Lawsuit Seeks to End Little Rock’s Taxi Monopoly

Little Rock, Ark.—The Arkansas Constitution says that monopolies are “contrary to the genius of a republic, and shall not be allowed,” but that has not stopped the Little Rock Board of Directors from enforcing an ordinance that grants a monopoly to the only taxi company in town. Today, the Institute for Justice has joined a local taxi-driver-turned-entrepreneur in filing a lawsuit that seeks to end the city’s taxi monopoly once and for all.

The City of Little Rock currently prohibits any new cab companies from competing with its one existing company, Greater Little Rock Taxi Service, LLC (“Yellow Cab”), by allowing new taxi permits to be issued only if “public convenience and necessity” leave no other choice and if doing so will not harm the existing permit holder. In other words, a newcomer to the Little Rock taxi market needs to obtain arbitrary approval from the city government and permission from their competitor.

After eight years of working as a driver for Yellow Cab, Ken Leininger decided to start his own business. He founded Ken’s Cab, a taxi company that only uses hybrid vehicles and offers reliable service at competitive fares. Ken believed he could deliver a better service to the people of Little Rock, provide a better deal for drivers, and successfully compete with Yellow Cab. But when Ken tried to get permits for his new business early last year, his applications were repeatedly denied.

Little Rock’s Fleet Services Department admitted that Ken met all of the requirements other than “public convenience and necessity” and approval from Yellow Cab, and therefore denied Ken’s application. Shocked, Ken appealed the decision to Little Rock’s Board of Directors. When the Board heard Ken’s appeal at its meeting in October, Fleet Services again admitted that Ken met all of the other requirements. Some Directors even admitted that Little Rock had created a private monopoly. But when Yellow Cab’s owner asked the Board to reject Ken’s appeal, it did, preserving the monopoly for Yellow Cab.

“Little Rock has only one taxi company, and it is illegal to start a second one,” said Institute for Justice Attorney Justin Pearson, who represents the plaintiffs in the lawsuit. “The government should not be Yellow Cab’s henchman, doing what’s best for Yellow Cab rather than what’s best for the citizens of Little Rock.”

Ken was not going to give up his right to earn a living, especially when he felt that consumers—not the government—should decide whether a new taxi business is “necessary.” So, he teamed up with the Institute for Justice to end the Little Rock taxi monopoly.

“It doesn’t seem right that the government can tell me that I can’t have a taxi service when I know I’ve fulfilled all of the requirements and more,” explained Ken Leininger.

“As Ken’s story shows, monopolies are harmful to small businesses and to customers, which is why the Arkansas Constitution prohibits them,” said IJ Attorney Allison Daniel, who also represents Ken. “Unfortunately, it will take a lawsuit to make Little Rock’s Board of Directors acknowledge that.”

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