’t based on any ratio of drivers to population, or any rational formula like consumer demand.  In fact, Milwaukee has one of the nation’s worst taxicabs to rider ratios—worse than LA, New York, Dallas, and Houston.  Now, if Ghaleb were to buy a permit from an existing permit holder, he’d have to pay around $150,000 for it.  He and two others challenged Milwaukee’s cap under the Equal Protection and Due Process Clauses of Wisconsin’s Constitution, arguing that the law serves no public purpose.  The lower court ruled in favor of the three plaintiffs, and the City appealed.

The City claimed that it enacted the cap in order to encourage permit holders to invest in their businesses and to increase professionalism in the industry.  But as PLF argues in its friend of the court brief filed yesterday, restrictions on competition have the opposite effect.  The cap makes it harder for entrepreneurs to enter the industry, which means that existing firms aren’t threatened by competitors, and have less incentive to improve their businesses.  Studies from places that have eliminated taxicab permit caps, like Indianapolis, Dublin, and New Zealand, show that riders experience lower wait times, shorter fares, and better service than what they experience under caps.

Worse, caps on taxicab permits stifle entrepreneurs’ economic opportunity—particularly for those who need it most.  Because driving a taxi requires few specialized skills and little capital, it is a good opportunity for unskilled laborers and immigrants to make a living.  Driving a taxi provided a path to prosperity for many well-recognized people, including KISS guitarist Paul Stanley, and famed composer Phillip Glass.  But permit caps make it prohibitively expensive for many, let alone low-income, individuals to buy their own permits, and bars these individuals from rising from driver to owner.

Joined by our friends at the Reason Foundation, PLF argues that Milwaukee’s cap violates Mr. Ibrahim’s constitutionally protected right to pursue the American dream.  The cap doesn’t help consumers.  Instead, the measure is best explained as an attempt by existing permit holders to shield themselves from competition.  As PLF has argued in cases in OregonMissouriKentucky, and Nevada, licensing restrictions in the transportation industry are often abused for this purpose. But the Constitution says that the government can’t restrict someone from entering a trade for reasons unrelated to that applicant’s fitness to work.  The law simply does not meet this requirement, and the Court of Appeals must affirm.

 

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