March 18: U.S. Supreme Court Considers Accepting Case Examining Constitutionality of Good-Old-Boy Networks

John Kramer
John Kramer · March 8, 2005

Washington, D.C.—Can the government prevent you from pursuing an honest living for no other reason than to protect existing companies from competition? That is the question the U.S. Supreme Court will consider next week [NOTE TO EDITOR: MARCH 18, 2005] when it decides whether to take a case examining naked political favoritism in government regulation of business.

Arbitrary Licensing Scheme Creates Casket Cartel

The case, litigated by the Institute for Justice, arises out of Oklahoma, where casket retailers seek to break open a government-imposed cartel. Oklahoma law makes it a crime for anyone other than a fully licensed funeral director to sell caskets within the state, 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 that requires the embalming of 25 bodies, and two exams—training that is almost totally irrelevant to selling a casket. The goal here is not to protect consumers or the public from any genuine harm, but rather to protect the most profitable part of the funeral directors’ portfolio: namely, the sky-high markups (up to 600 percent in Oklahoma) on caskets that are imposed on unwitting customers as a result of Oklahoma’s state-sanctioned casket monopoly.

Circuit Split

In separate cases two federal appeals courts examined nearly identical laws and reached opposite conclusions about the constitutionality of state-sanctioned casket cartels. The 6th U.S. Circuit Court of Appeals in a case out of Tennessee found no rational basis for a state law requiring “someone who sells what is essentially a box” to be a licensed funeral director. But the 10th U.S. Circuit Court of Appeals reached the opposite conclusion in the Oklahoma case, explaining, “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.” Thus, rather than fulfilling its constitutional role as a check on such arbitrary and naked legislative abuses, the 10th Circuit held that economic protectionism alone is a legitimate function of occupational licensing laws. Stated plainly: state and local governments may concoct any scheme they want to promote their friends’ private economic interests at the expense of consumers and would-be entrepreneurs—the court will not interfere. Both cases were litigated by the Institute for Justice, a public interest law firm that litigates nationwide on behalf of entrepreneurs.

Ruling Could Impact Entrepreneurs Nationwide

Nearly 10 percent of occupations across the country require government licensure. Thousands of laws—enacted on the pretext of protecting the public’s health, safety or welfare—are in fact created for special interests to keep out potential competitors. Invisible to most consumers, these roadblocks to free enterprise are everywhere and limit consumer choice as well as entrepreneurial ambitions in occupations ranging from floristry to taxicab service and even such cultural art forms as African hairbraiding. In this case, entrepreneurs Kim Powers and Dennis Bridges, owners of Memorial Concepts Online, may sell caskets in other states through their Ponca City, Okla.,-based Internet company——but not in Kim’s home state of Oklahoma.

“If selling caskets presented any genuine concerns, then why haven’t we heard of any problems from the 40 or more states that permit unlicensed sales?” asked Clark Neily, an Institute for Justice senior attorney. “The truth is, casket sales laws like this one are nothing but a racket dreamed up by licensed funeral directors to protect their sky-high profit margins on casket sales. It is high time the courts stop sanctioning this kind of naked economic protectionism with their own inaction.”

“If the 10th Circuit decision is allowed to stand, it will give a judicial green light to unlimited backroom deals and cronyism by legislators,” said IJ President Chip Mellor. “With our Oklahoma casket case, the Institute for Justice seeks to once and for all put a nail in the coffin of government-run good-old-boy networks.”

The Institute for Justice has already argued two cases before the U.S. Supreme Court during the 2004-2005 term: a challenge to eminent domain abuse in Connecticut and a challenge to New York’s ban on the direct shipment of wine to consumers. In addition to its Oklahoma casket cartel challenge, IJ’s victory against the government-forced funding of “Got Milk” ads by farmers has been appealed by the government to the U.S. Supreme Court.

Economic Liberty Victories

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:

  • Ending California’s real estate broker licensing requirements for online real estate advertisers.
  • Striking down Tennessee’s government-imposed casket cartel—a law that was nearly identical to Oklahoma’s.
  • Exempting African hairbraiders in Arizona, California and the District of Columbia from outdated cosmetology schemes.
  • Defeating Nevada’s government-imposed limousine cartel.
  • Helping commuter vans fight New York City’s public bus monopoly.
  • Ending the Commodity Futures Trading Commission’s licensing of software developers and Internet publishers.
  • Breaking open 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.)

Current Economic Liberty Lawsuits

IJ is also currently litigating a federal lawsuit in Louisiana on behalf of three would-be florists challenging the State’s anti-competitive, anti-consumer florist licensing law. The lawsuit seeks to vindicate their right to economic liberty—the right to earn an honest living free from excessive government regulation. Louisiana law requires florists to pass a State-mandated licensing exam before they are allowed to work. No other state in the nation forces people to pass a test just to sell flowers. And finally, IJ is litigating to end arbitrary licensing of African hairbraiders in Mississippi and the state of Washington, as well as bed and breakfast operators in Seattle.

“All our clients want is to earn an honest living without arbitrary and irrational government interference,” Neily concluded. “We hope the U.S. Supreme Court will accept the Oklahoma casket case and will vindicate that right.”