August 5, 2015

White House licensing report: what about the Competitor’s Veto?

By White House licensing report: what about the Competitor’s Veto?

One thing the White House’s report on occupational licensing laws unfortunately left out completely is Competitor’s Veto laws: laws that forbid people from entering a business not because they are unskilled or unqualified, but solely and explicitly because existing businesses don’t want competition. While other kinds of occupational licensing laws require people to have certain education or training before they can get licensed, Competitor’s Veto laws—more commonly known as Certificate of Public Convenience and Necessity or Certificate of Need laws—forbid people from going into business unless they first get permission from their own competitors.

The Supreme Court says that all licensing laws must be related in some way to the person’s “fitness or capacity to practice” the business, but these laws have no connection at all to a person’s qualifications. They exist for the express purpose of prohibiting competition. We’ve fought these laws in many states, and won many of those battles, fortunately—but they remain on the books in most states and major cities, and they forbid people from entering a wide array of businesses: everything from moving companies to car lots to hospitals. These laws raise prices for consumers by blocking out competition; deter innovation by assuring existing companies that they have no need to improve or change, because they won’t be threatened by any new company offering some new idea; and restrict opportunity for those who need it most.

These laws are simply unconstitutional, at least in ordinary businesses that aren’t public utilities (and even there, I’ve got my doubts). They forbid a person from exercising his or her liberty by practicing a business simply as a favor to established insiders. But it is not constitutional for the government to restrict some people’s freedom simply for the private interest of others. If the Obama Administration is seriously concerned about the fact that (in the report’s words), “licensing restricts mobility across States, increases the cost of goods and services to consumers, and reduces access to jobs in licensed occupations,” it should start by targeting Certificate of Public Convenience and Necessity laws. There is no reason the Federal Trade Commission and other Justice Department lawyers could not take this issue on by the end of the day.

You can learn more about Competitor’s Veto laws here.

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