Lexington, KY; August 21 2012 — Kentucky is violating the U.S. Constitution by imposing an anti-competitive licensing law for moving companies that allows existing businesses to block start-up entrepreneurs from competing with them, according to a federal lawsuit filed today by Lexington small-business owner R.J. Bruner.
Bruner had been hit with citations by police enforcing the anti-competition law. Bruner, who owns Lexington-based Wildcat Moving, is represented by attorneys with Pacific Legal Foundation (PLF), a nonprofit watchdog organization that litigates nationwide for limited government, property rights and free enterprise. As with all PLF’s clients, Bruner is being represented by PLF attorneys without charge.
Existing businesses allowed to veto new competitors
The licensing law — called a Certificate of Necessity law (Kentucky Revised Statutes, section 281.615, et seq.) — essentially prohibits any person from going into the moving business without getting permission from the state’s existing moving companies. Bruner’s lawsuit argues that this restriction violates his constitutional right to earn a living, guaranteed by the Fourteenth Amendment.
“R.J. Bruner is the kind of hardworking entrepreneur who should be applauded, and his moving business should be protected by the law, not run off the road,” said Timothy Sandefur, the PLF principal attorney who represents Bruner. “These kinds of restrictive licensing laws don’t protect consumers — they only protect existing businesses from having to compete fairly.”
The Certificate of Necessity law requires any person wanting to run a moving company to obtain a certificate from the state’s Division of Motor Carriers. But when an application is submitted, the Division notifies the state’s existing moving companies and gives them an opportunity to file a protest. When a protest is filed, the would-be business owner must attend a public hearing and “prove” to the government that existing moving services are “inadequate,” that a new moving company would serve the “present or future public convenience and necessity,” and that the new license would be “consistent with the public interest.”
“What do these words mean? What is ‘inadequate’ moving service?” asked Sandefur. “The law doesn’t say. Yet a new moving company isn’t allowed to operate if it can’t somehow prove to the bureaucracy that it meets these vague and undefined standards.
“The hearing requirement is particularly burdensome for small businesses,” Sandefur continued, “because applicants are required to be represented by an attorney at the proceedings — a cost that many entrepreneurs can’t afford.”
Closing off opportunity
“But the primary problem with such laws,” said Sandefur, “is that they close the door of opportunity to aspiring entrepreneurs — and this violates the supreme law of the land.
“The U.S. Supreme Court has always said that each person has the right to practice a trade without unreasonable government interference,” Sandefur said. “Government can regulate to protect the public from dangerous or illegal practices, but not to protect established businesses from legitimate competition. These Certificate of Necessity laws don’t safeguard public health or safety, they safeguard the market share of companies that are lucky enough to already have licenses. That’s not a legitimate reason for regulation. Allowing established companies to veto new competitors isn’t just unfair, it’s unconstitutional.”
Bruner entered the moving business in 2010 after working as a waiter to put himself through the MBA program at the University of Kentucky. He started by advertising on craigslist.com, and now Wildcat Moving operates five trucks and employs 31 people.
When he started the business, Bruner was not aware Kentucky law gave existing moving businesses the power to block his entry into the field. He learned of the law only when Lexington police officers cited him for operating without a Certificate of Necessity.
“I was shocked when I learned that my businesses had to be approved by other moving companies in order to serve the public,” Bruner said. “This kind of roadblock for free enterprise is not the American way. I’m grateful that Pacific Legal Foundation is helping me take a stand in court for the constitutional right of all entrepreneurs to provide honest services and choices for consumers.”
Bruner is a member of the National Federation of Independent Business, the leading advocate for small businesses across the country. NFIB is supporting the efforts to have the restrictive licensing law overturned.
Tom Underwood, NFIB’s state director for Kentucky, issued this statement:
“The No. 1 issue we’re facing as a state and as a country is job creation. We need to break down any unnecessary barriers. We need to clear the path for small businesses to do what they do best, which is create, innovate, and provide employment in local communities. NFIB is committed to promoting and protecting the right of our members to own, operate, and grow their businesses.”
PLF has overturned other state’s Necessity laws
Pacific Legal Foundation’s challenge to Kentucky’s Certificate of Necessity law follows its successful challenges to similar cartel rules for the moving business in Oregon and Missouri. In both those states, PLF’s lawsuits prompted state lawmakers to repeal the restrictions on new moving businesses.
The Kentucky case is Bruner v. Mathews. The complaint, along with more information on the case, may be found at PLF’s website: www.pacificlegal.org.
Donor-supported Pacific Legal Foundation (www.pacificlegal.org) is a legal watchdog organization that litigates for limited government, property rights and free enterprise in courts nationwide
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