Occupational Licensing

Colorado Taxi Drivers Get Their Day in Court

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A group of Denver cab drivers represented by the Institute for Justice (IJ)*, a public interest law firm, will argue before the Colorado Supreme Court today that the state agency that regulates taxis cannot ignore a 2008 law easing entry barriers for new businesses in several counties, including Denver.

Colorado law requires cab companies to obtain a certificate of public convenience and necessity from the Public Utilities Commission (PUC) and allows existing companies to object to new entrants. Until 2008, the law directed the PUC to presume "excessive" competition is harmful to the public interest.    

This essentially barred entry into the Denver taxi market for 50 years, during which time residents made do with scarce and expensive service from only two companies (a third was approved in 1995 after an IJ lawsuit).

Legislators realized, however, that protecting incumbents is not good policy, and the 2008 law requires the PUC to shed the presumption that competition is ruinous. Moreover, while existing companies can still object to new entry, they must present actual evidence that more cabs would be detrimental to the public interest.

Senator Josh Penry (R-Grand Junction**) explained the legislature's intent at a hearing on the then-bill (via an IJ brief):

Existing carriers would have to prove that allowing a new company into the market would be harmful to the public. And so what [the law] does is it flips the onus so that when new carriers want to gain entry into the marketplace the onus isn't on them to demonstrate that what they are doing is bad. What others would have to demonstrate is that there would be some undesirable consequence associated with their competition.

Shortly after the change, Mile High Cab, Inc., a group of experienced cab drivers intending to offer lower prices to residents and better working conditions for drivers, applied for permission to dispatch 150 new taxis.

Competing businesses (but not IJ's 1995 client) predictably objected, but did not offer any of the required evidence (beyond "expert" testimony reasserting the theory that more competition could possibly "result in the fractionalization and ultimately a deterioration of service"). Nevertheless, PUC commissioners decided to deny Mile High's application.

The PUC claims legislators did not mean what they said in floor statements or in letters to the commission (cited in IJ's brief) and that the law does not say what it plainly says. A trial court let them get away with it. The Supreme Court has the opportunity to correct that error.

*Disclosure: I am a former employee of the Institute for Justice.

** Penry represented Grand Junction and not Denver or the Denver metro area, as originally reported. Hat Tip: Austin Rueschhoff.

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  1. IJ needs to back off a bit on Colorado. Now that weed is legal and you can start your own cab company without much hassle, everyone will be moving there. Seriously, who is going to run the shipyards that import precious goods from China? Who is going to run chicken farms and make cheese?

    1. A-hem. Chicken farms don’t make cheese.

      (Runs for cover.)

      1. Chicken Cheese (sort of)
        http://www.humbirdcheese.com/s…..=10&page=1

        1. Chicken Cheese (sort of)

          Time for the teenage girl noise:
          Eeeeew!
          I wonder how they formed curds out of chicken stock and celery.

      2. I don’t know, do chickens have nipples? I’m assuming not.

        “You can milk anything with nipples.”

    2. I thought all the shipyard work was in Utah and Kansas? It’s in Colorado?

      1. I could use a hand getting my kayak out of the water…

      2. They have the high elevation necessary to get the big ships all the way down the launch ramp to the Gulf. Kansas has to use rocket boosters and Utah never got federal funding to complete the Ship Tunnel.

  2. There is no such thing as excessive competition. The market would quickly weed out those who don’t make the cut.

    1. Seriously. How in the hell can people still believe that Marxist horseshit after the experience of the 20th century?

      1. The Department of Education
        oh, and Hollywood.

        ’cause corparayshunz iz evil!

        1. ’cause corparayshunz that aren’t stuffing my pockets iz evil!

      2. It’s an idealogy for concentrating power into the hands of a few. It’s like a fooking virus and, like the flu it will shift a few genes and keep coming back.

        1. Unfortunately, unlike the flu, there is no innoculant.

      3. Because it feels good. Collectivism feels good. We’re all in this together. It feels good to all be in it together. It feels good to heap scorn on those who think every man is an island. You can accomplish things when you all work together and use force. Force accomplishes things. Force can silence those who disagree with you. It feels good to silence the opposition. Force gets things done, and it feels good to get things done.

        Sure it all breaks down under any critical and rational analysis, but that doesn’t feel good so why bother?

        1. Critical thinking is for mean people!

    2. But it’s not fair that businesses fail. Then the federal government would have to bail out the failing cab companies (at least the big ones), because we can’t let people who made mistakes face consequences. That might make them feel bad.

  3. Someone should start a cab company named Fuck the Government, These Cabs are Awesome and Cheap.

  4. Let’s see if I can fathom why such a state enforced guild exists. In a free market, there will be multiple price points offering a spectrum of cabrioleting experiences. A faction of service providers are noticing that the service in general may be getting a bad rap from the bottom of the barrel folks, so they establish the Cabbing Association. But then accusations are made about anti-competitive price fixing (which is simply the envy of the bottom feeders for being left out). So such associations are banned. But the idea of minimum quality resonates, so now instead of a self policed industry, it is turned over the the Enforcers. And they weed out who can be and who is left out, and there so few players, and the price de facto gets set by collusion supported by the State. Just another case where imperfections detected in the free market made worse by intervention.

  5. Maybe I’m crazy, but I think that the GOP could actually do well by running on issues like this. Too bad they prefer to be Pro-Existing-Business rather than Pro-Market.

    1. Markets don’t contribute to campaigns. Existing businesses do.

      1. Nice, I might have to “borrow” this line someday.

      2. True. But campaign contributions don’t really win elections, especially not beyond a certain minimum necessary to get a message out.

        At some point they may actually care about winning.

        1. Contributions don’t by themselves win, but a candidate who doesn’t have any is sure to lose.

          1. Yes, you need some to make your case and get a message out. Beyond a certain minimum, they don’t do much.

    2. YOU’RE CRAZYYYYYYYY!

  6. Until 2008, the law directed the PUC to presume “excessive” competition is harmful to the public interest.

    You wouldn’t want the poor huddled ignoramuses to suffer from choice fatigue.

  7. I think that the GOP could actually do well by running on issues like this.

    They’d find a way to fuck it up.

  8. It’s too bad the officials involved can’t be made personally liable for lawyer fees and court costs when they pull stuff like this. They ignore the law because it doesn’t cost them anything. All trials and appeals are at taxpayer expense, and when they ultimately lose on this issue they just make up a new excuse and start over.

    If personal liability means that no one is willing to serve on these commissions, so much the better.

  9. John Ross said:

    The PUC claims legislators did not mean what they said in floor statements or in letters to the commission (cited in IJ’s brief) and that the law does not say what it plainly says.

    Honestly, they had to have made a stronger case than that, right? I wish I could’ve seen a quote there.

    1. You might be surprised. Part of my job is reading a shitload of legal briefs, and in one of the recent ones, the government manifestly and repeatedly mischaracterized the arguments their opponents were making, when their only job was to rebut that argument. They basically devoted their entire allotment of time to pulling out a strawman and hitting it with sticks, and the court bought it hook, line and sinker.

    2. There isn’t a money quote, unfortunately. The PUC acknowledges in its briefs that the burden of proving whether new cab services are/aren’t in the public interest shifted from entrants to incumbents. But the “evidence” the incumbents presented was pretty much the same thing that would have sufficed pre-2008, which boils down to the law did not change anything in my view.

  10. Until 2008, the law directed the PUC to presume “excessive” competition is harmful to the public interest.

    Huh??? Does not compute. How is having more choices, and more cab companies competing to offer the best service at the lowest price possibly “harmful to the public”? What the fuck?

    1. The same way that having more hospitals is harmful to the public.

    2. You just have to define the public interest as being served by having a stable group of companies providing a service, and bango, there you are, excessive competition hurts the public interest.

    3. If the public had more choices, they’d have to choose between the cheap taxi, the expensive taxi (but more comfortable) and the electric taxi (for people who want to be conspicuously good for the environment). They’d be so distraught at actually having to make a decision, they’d never get to where they were going. Which I suppose is almost as good as using an electric taxi.

  11. I would like to see reason start covering some of the 3-tier law abuses like they do cabbies.

    An interesting one right now is Louis Glunz v Dogfish Head, which is heading to court it Illinois (maybe).

    Basically, the Illinois franchise beer distributor law requires a brewery to offer “fair market value” to their distributor if they wish to change distributors without cause.

    Dogfish Head, for whatever reason, is changing. They initially offered Glunz 4.4 times their GROSS profit on DFH beers from the last year. Not net, gross*. The 2nd offer was 4.8X. Glunz says those are jokes and is sueing for more than 10X.

    *net would be hard to figure for individual brands anyway.

    You get 4.4X your annual gross profit, NOW, for doing nothing. And they consider that an insult.

    The franchise laws are truly a law of unintended consequences (and not an Iron Law example of forseeable). When most went in, and nearly all states have them, the big players were the Breweries and there were lots of little distributors. And so the laws went in to protect the distributors from the games the breweries were playing. Bud switching from one to another could kill a distributor off, for example. [insert SLDs here, I think the laws were a bad idea then] However, due to consolidation and etc, the distributors are now the power brokers, and of course, they arent willing to give up their rent seeking ways.

    1. Car dealer laws are just as ridiculous in basically all states too.

      1. Deosnt surprise me.

        1. It’s actually illegal for car companies to direct sale a car in all states I know of, for instance.

    2. Glunz is asking for 10X their annual gross profit from what they would’ve made off DFH. And this future profits forecast is based on another “expert” study that has DFH always selling beer and no further disruption in the craft market.

      btw, DFH’s tweason’ale is the best gluten free beer i’ve ever had.

  12. Why is a cab service a utility?

  13. Mundy, of the University of Missouri at St. Louis, is the same hired gun for the incumbent taxi industry who three years ago produced a “study” that actually presumed to discover the ideal number of taxi permits for this region. “The correct number of taxi permits in Denver,” the study concluded with regal precision, “is 942.”

    Not 943, you understand. That would amount to oversupply.

    and some administrative judge ate it up. good for IJ.

    WTF is an administrative judge anyway? is the minimum requirement a pulse?

    1. “WTF is an administrative judge anyway? is the minimum requirement a pulse?”

      HOW DARE YOU!

      (Its a pulse AND political connections).

      1. So it’s someplace to stash failed politicians?

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