Requiem for a Cartel: Challenging Oklahoma’s Casket Monopoly
In the spring of 2001, Kim Powers, of Ponca City, Oklahoma, and Dennis Bridges, of Knoxville, Tennessee, launched Memorial Concepts Online (www.memorial conceptsonline.com), a company that provides high-quality caskets to consumers across the nation at a discount price. But Oklahoma is one of a half-dozen states that shuts out potential competitors by requiring anyone who sells caskets and other funeral-related merchandise to be a licensed funeral director, even if the retailer, like Powers and Bridges, performs no funeral services of any kind.
Obtaining an Oklahoma funeral director’s license requires several years of full-time college course work, a one-year apprenticeship including the embalming of 25 bodies, and two exams. Supposedly enacted to protect vulnerable consumers, the true purpose and effect of such laws is to create a cartel in the funeral merchandise market for the benefit of licensed funeral directors. By limiting competition, funeral directors are able to greatly overcharge consumers.
Represented by the Institute for Justice, Powers and Bridges filed a federal lawsuit challenging Oklahoma’s government-imposed casket-selling cartel aiming to strike the law down and protect the right of individuals to earn an honest living in the profession of their choice without having to seek government approval.
John E. Kramer
Vice President for Strategic Relations
William H. Mellor
Chairman and Founding General Counsel
Judge Stephen P. Friot's Decision
Federal Trade Commission amicus brief filed in the District Court
Tenth Circuit Decision in this case
IJ's Petition For A Writ Of Certiorari
FCA amicus brief
PLF amicus brief
Respondent's Brief in Opposition to IJ's Cert Petition
IJ's Reply to Oppostion to Cert Petition
Get in touch with the media contact and take a look at the image resources for the case.John E. Kramer Vice President for Strategic Relations [email protected]
Is America a place where individuals have the right to earn an honest living in the occupation of their choice, or may the government arbitrarily grant monopolies to its local favorites?
That question is important to entrepreneurs nationwide, but especially to Kim Powers and Dennis Bridges, owners of Memorial Concepts Online, who are taking their fight for economic liberty to the U.S. Supreme Court. A government-created good-old-boy network effectively bans Powers and Bridges from selling caskets in Kim’s home state of Oklahoma, even though they may sell caskets in other states through their Internet company, www.memorialconceptsonline.com. More than 500 occupations—approximately ten percent of all jobs in the United States—require that individuals have permission from the government, in the form of a license, before they can pursue their chosen occupation. 1
The Institute for Justice, which represents Powers and Bridges for free, believes America is still the Land of Opportunity; and that is why on Monday, November 22, it took their case to the U.S. Supreme Court. IJ is appealing a cynical ruling by the 10th U.S. Circuit Court of Appeals that stated, “while baseball may be the national pastime of the citizenry, dishing out special economic benefits to certain in-state industries remains the favored pastime of state and local governments.” But rather than fulfilling its constitutional role as a check on such arbitrary and naked legislative abuses, the court then ruled that economic protectionism alone could justify upholding any occupational licensing. Stated plainly: state and local governments may concoct any scheme they want to help their friends—the court will not interfere.
Oklahoma’s arbitrary law requires anyone selling a casket to become a government-licensed funeral director even though casket retailers do not handle dead bodies or arrange any aspect of the funeral service, but instead merely sell what one federal appeals court aptly described as “a glorified box.” Obtaining an Oklahoma funeral director’s license requires at least two years of full-time college course work, a one-year apprenticeship including the embalming of 25 bodies and two exams.
If this decision is allowed to stand, it will give a judicial green light to unlimited backroom deals and cronyism by legislators. With its Oklahoma casket case, the Institute for Justice seeks to once-and-for-all put a nail in the coffin of government-imposed good-old-boy networks.
Kim Powers is a third-generation entrepreneur, a single mother and Oklahoma native. Dennis Bridges lives in Knoxville, Tennessee, where he has been in the funeral business for most of his life. Together, they started an Oklahoma-based company called Memorial Concepts Online to sell funeral merchandise directly to the public nationwide. By logging on to Memorial Concepts’ website (www.memorialconceptsonline.com), customers may browse through hundreds of images, compare prices, and purchase caskets, urns, memorials and other funeral merchandise from the comfort of their own home. Besides the ease and convenience of shopping online, Kim and Dennis offer their products to customers at prices that are far below what funeral homes charge for the same item.
But Oklahoma’s State Board of Embalmers and Funeral Directors doesn’t consider this a public benefit. The Board considers it a crime because Kim and Dennis are not licensed funeral directors in Oklahoma.
Like nine other states, Oklahoma forbids anyone who is not a licensed funeral director from selling caskets directly to the public. The law creates a cartel in the casket market for the benefit of licensed funeral directors. As members and beneficiaries of that cartel, funeral directors receive an extraordinarily lucrative state-created lock on the retail casket market. Oklahoma’s casket sales laws deliberately shut out potential competitors, like Kim and Dennis, who have neither the desire nor the intention of providing any funeral directing services, and instead simply wish to sell quality merchandise at affordable prices to customers who have enough troubles without having to endure the high prices of a government-created cartel when they buy caskets for their loved ones.
Becoming a licensed funeral director is an arduous and expensive process. State law requires that applicants have at least two years of full time college coursework, that they have graduated from an accredited program of mortuary science, and that they have completed a one-year apprenticeship during which they must embalm at least 25 human bodies. 2 Because Kim Powers and Dennis Bridges are not licensed funeral directors in Oklahoma, they are not members of the state-created casket cartel. And because they are not members of that cartel, they will be selling caskets at prices that are far below what funeral homes typically charge for the same items. To do that without running afoul of the law, however, Kim and Dennis first must change that law. And that is why they have turned to the courts with the simple request that the State of Oklahoma be ordered to respect the basic rights of economic liberty they enjoy as American citizens—to pursue their chosen livelihoods without interference from Oklahoma’s protectionist licensing laws.
On March 14, 2001, Kim and Dennis filed suit in U.S. District Court for the Western District of Oklahoma in Oklahoma City against the State Board of Embalmers and Funeral Directors, seeking to have Oklahoma’s anti-competitive and unconstitutional casket sales laws struck down. In 1998, the Board has used those laws to shut down at least one other unlicensed casket retailer, 3 and Kim and Dennis wish to avoid the stiff fines and possible jail sentences they face if they sell caskets in Oklahoma while that law is still on the books. 4 Oklahoma’s funeral merchandise laws violate the constitutional rights of entrepreneurs like Kim and Dennis by arbitrarily denying them the right to earn an honest living in their chosen profession. But it also hurts consumers by forcing them to purchase caskets at the significantly inflated prices charged by the funeral home cartel.
On December 12, 2002, a federal court in Oklahoma bucked a trend of recent federal court decisions striking down government-imposed casket cartels. In his 34-page decision, the Honorable Stephen P. Friot of the U.S. District Court for the Western District of Oklahoma deferred to the legislature in its decision to require onerous licensing as a condition of retail casket sales. The judge wrote, “The legislature may determine, without interference from the Due Process Clause, that protection of the consumer lies in creation of a cartel-like scheme for protection of an industry.” Despite the fact that there is no rational connection between the State’s onerous licensing requirements and the simple act of selling caskets, the judge wrote, “The choice of whether to be paternalistic, and, given that choice, as to how best to be paternalistic, was one for the Oklahoma legislature to make.” IJ appealed the case to the U.S. Court of Appeals for the 10th Circuit, which upheld the lower court ruling on August 23, 2004.
Entrepreneur Kim Powers remains unbowed. She said, “This is wrong. All we want to do is give consumers a choice to buy their caskets at reasonable prices and where they won’t be exploited or subjected to high-pressure sales practices that are often found in funeral homes.”
Both court decisions in the Oklahoma casket case are in sharp contrast to a December 6, 2002, 6th U.S. Circuit Court of Appeals decision that found, “Courts have repeatedly recognized that protecting a discrete interest group from economic competition is not a legitimate governmental purpose.” The court stated in that decision, “dedicating two years and thousands of dollars to the education and training required for licensure is undoubtedly a significant barrier to entering the Tennessee casket market. The question before the court is whether requiring those who sell funeral merchandise to be licensed funeral directors bears a rational relationship to any legitimate purpose other than protecting the economic interests of licensed funeral directors. The weakness of Tennessee’s proffered explanation indicates that the 1972 amendment adding retail sales of funeral merchandise to the definition of funeral direction was nothing more than an attempt to prevent economic competition. Indeed, Tennessee’s justifications for the 1972 amendment come close to striking us with ‘the force of a five-week-old, unrefrigerated dead fish,’ a level of pungence almost required to invalidate a statute under rational basis review.”
On November 22, 2004, IJ appealed the 10th U.S. Circuit Court of Appeals decision to the U.S. Supreme Court.
The Funeral Industry in Oklahoma and the Nation: BIG Business
Each year, Americans arrange more than two million funerals for family and friends—for most of us, that means about once every 14 years. 5 Most of those two million funerals are handled by the estimated 22,000-plus funeral establishments across America. 6 In Oklahoma, 495 funeral establishments handle arrangements for the approximately 33,000 citizens who die there each year. 7 Nationwide, the funeral industry is a $25 billion per year business. 8
Sadly, the cost of dying increased three times as much as the cost of living between 1993 and 1998. 9 By the time a family adds together funeral and cemetery costs, the final bill for the death of a loved one averages almost $8,000. 10 For many poorer families, a funeral is the third-largest purchase of a lifetime, after a home and a car. 11 In Oklahoma, the average funeral costs about $5,500, not including the cemetery plot and grave. 12 The national average is about $4,700. 13
These high prices affect all Americans, but hit some harder than others. For example, cremations are becoming more and more popular among white Protestants, and are expected to account for over 40 percent of all funeral services by 2010. 14 In contrast, Catholics and ethnic minorities favor traditional funerals, and are thus more impacted by higher casket prices. Cognizant of this fact, the funeral industry has begun targeting those groups. 15 In particular, the African-American market is viewed as highly desirable by the industry, as African-Americans tend to favor more lavish funerals. 16
In states with protectionist licensing laws, like Oklahoma, the price of caskets is dramatically inflated due to the monopoly status of the funeral home industry. 17 For example, in striking down Tennessee’s protectionist licensing laws, federal district judge Allan Edgar noted that “trial testimony in this case reveals that funeral homes markup the price of their caskets from 250 percent to 400 percent, perhaps as high as 600 percent.” 18 Six-hundred percent markups were also documented at trial in the Oklahoma casket case. By far the largest portion of high funeral costs goes to the casket purchase, which provides funeral directors with their highest profit margins particularly at funeral homes that handle a comparatively low volume of business. 19 According to the Federal Trade Commission, caskets are “frequently the single most expensive item you may have to buy if you are planning a traditional funeral.” 20 Caskets can often account for one-third to one-half of the total cost of funerals that include burials. 21
Thus, while some funeral homes maintain a full work load that keeps their staffs fully occupied, many funeral homes are under-worked, handling perhaps two or three funerals a week and leaving their staffs with a substantial amount of “down time.” In a free market, some of these “under-worked” homes would simply go out of business. But in states like Oklahoma, under-worked funeral homes are able to stay in business by charging exorbitant prices on caskets and other restricted items to the few customers they do serve. As a result, many funeral directors in those states are able to receive, as one analyst put it, “full-time pay for part-time work.” 22
Those lucky enough to have not yet faced making funeral arrangements for close family members or friends may be astounded at the spectrum of caskets for sale, which can range from a few hundred dollars to more than $20,000. 23 Higher-end caskets come with adjustable inner-spring mattresses and can have satin or velvet linings, sometimes with intricate designs sewn in. Another feature of higher-end caskets is the use of “protective sealers” which hermetically seal the caskets, ostensibly to protect the deceased by keeping out water, air, and insects—although in reality, they likely hasten the decomposition of the body.
Caskets come in a range of materials. Almost 75 percent of all caskets are made of steel, which comes in different gauges. The higher the gauge, the lighter the steel, the less expensive the casket, and the easier it is to carry. Some funeral directors try to steer customers away from lighter steel caskets, comparing them to an easily-dented car. More expensive metal caskets are made of bronze and copper, and these account for about three percent of all caskets sold.
Hardwood caskets of oak, walnut, cherry, and mahogany are also fairly common, comprising about 15 percent of all casket sales. Funeral directors emphasize the wood’s beauty in selling those caskets. Less expensive woods, such as particle board and plain pine (common in Jewish ceremonies), make up less than 10 percent of all casket sales. Plastic, aluminum, and fiberglass are also occasionally used, but only in less than one percent of cases. Cardboard and fiberboard are used to ship bodies or for cremations.
Both nationally and in Oklahoma, however, independent casket retailers offer caskets at substantial discounts. 24 For example, a sampling of Oklahoma funeral homes shows that the price for blue stainless steel caskets ranges from $3,600 to $4,200, with an average of $3,900. 25 But Memorial Concepts Online sells its blue stainless model for $1,990. Similarly, Oklahoma funeral homes sell oak caskets for an average of $3,900, 26 whereas Memorial Concepts’ price is $1,985.
The History of the Funeral Industry in America
Until the last hundred years or so, American funerals were fairly simple affairs. 27
Embalming and viewing were held at people’s homes, and doors to parlors were purposely built large enough to let a coffin pass through. Simple wooden caskets were favored. 28
Coffins were manufactured as a side business by furniture makers, some of whom soon began serving as “undertakers,” meaning one who would “undertake” to prepare a body for burial. 29
Late last century, however, funerals started becoming more elaborate, and the participants more specialized. Companies sprang up that made only coffins, and undertakers sought to organize themselves as professionals. Funeral parlors started cropping up around the turn of the century to serve city dwellers whose cramped apartments were unable to accommodate caskets. 30 Not surprisingly, both groups soon formed influential trade associations. In 1881, coffin makers organized the National Burial Case Association, which set industry-wide prices that included an average 40 percent price markup. Undertakers also organized their trade so that they could “control funeral prices and collectively bargain with manufacturers for funeral merchandise.” The National Funeral Directors Association, founded in 1882, 31 resolved the next year to keep prices as high as possible: “Resolved, that we, as funeral directors, condemn the manufacture of covered caskets at a price less than fifteen dollars for an adult size.” 32
More recently, the funeral industry has been marked by increasing corporatization. 33 The three largest corporate funeral home chains are Service Corporation International (SCI), Loewen, and Stewart, which own 15 percent of the nation’s funeral homes, handling one in every five funerals. The casket business in turn is dominated by three companies, York, Batesville, and Aurora, which make an estimated 90 percent of casket and urn sales in this country. 34
The Rise of Independent Casket Retailers
Currently, about 65 stores and mail-order houses nationwide sell caskets directly to the public, either through showrooms, catalogues, or the Internet. 35 Federal law requires funeral homes to accept delivery of these third-party caskets and not to charge extra for their use. 36 Because the funeral home industry has been so successful in holding onto its cartel, even this limited bit of competition is relatively new, dating back generally to the mid-1980’s.
Before that time, funeral establishments typically conditioned the provision of body-handling and other services that only they could provide upon the purchase of a casket, a practice known as “bundling.” If a customer tried to purchase a casket elsewhere, many funeral directors would refuse to provide body-handling or funeral services.
In 1984, however, the FTC passed a set of rules governing the funeral industry generally that also required funeral directors to unbundle their services; that is, it prevented homes from conditioning the provision of funeral services upon the purchase of a casket and other items. Soon, a separate marketplace for funeral goods sprang up in which independent casket retailers began offering caskets at prices much lower than those offered by funeral homes. 37 In response to this new competition, the funeral homes began charging “casket-handling fees” whenever a customer purchased a casket elsewhere, ostensibly to recoup overhead and other fixed costs. 38 In reality, however, these fees were designed to stifle competition by removing a customer’s incentive to price-shop and by penalizing those who did. Soon, these handling fees had the desired effect, driving independent casket-retailers out of business. 39
Although the FTC explicitly prohibited such handling fees in 1994, 40 funeral directors keep finding creative ways to impose them. For example, many funeral establishments have begun inflating their itemized prices so much that nobody would contemplate buying anything other than a package. They then offer discount packages that include coffins, thus essentially precluding the purchase of third-party caskets. 41 Some funeral directors responded by lowering casket prices to be competitive with those of the independent retailers, but then raising prices across the board on other products and services. They can then blame the “increase” in funeral costs on the casket retailers. 42
In 2002, the Federal Trade Commission filed a brief with the trial court on behalf of Powers and Bridges to clarify that its regulations are not intended to promote competition, not stifle it, the way Oklahoma’s regulations do. The FTC brief argued that competition and choices are good for consumers and that being forced to do business with a state-mandated cartel is not. “Rather than promote consumer choice, [Oklahoma’s Funeral Services Licensing Act] forces consumers to purchase caskets from funeral directors,” the FTC’s brief said. “Whatever ends the FSLA can be said to be advocating, it is not advancing the ends of the FTC’s Funeral Rule.”
The funeral industry has creatively resisted the rise of independent casket retailers in other ways as well. For example, some homes engage in casket-vandalism. They damage third-party caskets and then tell customers the casket arrived that way. To combat this practice, one national distributor has begun videotaping its caskets as they leave the store and requiring the deliverymen to sign for their condition upon drop-off at funeral homes. 43 Some casket manufacturers assist funeral homes in maintaining their monopolies by refusing to sell to independent retailers. 44
In another tack, many states require anyone who simply sells caskets to the public to become a licensed funeral director or mortician. Alabama, Delaware, Idaho, Louisiana, Maine, Minnesota, Oklahoma, South Carolina, Vermont and Virginia all require some type of licensure to sell funeral merchandise. 45 Because licensure is time-consuming and costly, this is simply another way of forcing consumers to buy caskets only at funeral homes. Incredibly, the funeral industry tries to justify this requirement on health and safety grounds. “If they start selling caskets on every street corner, it’s possible that more people would start trying to do their own funerals,” said the spokesman for the South Carolina Funeral Directors Association. “With some of the diseases that we have, it could become a public health problem.” 46 Another argument is that “[t]he need to ensure the accuracy of death statistics requires only funeral directors to sell caskets.” 47
If the unlicensed sale of caskets presents a genuine public health problem, then what about the 40 states that have no licensing requirements? There have been no reports of casket-related epidemics (or even illnesses) in those states. And why does Oklahoma make an exception to the licensing requirements when the casket is provided by a relative of the deceased? 48 Does a casket provided by a relative have some mysterious antiseptic quality that other caskets do not? Of course not. In reality, the public safety argument is, like all of the other justifications for casket licensing laws, including “consumer protection,” utterly baseless. State licensing laws have no genuine connection to any public welfare concerns, as confirmed by recent court rulings in Tennessee, Mississippi and Georgia. 49 The federal district judge in Tennessee succinctly captured the fallacy of the pro-licensing arguments when he concluded that “[t]here is no reason to require someone who sells what is essentially a box to undergo the time and expense of training and testing that has nothing to do with the State’s asserted goals of consumer protection and health and safety.” 50
Casket Regulation in Oklahoma
Oklahoma law requires anyone who sells “funeral service merchandise,” to be a licensed funeral director. 51 For reasons it has never explained, the State Board does not apply Oklahoma’s licensing requirements to any other funeral merchandise besides caskets. The seven-member State Board of Embalmers and Funeral Directors administers and enforces that law, and it is made up of five licensed funeral directors and two lay-persons, one of whom, if possible, should be actively engaged in the health care field. 52
Becoming a licensed funeral director in Oklahoma requires at least two years of full-time college coursework and a one-year apprenticeship. 53 State law provides that “[a] license to practice embalming or funeral directing shall not be issued until . . . [the] applicant has embalmed at least twenty-five dead human bodies for burial or shipment during an apprenticeship.” 54 Although the statutes and regulations do not specify the exact content of the required coursework, the curriculum prescribed by the American Board of Funeral Service Education includes subjects such as “pathology, chemistry, anatomy, embalming, and restorative art.” 55
Oklahoma law also requires individuals who merely wish to sell caskets to obtain a license for their business as a registered “funeral establishment.” 56 In addition to employing a full-time licensed funeral director 57 and an embalmer, 58 a funeral establishment must have a “preparation room” equipped with drainage and ventilation facilities and “sufficient supplies for normal operation.” 59 A funeral establishment must also have a “selection room” that is “devoted solely to the purpose of providing the public a reasonable selection of funeral service merchandise,” with an inventory of “not less than five adult caskets at the location.” 60 Finally, a funeral establishment must have “adequate areas for public viewing of dead human remains.” 61 There are no exceptions in the statutes or the regulations for businesses, like Memorial Concepts Online, that only sell merchandise, never handle human bodies, and maintain no on-site inventory of merchandise.
After the applicant’s training, he or she must pass a subject-matter licensing exam, which can be either the Oklahoma State Board’s exam or the National Board Examination of the International Conference of Funeral Service Boards. 62 Applicants must also take a separate exam on state laws regulating the funeral industry and “demonstrate to the Board proficiency as an embalmer or funeral director.” 63 There is only one school in Oklahoma that offers an approved curriculum of mortuary science (two- four-year undergraduate programs at the University of Central Oklahoma in Edmond), 64 although one may attend an out-of-state school as well.
Violation of Oklahoma’s licensing provisions is a criminal misdemeanor that carries a possible jail sentence of up to one year and/or a fine of not more than $5,000. 65
Kim Powers is a mother, a native Oklahoman, and a third-generation businesswoman. Kim’s mother and her grandmother before her both owned restaurants in Ponca City, and Kim now seeks to add her own chapter to that legacy of entrepreneurship and self-reliance. After joining one of the country’s largest funeral service providers, Kim quickly distinguished herself as a rising star in the company’s male-dominated ranks.
Dennis Bridges lives in Knoxville, Tennessee, where his soft-spoken voice and calm demeanor have touched and comforted thousands of people during his 20 years as a Tennessee-licensed funeral director. Like Kim, Dennis joined one of the country’s largest funeral services companies and, on the strength of his quiet professionalism, boundless energy, and unflappable spirit, found himself on the fast-track to corporate success.
But Kim and Dennis wanted a measure of freedom and independence that just wasn’t available in a big company. Together, they recognized the unmistakable opportunity presented by the combination of their talents, skills and drive, on the one hand, and the tremendous need for a new, more convenient, and less expensive alternative for consumers seeking caskets and other funeral merchandise, on the other. Kim and Dennis responded to this need by immersing themselves in the minutiae of small business operations and the arcane world of e-commerce and Web development. After nearly a year of full-time work, a large financial investment, and countless hours spent arranging financing, lining up vendors and learning the intricacies of web design, Kim and Dennis finally launched Memorial Concepts Online on March 14, 2001.
Kim and Dennis understood that the reality of the Internet does not always live up to its promise, and they proceeded methodically, constantly evaluating their business plan and making changes when necessary. For example, they realized that some customers would never feel entirely confident putting down thousands of dollars on a casket with a company whose only visible presence was a site on the Internet. So Memorial Concepts has representatives standing by 24 hours a day to talk to customers who desire more personal attention. Kim and Dennis have also recruited sales representatives, both in Oklahoma and in other states, who will be available to meet face-to-face with customers and provide them with whatever assistance or information they need in making their purchases from Memorial Concepts.
Kim and Dennis sell high-quality caskets at steeply discounted prices to customers all over the country. Customers benefit in many ways from Kim and Dennis’ service. First and foremost, they provide consumers with a much-needed alternative to over-priced funeral homes when it comes to buying caskets and other funeral-related products. Second, Memorial Concepts Online provides consumers with an invaluable source of information about the prices, features, and different styles and models of the various caskets that are available. Even if some customers choose not to purchase a casket online, they can use the information they have obtained to ensure they get a fair deal if they decide to make their purchase through a funeral home. Many customers find the online shopping experience far less stressful than the atmosphere in a funeral home.
But before they can fully realize their share of the American Dream, Kim and Dennis have to do battle with the State of Oklahoma and its monopoly on casket sales. The State Board has left no doubt that it will go after any business that is bold enough to challenge the casket cartel by selling caskets in the state without a license. In 1997, for instance, the Board took the Stone Casket Company of Oklahoma City to court in order to shut down the company’s unlicensed casket-retailing operation. The state trial court in that case correctly noted the absence of any “compelling state interest which would require a person who is solely in the business of selling caskets to meet the same qualifications as funeral directors or embalmers.” 66 Unfortunately, an intermediate appellate court reversed the trial court, based on the mistaken premise that “[a] casket is part of the funeral service business and cannot be separated as an independent item.” 67 The appellate court’s fundamental misconception about the role of caskets in the burial process is further revealed in its observation that “[t]he casket, in which human remains are buried, directly impacts sanitation.” 68 As the federal court in Tennessee recognized after receiving testimony from a number of expert witnesses, caskets “are not intended to prevent the spread of communicable diseases” and have no role in that process whatsoever. 69 Unfortunately, it appears that the Oklahoma state court made its ruling without the benefit of a well-developed fact record such as the ones before the Tennessee and Mississippi courts. 70
The Importance of Economic Liberty
After the Civil War, newly-emancipated slaves counted economic liberty as among the most cherished of their new civil rights. To protect entrenched white businessmen from competition, however, Southern governments soon suppressed economic opportunities for their newest citizens by heavily regulating entry into trades and businesses. The national government moved quickly to curtail these abuses by passing first the Civil Rights Act of 1866 and then the Fourteenth Amendment, both of which sought to protect the economic liberty of all Americans among the “privileges or immunities of citizenship” that states were prohibited from violating.
But in the 1873 Slaughter-House Cases, a sharply divided U.S. Supreme Court effectively read the Privileges or Immunities Clause out of the Constitution by a 5-4 vote. That decision gave states a virtual carte-blanche to enact shameful Jim Crow-era laws that restricted economic opportunities for black Americans. But states soon seized on this unchecked power to use regulation to protect all sorts of entrenched interests. Relying on Slaughter-House, states continue to regulate with impunity entry into trades and professions. These onerous restrictions often far exceed what was actually necessary to protect public health and safety, thus revealing their real purposes—the protection of cartels.
After almost 130 years of ignoring the Privileges or Immunities Clause, however, the Supreme Court breathed new life back into this vital constitutional provision in May of 1999. In Saenz v. Roe, the Court used the clause to strike down a California law that limited welfare benefits for new residents. 71 Although Saenz dealt specifically with the right to travel as being protected by the Privileges or Immunities Clause, the Court’s use of the clause and the language of the decision cracks open the door for its reestablishment as the primary constitutional protection for economic liberty, as it was originally intended to be. 72
This lawsuit goes to the very core of a cherished constitutional value: the right of individuals to earn an honest living. The plaintiffs ask for nothing more than the opportunity to provide necessary goods to families in times of need. Yet the laws of Oklahoma erect arbitrary barriers to their aspiration.
The U.S. Constitution prevents the government from arbitrarily interfering with citizens’ ability to go about their lives and earn honest livings in their chosen occupations. Under the due process, equal protection, and privileges or immunities clauses of the Fourteenth Amendment, the government may only restrict a person’s right to pursue his or her chosen livelihood when there is a “rational basis” for the restrictions. In order to establish a rational basis, the government must show that there is a reasonable fit between the government-imposed restrictions in question and a legitimate public purpose. Creating insurmountable barriers to entry into a given profession in order to promote the economic interests of a favored group, such as funeral directors, is not a legitimate public purpose.
Kim Powers and Dennis Bridges are asking U.S. Supreme Court to declare that, under the U.S. Constitution, Oklahoma’s protectionist licensing laws violate their due process rights to earn an honest living, their right to equal protection, and the right to economic liberty protected by the Privileges or Immunities Clause.
As the Institute for Justice stated in it cert petition to the U.S. Supreme Court, “Accepting economic protectionism as a legitimate state interest would transform the right to earn a living into a mere privilege in defiance of history, common law, and original understanding” of the U.S. Constitution.
Since its founding in 1991, IJ has scored significant legal victories on behalf of entrepreneurs and, in the process, opened up long-closed markets. These include:
-Craigmiles v. Giles—In 2003, a federal appeals court upheld a lower court ruling that found Tennessee’s government-imposed cartel on casket sales was unconstitutional. This is the highest pro-economic liberty court decision since the New Deal. Tennessee’s law is nearly identical to the Oklahoma law.
-Farmer v. Arizona Board of Cosmetology—In 2003, as a result of an Institute for Justice Arizona Chapter (IJ-AZ) lawsuit, the Arizona legislature exempted hairbraiders from the State’s outdated cosmetology scheme.
-Clutter v. Transportation Services Authority—In 2001, IJ defeated Nevada’s Transportation Services Authority and its entrenched limousine cartel that had stifled competition in the Las Vegas limousine market.
-Ricketts v. City of New York—In 1999, IJ helped commuter vans fight a public bus monopoly that would not allow vans to provide their service in underserved metropolitan neighborhoods in New York City. –
-Cornwell v. California Board of Barbering and Cosmetology—In 1999, IJ defeated California’s arbitrary cosmetology licensing requirement for African braiders.
-Jones v. Temmer—In 1995, IJ helped three entrepreneurs overcome Colorado’s protectionist taxicab monopoly to open Denver’s first new cab company in nearly 50 years. IJ also helped break open government-sanctioned taxicab monopolies in Indianapolis and Cincinnati.
-Uqdah v. D.C. Board of Cosmetology—In 1993, IJ’s work in court and the court of public opinion led the District of Columbia to eliminate a 1938 Jim Crow-era licensing law against African hairbraiders.
The lead attorney in this case for the Institute for Justice is Senior Attorney Clark Neily, who litigates economic liberty cases nationwide and who recently represents independent limousine drivers in their successful challenge to the Las Vegas limousine cartel. He also helped represent commuter van operators in New York City in their successful challenge to the City Council’s veto over new van licenses. He is joined in the Oklahoma litigation by William H. Mellor, president and general counsel of the Institute for Justice and lead counsel in the Tennessee casket case. Assisting the Institute for Justice as able local counsel is Andy Lester of the Oklahoma City law firm Lester, Loving & Davies.
For more information, contact:
John E. Kramer, Vice President for Communications
Institute for Justice
(703) 682-9320 ext. 205
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