State 'Competitor's Veto' Laws and the Right to Earn a Living: Some Paths to Federal Reform

Abstract

Imagine what would have happened if, in 1992, the owners of then-little-known Starbucks had been required to prove that the United States “needed” a new chain of coffee shops. At that time the nation had millions of coffee shops serving tens of millions of customers daily, and these coffee shops would have argued that they could cover any foreseeable increase in demand. Yet the nation did need a new chain of coffee shops, as Starbucks’ dramatic success proves. Only through the experiment could the company’s owners prove that America needed a new coffee chain.Silly as this example might seem, many states and cities actually do enforce laws that prevent new businesses from entering the market unless they can prove — without running the experiment — that there is a “public need” for new competition. These laws, called “certificate of public convenience and necessity” (CPCN) laws, govern a wide variety of businesses, from taxicab and limousine services to car dealerships, ambulance companies, hospitals, moving companies, and so on. This article explores the history, theory, and operation of CPCN laws, also known as “Competitor Veto” laws, focusing on evidence uncovered as part of litigation challenging such laws in Missouri and Kentucky. The article concludes that because these laws are designed to protect incumbent businesses, there must be reforms on the federal level to abolish them. Several possible reforms are considered, along with objections.