Victory For Minneapolis Taxi Entrepreneurs

By Scott Bullock

Can an entrenched cartel of Minneapolis taxi drivers violate the civil rights of entrepreneurs and consumers?

No, according to U.S. Magistrate Judge Franklin L. Noel. In an opinion released at the end of October, the judge recommended that a lawsuit brought by members of the taxi cartel to overturn the city’s free-market reforms be dismissed.

The Institute for Justice Minnesota Chapter (IJ-MN) intervened in this case to defend the city of Minneapolis’ deregulation efforts that removed a cap on the number of taxis licensed in the city. The city finalized its reforms in March 2007 and opened the market to entrepreneurs who are “fit, willing and able” to serve the public. The new ordinance will increase the number of cabs by 180 in the coming years, and eliminate completely the cap on the number of cabs by 2011.

In response, the established taxicab cartel sued the city, demanding reversal of the reforms and proclaiming that its owners should be able to keep the spoils of the old law that excluded new competitors from the taxi market in Minneapolis for more than 10 years.

The Institute represents taxi entrepreneur Luis Paucar, who had tried for nearly four years to provide service in Minneapolis. He received licenses for 22 vehicles under the new law.

The decision is an important victory both for aspiring taxi entrepreneurs like Luis and for Minneapolis consumers. The significance of the decision rests with the fact that the taxi cartel argued that the monopoly profit the license holders could charge for their licenses in a secondary market was a “property right” and that the city’s deregulation of the taxi market had unconstitutionally “taken” the artificially inflated price they were once able to obtain for their licenses.

If successful, the cartel’s argument would have worked a radical change in American law. Under its theory, any time the government sought to ease entry into a business or profession, it would be financially liable to those entities that profited from the artificial barriers once protecting industry insiders. As a result, the regulatory status quo would forever be maintained, no matter how onerous or irrational the scheme had become.

The cartel was essentially using the law to quash competition from entrepreneurs like Luis. Thankfully, the judge completely rejected the cartel’s arguments. As he noted in his recommendation, there is no “taking”; the license holders maintained their licenses and were still able to operate their cabs. But, the judge noted, the law “does not guarantee that the City would indefinitely limit the number of licenses issued. . . . [T]he taxicab vehicle license holders do not have a constitutionally protected freedom from competition.”

The cartel violated the civil rights of entrepreneurs like Luis. IJ-MN got involved in the case to defend the city’s free-market reforms because taxicab entrepreneurs have the right to earn an honest living in the occupation of their choice free from the anti-competitive barriers to entry that the taxi cartel wants to preserve.

If the cartel appeals, we will stand by Luis until economic liberty is finally the rule, not the exception.

Scott Bullock is an IJ senior attorney who argued the case on behalf of Luis Paucar.