Washington, D.C.-Should government be allowed to create exclusive cartels that protect favored companies from competition and keep out newcomers, or does that violate the constitutional rights of would-be entrepreneurs who seek to enter the marketplace?
That is the question the Nevada District Court for Clark County of will answer at a trial in a case brought by independent limousine entrepreneurs who tried to provide new service in Las Vegas, but were blocked from doing so by the Transportation Services Authority, a Nevada agency that preserves the state-created, industry-backed monopoly. The trial, which is expected to last for up to two weeks, is scheduled to begin at 9 a.m. on Tuesday, February 13 at the Clark County Courthouse, 200 S. 3rd Street, in Las Vegas, Nevada.
Across the nation, state and local governments block entry into approximately 10 percent of all occupations. In the Nevada limousine industry, rather than enforcing reasonable regulations that would genuinely protect the public’s safety—such as requiring a valid driver’s license and background check as well as an insured, inspected vehicle—the State of Nevada’s Transportation Services Agency (TSA) works with politically influential companies to prohibit or seriously limit the services provided by new competitors.
“The TSA allows existing companies to intervene against applicants and turn what should be a simple administrative hearing into an inquisition,” said Clark Neily, an Institute for Justice attorney who will argue in court on behalf of the independent limousine operators. “The State allows the intervenors to take over the process and keep out would-be competitors or else limit their operating authority in ways that render them unable to compete.”
Attorneys for the Institute for Justice, which filed this case on May 4, 1998, have opened up ground transportation markets in New York, Denver, Indianapolis, Cincinnati and Houston. The Institute for Justice has also broken up similar government-enforced cartels in the hairbraiding industry in California and Washington, D.C., as well as retail casket sales in Tennessee.
Beginning in October 1997, the newly created Transportation Services Authority began cracking down on independent limousine operators—those who do not have a “certificate of public convenience and necessity.” The TSA impounds their vehicles, assesses large civil fines against them, and even refers them for prosecution in criminal court for operating limousines without the required certificate.
In December of 1997, the TSA wielded this three-pronged weapon against William Clutter, one of the drivers who filed suit against both the State of Nevada and the TSA. His limousine has remained impounded since then, collecting storage fees at a rate of $15/day. The TSA assessed two $2,500 civil fines against him and has initiated a criminal prosecution based on the same activities. (At one point the impound lot actually sold Clutter’s car unbeknownst to him, then, after he discovered it was missing, bought it back, damaged and missing the license plates, registration and important personal papers.) Now, Clutter can no longer operate his business to earn a living. In one day, the TSA transformed him from an independent hard-working entrepreneur into an unemployed criminal—all for simply driving a limousine without the proper government-issued certificate.
So why didn’t Clutter just obtain the needed state certificate? Because the system is hopelessly rigged against new entrants.
“Nevada’s protectionist public convenience and necessity standard requires new businesses to show that their proposed services will not have an unreasonable and adverse effect on existing businesses,” explained Neily. “Under that absurd standard, our entire free-market economy would collapse.”
“The whole notion of public convenience and necessity is a fraud,” added Chip Mellor, president of the Institute for Justice. “The public, not the government, is best able to decide what services are convenient and necessary. If an enterprise can’t provide service the public wants and enjoys, it will go out of business. All public convenience and necessity does is give existing limousine operators veto power over possible competitors.”
“The requirements for getting a certificate to operate a limousine are wildly out of proportion to any conceivable public safety concern,” said Dana Berliner, an Institute for Justice senior attorney who is also litigating the case. “Would-be entrepreneurs could prove insurance and car safety in one day. Instead they spend months in a pointless paper mill.”
Equally troubling is the fact that the TSA, the same agency that cites the accused, is responsible for conducting and presiding over hearings when the citations are challenged and making determinations of guilt. Moreover, all money collected from the assessment of any fines as a result of those hearings is deposited in a special TSA regulatory fund that the agency then uses to purchase, among other things, guns, vehicles, computers and training for TSA enforcement personnel. This creates an unconstitutional appearance of bias and gives TSA’s enforcement personnel an improper incentive to stop and impound as many vehicles as possible. It also gives the presiding TSA commissioner an incentive to find against an accused violator and assess high-dollar fines.
That is why Clutter, John West, and the Independent Limousine Owners/Operators Association are fighting this system. They joined with the Washington, D.C.-based Institute for Justice in filing suit in state district court challenging the TSA’s regulations and the virtual monopoly it has imposed on Las Vegas limousine passengers. Their goal is to restore economic liberty—the right to earn an honest living free from excessive government regulation—as a fundamental civil right.
“Stifling competition isn’t the proper role of government,” said Berliner. “For a Nevada state agency to tell otherwise productive limousine entrepreneurs that they can’t compete with a private cartel is simply un-American.”