Friday, August 10, 2012

Institute for Justice wins Hairbraider’s Constitutional Rights case in Utah

In a major victory for economic liberty, a federal court ruled this week that Utah’s requirement that hairbraiders have a government-issued cosmetology license is unconstitutional.  Along with the Institute for Justice and local counsel. Jestina Clayton filed suit to fight the state’s anti-competitive cosmetology regulations and won. The above video tells her story.

The Institute for Justice is the organization representing the Nashville limo owners who are suing metro seeking to overturn Metro's limousine price-fixing bill. Until June 2010, limousine service was largely unregulated in Nashville and limo's were a luxury service. However, a new service appeared on the scene a few years earlier which was not a taxi but was a service cheaper than a limo. This new service did not use the stretch limousine vehicle but used black sedans.

This service was started by Ali Bokhari, who emigrated from Pakistan in 2000, and ended up in Nashville.  He saw an opportunity for a new kind of livery service and he developed a successful business model. From starting with one car, his business has grown to a fleet of 20 cars plus 15 independent owner-operators who work for him. Seeing his success, others started providing the same service. This new type of service was popular. Instead of paying $45 or more for a limo to take one from the airport to a downtown hotel, this new service only charged $25. Also, a lot of clients preferred the less ostentatious black sedan over the stretch limousine.

There was problem however.  The big well-connected limo companies were losing customers to the sedan companies so they went to Metro Council and got a bill passed that essentially would put the sedan companies out of business and make them operate like traditional limo companies. The regulation they drafted established a minimum $45 fee for a limo ride.  The Metro Council passed their anti-competitive bill in June 2010 and no one in the Council, not even the self-identified constitution-loving, free-market advocating conservatives, opposed the bill.

In addition to the new minimum fare requirement, the new law did a lot of other things designed to restrict the ability of the sedan companies to provide the service they were providing. The new law did such things as permit only one fare per hour; require a central dispatch office, which has the effect of prohibiting clients from directly contacted the driver by cell phone and thus prohibiting the single-car, owner-operator; established discriminatory vehicle age and mileage requirements on sedans which are more restrictive than those on the limo body type vehicle; and more. These regulation had nothing to do with health and safety but were designed for no other purpose than to squash the competition.

In April 2011, Metro Livery and two other economy limo companies filed a federal lawsuit challenging the constitutionality of the new regulation and the minimum fee. The Institute for Justice, a libertarian public interest law firm represented the livery companies. Metro sued to dismiss the law suit and that law suit failed. 

On January 20th, 2012 the motion to dismiss was heard in the U.S. District Court for the Middle District of Tennessee and the court denied the motion. That ruling emphasized that “Courts have repeatedly recognized that protecting a discrete interest group from economic competition is not a legitimate governmental purpose,” quoting Craigmiles v. Giles, a 2002 case that the Institute for Justice won on behalf of some casket retailers in Tennessee. The casket retailers in that case were being locked out of the marketplace by a group of well-connected companies. The casket retailers won their case.  In dismissing Metro’s motion to dismiss the Metro Livery case, the court recognized precedent in holding that legislating for no other purpose than protecting industry insiders is illegitimate.
Any day now, the court may rule on Nashville's limo price fixing bill. Let us hope economic liberty prevails again. 

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