John Kramer
John Kramer · March 4, 2014

Arlington, Va.
—A notorious U.S. Supreme Court ruling handed down more than 140 years ago first opened the way for massive government-regulation of American private enterprise. But one of the few individual rights respected by the infamous Slaughter-House ruling of 1873—the right of all Americans to use the nation’s navigable waterways—is now the subject of an appeal to the U.S. Supreme Court on behalf of two brothers from Washington state who wish to operate a ferry service to compete with the poorly operated government-imposed ferry monopoly. So far, however, the lower courts have ignored that explicitly guaranteed right spelled out by the justices in Slaughter-House.

So why should ordinary Americans, who may rarely use ferries let alone seek to operate one, care about this case? Because it is symptomatic of a trend that started with the Slaughter-House Cases and continues to haunt average Americans to this day: the unrestricted power of government to limit private enterprise in favor of politically powerful private interests.

Michael Bindas, a senior attorney with the Institute for Justice, which is litigating this case and appealed it to the U.S. Supreme Court on March 3, 2014, said, “This trend limits the drive, opportunity and achievements of America’s would-be job creators and needlessly restricts consumer choice. Worse yet, it shifts the American culture away from one of enterprise to one of government dependence, where before they may work, ordinary Americans must first ask, ‘Government, may I?’”

Brothers Jim and Cliff Courtney have a plan to bring economic prosperity to their small community of Stehekin, located on the northern end of Lake Chelan in the center of Washington state. Because Stehekin is accessible only by boat or plane, the Courtney brothers want to provide convenient ferry service across Lake Chelan so more people can enjoy the natural beauty and outdoor activities in the community their family has called home for four generations.

So far, however, the state of Washington has sunk their plan. A nearly century-old state law requires Jim and Cliff to obtain a certificate of “public convenience and necessity” from the state in order to pick up and drop off passengers along Lake Chelan. This requirement, which was implemented to protect existing ferry providers from competition, has resulted in a government-imposed monopoly on Lake Chelan ferry service since the 1920s.

The public convenience and necessity requirement is an anticompetitive condition that turns the ordinary rules of business on their head. It forces entrepreneurs like Jim and Cliff to either obtain the existing ferry company’s permission to compete (akin to Burger King having to get McDonald’s permission before opening a restaurant) or prove in a trial-like hearing to the government that the existing company is not providing “reasonable and adequate service” and that a new service is necessary.

In practice, this standard is so arbitrary and hostile to honest entrepreneurship that enterprising citizens are routinely prevented from pursuing their dreams. Such an approach is fundamentally inconsistent with the American tradition of allowing consumers and entrepreneurs—not bureaucrats and existing businesses—to decide whether a new business is necessary.

Chip Mellor, president and general counsel of the Institute for Justice, said, “The courts need to step up and strike down these government-imposed monopolies that violate the rights of would-be entrepreneurs. A properly engaged judiciary should not ignore entire provisions of the Constitution—including the Privileges or Immunities Clause of the 14th Amendment. The lower courts were wrong to hold that the right to use the navigable waters of the United States does not encompass their use in business. The Privileges or Immunities Clause was designed to protect the right of all Americans to participate fully in the economic life of the nation.”

Robert Frommer, an IJ attorney, said, “Although the state has a legitimate interest in requiring ferries to be insured, inspected, and manned by a trained and capable crew, it should not block entry merely to protect other ferry operators from competition, which is exactly what is happening in this case.”

The Institute for Justice filed suit on behalf of Jim and Cliff on October 19, 2011. They lost in trial court in April 2012 and before the 9th U.S. Circuit Court of Appeals in December 2013.

“Government ought to welcome entrepreneurship, but instead, Washington state is prohibiting new businesses from forming—all for the sake of protecting an inefficient, government-enforced monopoly,” concluded Bindas. “Although the lower courts have allowed that monopoly to exist for the time being, we are confident that its days are numbered.”