Abdallah Batayneh came to this country believing in the idea that you can work hard and build a better life for yourself and your family. He loves nature, and now he helps run a beautiful hot springs resort in the Colorado mountains. The best way to reach the resort is by shuttle, but Abdallah kept hearing complaints from visitors about the existing companies and how they were too expensive or had horrible customer service. So, Abdallah decided to open his own company and offer a cheaper, more reliable shuttle service for the region.
Unfortunately, in Colorado—as in most states—powerful insiders have quietly put in place laws that ban any new competition without permission from the existing monopolies and cartels. The existing shuttle companies used those laws, said “no” to Abdallah, and got the state to ban him from competing.
Colorado’s law is designed to protect insiders and let them block entrepreneurs like Abdallah. In order to start his new business, Abdallah first had to get permission from the government. That’s where the trouble began. The existing companies guard their government-protected monopoly jealously and objected to Abdallah’s potential competition. The local shuttle companies intervened in Abdallah’s application and argued that another shuttle service wasn’t “needed” and would cut into their business. Unfortunately, Colorado agreed and denied Abdallah the right to start his business, even though the government found that Abdallah was “operationally, managerially, and financially fit” to open and operate his proposed shuttle service. In the end, it didn’t matter that Abdallah was qualified and would improve service and lower costs for the community. All the state cared about was protecting existing companies and their profits.
But Abdallah is fighting back. He has teamed up with the Institute for Justice to file a constitutional lawsuit because it’s not the government’s job to pick winners and losers in the marketplace or to protect established companies from competition. That’s not just bad policy, it’s unconstitutional.
Abdallah Batayneh Fights for His Right to Start a Business and Compete
Abdallah Batayneh is a hardworking family man from Jordan. He came to this country with the dream of building a business and controlling his own destiny. An entrepreneur at heart, Abdallah manages his own cleaning company while still working full-time to help run a beautiful resort in Steamboat Springs, Colorado.
Abdallah loves the natural beauty of the mountain resort and is passionate about helping people visit so they can experience it for themselves. Unfortunately, the resort can be hard to reach without using a shuttle. Although there are two shuttle companies in the area, they take advantage of a government-enforced monopoly over transportation in the region. Since they don’t have to worry about competition, they have no incentive to keep costs down or provide great service to customers. Many of the resort’s guests told Abdallah that they had a hard time getting a ride, that the wait times were unreasonable and that the shuttles were too expensive.
So, Abdallah did what Americans have often done when they saw that customers’ needs were not being met—he decided to start his own business and compete.
Colorado Protects the Shuttle Cartel
Colorado, however, had other ideas. Instead of letting entrepreneurs innovate, the state’s laws create private monopolies and cartels within the state’s transportation industry. Since Abdallah wanted to open a shuttle in a cartel’s territory, he had to get permission from the government to open his new company. When he applied for it, Colorado asked the existing companies whether Abdallah should be allowed to compete with them. Not surprisingly, they said no, so Colorado banned Abdallah from starting his business.
Laws like Colorado’s are known as Certificates of Need or “CONs.” These laws grant existing businesses a monopoly over their services in a specific region. CONs cheat hard-working entrepreneurs out of their constitutional right to start a business and earn a living.
Colorado’s law does nothing other than protect insiders, monopolies and cartels. Here’s how. First, when someone like Abdallah wants to start a new company, he has to get permission from the state’s Public Utility Commission (the “PUC”). Before he can, he needs to go through an application process during which the PUC informs the existing companies in the territory that a newcomer is moving in. Of course, the cartel objects, and this triggers a long, difficult administrative process, culminating in a hearing where the existing companies get to argue against the application.
Worse, the administrative process is a charade. Even after an entrepreneur is found fit and qualified to open their business, they are still banned unless they can prove that their new company is “required” by “public convenience and necessity.”[i] According to the state, competition is only “required” when the existing companies lack the capacity to serve every potential customer who might want to use a shuttle in the future. This means that even if an entrepreneur meets all the safety requirements, is fully qualified and can improve service and lower costs for the community, the PUC will still find the additional competition is not “required” so long as the existing companies can potentially take on more customers, no matter how poorly. That’s not only wrong, it’s unconstitutional.
That’s exactly what happened when Abdallah tried to open his shuttle business. The two existing shuttle companies in the area objected, so the PUC rejected Abdallah’s application. The PUC explicitly found Abdallah “operationally, managerially, and financially fit to operate the proposed service,” but that didn’t matter. Even more, the PUC found that customers and potential customers weren’t satisfied with the existing shuttles’ service and rates, but that didn’t matter either. In Colorado, all that matters is protecting the private monopoly.
After moving to the United States to pursue the American Dream, Abdallah is not about to give up now. With IJ’s help, Abdallah is challenging the constitutionality of Colorado’s CON law in court. And, once he wins, monopolies throughout the state will forever lose their ability to keep newcomers and competition at bay.
The Legal Claims
Colorado’s CON doesn’t just foster monopolies and hurt the rest of us; it violates the Due Process Clause of the Colorado Constitution.
The Due Process Clause is designed to protect the “American constitutional concept of fundamental freedoms and liberties, under which the individual has the right to engage in a lawful business.”[ii] That’s exactly what Abdallah is fighting for—his right to open a business, so that he can work for himself and better provide for his family. This important constitutional right should not be infringed merely to protect the interests of the transportation cartels.
It is unconstitutional for the government to pick and choose winners or to protect one private industry from competition. The Colorado Supreme Court has already held that laws which are purely economic and designed to protect some companies from competition violate due process.[iii] The Colorado Constitution doesn’t allow for this sort of protectionist law, and that includes Colorado’s CON laws.
Leading the Fight for Transportation Freedom
For decades, IJ has been winning the war against taxi monopolies and the governments that gifted them strangleholds over the transportation industry. Long before Uber and Lyft increased access, IJ led the way for taxi entrepreneurs to open up these closed markets, compete with the insiders, and in so doing, improve access to transportation for millions of residents.
IJ has fought for transportation freedom in cities and states throughout the nation, including in Bowling Green, Chicago, Lake Chelan, Las Vegas, Little Rock, Milwaukee, Nashville, Nebraska, New York and San Diego.
Special-interest groups have lobbied for favors and governmentally protected monopolies throughout the nation. CONs are a favorite of transportation cartels because they allow cartel members to claim territory as their own and use the state to keep competition at bay. Since insiders love CONs, it’s no surprise that IJ is the leader is defeating them. In fact, many of IJ’s transportation cases over the years have involved these types of anticompetitive trade barriers. Even in Colorado, IJ has been working for decades to increase freedom for the state’s transportation entrepreneurs. In response to IJ’s constitutional challenge to Denver’s taxi CON back in 1993, the Colorado Legislature changed the law. Even then, IJ successfully sued again to enforce the improved law after the PUC refused to abide by it. And now, Abdallah and IJ are teaming up to build on IJ’s success in Denver and eliminate transportation monopolies throughout Colorado.
Building on our long history of success increasing freedom in the transportation field in general, and in defeating transportation CONs in particular, IJ is now the leader in constitutional litigation against all CONs. We have built upon our work in challenging CONs in the transportation and other industries to take on increasingly sophisticated cases, including challenging protectionist CONs in the medical sector. IJ has challenged more CONs than any other organization and has taken on anti-competitive CONs in the medical realm in North Carolina, Kentucky, Iowa and Virginia. As a result, states across the nation are gradually coming around and reach out to IJ for guidance. Recently, IJ worked with the Florida Legislature to successfully repeal Florida’s CON law for hospitals throughout the Sunshine State.
No matter the industry or legal mechanism put in place to ensure them, governmentally protected monopolies are bad for everyone except the insiders they protect. Protectionism increases prices, decreases quality and is completely contrary to our nation’s values. For decades, IJ has a proven track record of improving transportation freedom and defeating protectionist policies. The Institute for Justice will continue to build on that success and increase freedom for entrepreneurs—and the public they serve—for decades more to come.
IJ Attorney Will Aronin and IJ Senior Attorney Justin Pearson are representing Abdallah and his company. They are joined by LaMar Jost of Wheeler Trigg O’Donnell, LLP as local counsel.
About the Institute for Justice
The Institute for Justice is the national law firm for liberty. IJ is the leader in the fight against CONs and has 25-plus-years’ experience breaking down barriers to competition in the transportation industry.
[i] Colorado Revised Statutes § 40-10.1-201(1)
[ii] City and County of Denver v. Thrailkill, 244 P.2d 1074, 1079 (Colo. 1952).
[iii] People ex rel. Orcutt v. Instantwhip Denver, Inc., 490 P.2d 940, 944 (Colo. 1971).
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