A Public Convenience and Necessity and Other Conspiracies Against Trade: A Case Study from the Missouri Moving Industry
46 Pages Posted: 5 Jun 2013 Last revised: 15 Apr 2014
Date Written: May 26, 2013
This article looks at the political economy and constitutionality of “Certificate of Public Convenience and Necessity” or “Certificate of Need” (CON) laws, which require a business to obtain approval from a government agency before beginning operations. Unlike occupational licensing laws, CON requirements do not purport to determine whether the applicant is educated, trained, or skilled; rather, these laws are expressly aimed at preventing competition against established firms. Devised in the late nineteenth century to regulate public utilities and natural monopolies, CON laws now apply to a variety of industries — especially the taxicab industry and moving companies — where they have no economic justification. Public choice theory would predict that such laws will lead existing firms to exploit these barriers to entry so as to prevent competition, drive up prices, and deprive potential competitors of their constitutionally guaranteed right to economic liberty.
In this article, I will focus on a recently abolished CON requirement for moving companies in Missouri. My recent litigation challenging the constitutionality of that statute provides a particularly revealing case study of the abuse of government regulation for private ends, rather than for public welfare. After a brief discussion of the history of CON laws and their application to the moving industry, I address the Missouri law as a case study of how established industries exploited the power of these laws to bar legitimate competition. Part III shows how the Missouri case is typical of the rent-seeking dynamics at work in CON regimes, and discuss what this can teach us about the application of rational basis scrutiny to cases involving the right to earn a living. In Part IV, I conclude with the argument that, at least when applied to competitive, non-utility markets, CON laws are unconstitutional.
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