Washington, D.C.—In a case that could have national impact, the Institute for Justice filed on January 28, 1993, a lawsuit on behalf of four entrepreneurs challenging the constitutionality of the Denver taxicab monopoly.
This lawsuit is part of a comprehensive effort by the Institute for Justice to restore judicial protection for “economic liberty” — the basic civil right of every American to pursue a business or profession free from arbitrary or excessive government regulation. The suit was filed in U.S. District Court in Denver, Colo., naming the Colorado Public Utilities Commission (PUC) as the defendant.
The PUC allows only three taxi companies to operate in Denver. The PUC has prohibited entry into the Denver taxicab market to every new applicant since 1947.
“Countless qualified individuals have been denied the right to earn a living in a business ideally suited to entry-level entrepreneurs,” said Chip Mellor, Institute general counsel and lead attorney on this case. “And the general public, especially in low-income communities, suffers from inadequate, unreliable and costly taxicab service. The current regulatory scheme benefits only the three existing companies, their lobbyists and their lawyers.”
The ramifications of this lawsuit extend far beyond Denver and the parties involved. Entry into the taxicab business is severely limited in cities such as Boston, Buffalo, Chicago, Houston, Los Angeles, Miami, New York and San Francisco.
An absolute ban on new taxicab companies is a common form of taxicab regulation. However, an abundance of regulations burden the industry to the same effect as an outright ban. A 1983 survey of 103 cities with populations of 50,000 or more found that 87 percent restricted entry in some manner. A separate study by the U.S. Department of Transportation found that:
Regulations restricting entry of new cabs and preventing discounting of fares cost consumers nearly $800 million annually. Moreover, removal of these restrictions would create 38,000 new jobs in the taxi industry.
Applicants for a certificate to operate a taxicab company in Denver face an insurmountable task. They must demonstrate that adequate service is not being provided by existing companies and that the existing companies cannot provide such service.
“Existing companies can block entry with the mere assertion that the new company would duplicate the service already being provided,” Mellor said.
The Institute for Justice promotes and defends economic liberty, school choice, private property rights, and the free exchange of ideas in the courts and through a program which trains law students, lawyers, and public activists in public interest litigation. The Institute was founded in September 1991 by Mellor and Litigation Director Clint Bolick.