May 19, 2016

PLF challenges law that allows businesses to veto new competition

By Anastasia P. Boden Attorney

Most people see the United States as the Land of Opportunity, where the right to pursue the occupation of one’s choice and to earn a living for oneself and one’s family is simply a “given.”  Yet over half the states have “Competitor’s Veto” laws, which effectively allow established businesses to shut out new enterprises simply because they don’t want to compete. 

Today, PLF attorneys challenged West Virginia’s Competitor’s Veto law on behalf of Arty Vogt, who owns a moving company based in Virginia.  Arty would like to provide moving services within neighboring West Virginia, which is just miles from his office.  But that state’s Competitor’s Veto law denies him the opportunity to compete there unless he gets permission from established West Virginia moving companies first. 

Arty already has licenses that allow him to work inside Virginia, and to perform moves from West Virginia to other states, or from other states to West Virginia.  So there’s no doubt that he is fit to provide local moves within the state.  His moving company, Lloyd’s Transfer & Storage, has been in business since 1931, and it had a license to operate in West Virginia up until Arty bought it in 2005.  Unbeknownst to Arty, when he bought the business, the license did not transfer with it.  Now, he can’t work in West Virginia unless he submits himself to the state’s unconstitutional and unfair Competitor’s Veto licensing procedure.

The way West Virginia’s Competitor’s Veto law works is like this:

Applicants apply to the West Virginia Public Services Commission (PSC) for a license to operate, and the PSC schedules a hearing.

The public and existing businesses are offered an opportunity to protest the application.  If a protest is filed, the applicant must attend a hearing akin to full-scale litigation, where he must prove to a state bureaucrat that there is a “need” for his business.  But if an existing business contends that it can service that existing need, the PSC must deny the application.

Of course, proving that there is a “need” for one’s services in advance is a complicated, if not impossible, task.  No law or regulation specifies exactly how an entrepreneur is supposed to do that.  In America, the typical way to prove that there’s a need for one’s services is to offer them to the public and let consumers decide.  But West Virginia instead leaves it up to bureaucrats to determine whether a new business is “necessary,” and allows entrenched businesses to demand that they alone service that need, rather than compete for it.

Since 2000, at least 13 moving companies applied for licenses and were either denied or withdrew in the face of protests by existing businesses.  The negative effect is not confined to the state of West Virginia.  These laws affect would-be West Virginia entrepreneurs and out-of-state entrepreneurs like Arty.  And yet Competitor’s Veto laws provide no corresponding benefit to the public.  They have nothing to do with protecting health and safety—even the safest businesses can be denied simply because they would compete with established businesses.  Instead, the Competitor’s Veto harms consumers, who suffer higher prices and decreased quality due to a lack of competition.  It is plain from the way that these laws work in practice that they are designed solely to favor established West Virginia businesses.

Most people would agree that the government shouldn’t be choosing the winners and losers in this manner.  Fortunately, the Constitution protects the right to earn a living free of such arbitrary government interference; and it forbids states from enacting laws that discriminate against other states’ commerce, or that unduly burden commerce across state lines.  In our lawsuit filed today, we argue that West Virginia’s Competitor’s Veto law not only violates principles of fairness, but also violates those important constitutional promises. 

To see more about how PLF is challenging Competitor’s Veto laws across the country, click here.

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