For most of us, the trip from California to Nevada can be a hassle-free jaunt.
Not for small-business owner Steven Saxon. He has hit a surprising regulatory roadblock at the state line. His fight to raze it bears watching if you think government’s proper role is to smooth the path for honest entrepreneurs, not blockade their hopes and dreams.
Steve is founder and operator of Affordable Moving and Storage in Sacramento. Thousands of satisfied customers around the River City have given him a thumbs’-up over the past 13 years. Now, he wants to build on that success by opening a branch in Reno, which his son Patrick would operate.
But there’s a problem: Nevada doesn’t welcome new entrepreneurs to the moving industry. Just the opposite. Basically, it puts a barrier in the way – so that existing companies won’t have to work harder to win customers.
Nevada stacks the deck against new moving companies
If you apply to start or expand a moving, limousine, or taxi business in Nevada, the firms that are already up and running can file an “objection.” You’re then thrust into a Kafka-like government maze. You have to “prove” that your business will meet a public need and won’t “adversely affect” competitors.
With no standards to go by, state regulators can reject requests on whim.
“Certificate of Public Convenience and Necessity.” That’s the state’s title for this prohibitive licensing scheme. A better name is “competitor’s veto.” Essentially, existing companies can say yea or nay to new start-ups.
It’s as if a new coffee shop had to seek Starbucks’ OK before it could start heating up its Latte machine.
Irony, anyone? Ordinarily, it’s California that gets panned as a purgatory of regulations for small businesses. But for movers like Steve Saxon, the Golden State’s rules are sensible and streamlined, aimed simply to protect the public from unsafe business practices. In contrast, Nevada’s restrictions “protect” the public from more options and services. Their candid purpose is “to discourage any practices which would tend to increase or create competition.”
An entrepreneur decides to fight back
“We were shocked when we found out that Nevada can block us just because we’d be competing with other businesses,” said Steve Saxon. “It’s like we’re in some other country, not the land of free enterprise.”
Steve was shocked into action. For help, he turned to Pacific Legal Foundation, and last week PLF filed a federal lawsuit against Nevada’s regulations. Along with Steve Saxon, the plaintiffs include Ron and Danell Perlman, owners of a small limousine service in Reno whose plans to expand have been stymied by the “competitor’s veto.”
“Nevada has some of the most explicitly anti-competitive laws for limousine, taxi, and moving services,” said PLF’s Anastasia Boden, lead attorney on the case. “This violates the constitutional right to earn a living by providing honest services to the public.”
Although Nevada’s may be the worst, similar limitations linger on the books in dozens of other states, relics of 19th century railroad regulations.
PLF has already succeeded, in federal court, in defeating Kentucky’s “competitor’s veto” law for the moving business – a ruling that columnist George Will recently hailed as a “blow for liberty and against crony capitalism.”
And a Ninth Circuit precedent should weigh decisively against Nevada’s law: Several years ago, a three-judge panel held that “[E]conomic protectionism for its own sake … cannot be said to be in furtherance of a legitimate governmental interest.”
A lawsuit the Gipper would love
So, why the reference to Ronald Reagan in the headline? Because PLF happens to be the “Gipper’s” brainchild, a vital legacy of his time as California’s governor. Frustrated that his sweeping welfare reform was fought in the courts by self-styled “public interest” litigators, he wondered aloud why there wasn’t a counterpart to defend the true public interest — expansive freedom and constitutional limits on bureaucracy.
In response, some of his aides went out and made it happen, establishing PLF as the first nonprofit legal organization with a broad pro-freedom agenda.
The challenge to Nevada’s “competitor’s veto” carries on that original vision. Reagan was eloquent in extolling entrepreneurs and the freedoms that allow them to create businesses, jobs, and new choices for consumers.
“Small business is the gateway to opportunity,” he told a convention of the National Federation of Independent Business in 1983. “The character and conscience of small business built this nation.”
“Looking at you I get a lump in my throat,” he said. Entrepreneurs “are the heroes of economic life…”
“Hero” isn’t too strong a word for the Steve Saxon and the Perlmans as they litigate against Nevada’s “competitor’s veto” scheme. By fighting for the principle that the Constitution protects the right to compete, they’re defending everyone’s freedom to dream the American dream.