March 24, 2015

State "Competitor's Veto" laws and the right to earn a living

By State "Competitor's Veto" laws and the right to earn a living

The Mercatus Center has published my paper on Competitor’s Veto laws—laws that force you to get permission from your own competition before you’re allowed to start a business—and how the federal government could protect people from such violations of their constitutional right to earn a living. My paper describes in detail the evidence unearthed in our recent lawsuits against Kentucky and Missouri on behalf of entrepreneurs who were unfairly denied their right to start businesses, because government officials thought there was no need for more competition.

These Competitor’s Veto laws are on the books in most states, sorry to say. Yet although economists have written at length about the economic theory involved, and have discussed the effects these laws have on consumers (they raise the cost of living by blocking free competition), it appears that nobody’s ever provided empirical research on how these laws work to block would-be business owners from the marketplace. The evidence we unearthed in litigation shows that—just as public choice theory predicts—they work exclusively to protect established businesses with zero benefits for the general public.

In the conclusion, I offer three options for federal reform. First, civil rights legislation expressly targeted at protecting economic liberty against state interference. Second, spending clause legislation that would condition federal grants for job training and education programs on the states reining in their abusive licensing laws, and third, legislation to make it easier for the FTC to bring antitrust cases against state licensing boards, as in the recent Supreme Court decision, North Carolina Board of Dental Examiners v. FTC.

You can read the whole paper here. It will also be published in the forthcoming issue of the Harvard Journal of Law & Public Policy. My thanks to the Mercatus Center for inviting me to participate.

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