Institute for Justice
The transportation business is quintessentially suited to immigrant or low income entrepreneurs. Running a taxicab, jitney, sedan or limousine service requires little in the way of formal education or startup capital. With a safe vehicle and a strong work ethic, entrepreneurs can be on their way to the American dream.
However, outdated restrictions, often defended by established businesses, including the powerful taxi industry, often prevent these aspiring small business owners from working freely. The Institute for Justice is determined to fight laws that needlessly limit competition and constrict consumer choice.
For generations, transportation businesses have been a vehicle by which people raised themselves and their families out of poverty. Not only do these businesses provide a promise of economic opportunity, they offer safe and affordable transit for communities that would otherwise have few options for reliable transportation.
In many lower income communities, simply getting to work is often a major challenge. Taxis are virtually non-existent, and cars are prohibitively expensive. Residents must depend on public transportation which is notoriously sporadic and unreliable.
Unfortunately, many cities and states have enacted regulatory roadblocks. These regulations do precious little to protect the public. Rather, they protect entrenched businesses from competition.
One of the most common regulations is a taxi medallion, or permit, required to own a cab. In cities with a medallion system, entrepreneurs can operate a cab only with a medallion.
This creates artificial scarcity which grossly inflates the price of a medallion. Today, taxi medallions in several cities cost entrepreneurs hundreds of thousands of dollars, clearly putting them well out of reach of those with limited means.
The goal of protecting entrenched businesses, protectionism, is even more blatant in cities that mandate minimum wait times and minimum fares. These restrictions ban transportation entrepreneurs from offering competitive fares and better service to their customers. Additionally, IJ has defended cities that enacted reform from specious lawsuits filed by cab cartels.
Consumers and entrepreneurs, not government officials, should decide what transportation options are available.
Little Rock established a monopoly for the only taxi business in town preventing competition and prohibiting consumer choice.
The City of Little Rock had only one taxi business, and it was illegal to start a second one. Little Rock’s government had completely forgotten that the right to choose which taxi to hire belongs to customers, and the government does not get to make this choice for them. Yet that is exactly what Little Rock’s government was doing by intentionally providing a monopoly to the only taxi company in town.
Rather than doing what was best for the public, Little Rock’s government had become one company’s henchman. Little Rock’s unusual ban on new taxi companies prevented Little Rock’s citizens from enjoying the competition, job creation, and consumer choice found in most other U.S. cities.
An entrepreneur and his environmentally friendly hybrid taxi business finally had enough. They filed suit in Pulaski County Circuit Court arguing that the city’s establishment of a private monopoly violated the Arkansas Constitution. Monopolies are harmful to entrepreneurs, employees, and consumers alike, which is why the Arkansas Constitution forbids them.
The Little Rock Board of Directors had directly violated multiple sections of the Arkansas Constitution. Unfortunately, it appeared that only a lawsuit would make the Board notice. That is why a taxi driver and his fledgling business joined forces with the Institute for Justice to vindicate the right of entrepreneurs to compete.
On December 7, 2016, Circuit Judge David Laser granted our motion for judgment on pleadings and held that Little Rock had violated the Arkansas Constitution’s antimonopoly clause. This resulted in a final judgment it entered in Ken’s favor on January 25, 2017 which the city chose not to appeal.
But all was not done. With the unconstitutional barriers removed, Ken was still required to reapply for taxi permits, which he did. On May 16, 2017, the Little Rock Board of Directors begrudgingly agreed that Ken had met all of the other requirements which also meant that the Board was required to issue the taxi permits to him.
Ken celebrated by purchasing more taxi vehicles and hiring more drivers. Thanks to his willingness to fight for his dream and a little help from the Arkansas Constitution, Ken not only made Arkansas a little freer, but he also won the right to do what he does best— create more jobs in Little Rock.
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