Should an entrepreneur be required to obtain permission from his competitors before starting a new business? In the state of Kentucky, that’s not a trick question.
In August the Pacific Legal Foundation, a public interest law firm based in Sacramento, California, filed suit in the U.S. District Court for the Eastern District of Kentucky, challenging a state law that lets moving companies veto the licensing applications of would-be competitors. At issue is a Kentucky statute requiring moving companies to obtain a Certificate of Public Conveyance and Necessity, which may be issued only if “existing transportation service is inadequate.” How do state officials decide whether the current moving companies are “inadequate” to the task and in need of some fresh competition? They ask them.
Like many occupational licensing requirements, this one is not justified merely on the grounds that it will protect public health, safety, or welfare. Instead it’s about protecting incumbents from competition. Under the law, existing moving companies are notified by the state’s Division of Motor Carriers whenever a new licensing application is received. Those firms may then submit “protests” against the new applicant, which can—and often do—result in a license denial.