My latest piece for the Civitas Institute examines a recent push in the Wake County suburb of Fuquay-Varina to ban food trucks. The ban’s biggest proponents are restaurant owners who don’t like the added competition from mobile food businesses. But should a business be able to regulate away its competition? I say no, for reasons based in morality, economics, and the law:
Morally, the use of government force as a tool to stifle fair competition is simply wrong. In a free society, people should be able to pursue their trade free of irrational legal barriers that serve only special interests. There’s nothing wrong with a business owner disliking competition – in fact, most people dislike having to compete for a living – but that doesn’t give businesses a license to regulate away anyone who dares challenge them in the marketplace.
Economically, competition serves an important function in a free market. It keeps prices low and generally increases the quality and selection of goods available. This happens precisely because businesses have to compete with one another for consumers. It’s no surprise, then, that some businesses try to avoid this hardship by getting special treatment from the government. But such special treatment acts as a constraint on supply, limiting competition and therefore reducing the benefits produced by competitive market forces. This means higher prices and less quality and choice for consumers.
Legally, several federal appeals courts have found that economic regulations cannot be used to eliminate competition under the guise of law. The Fifth Circuit Court of Appeals has found that “neither precedent nor broad principles suggest that mere economic protection of a particular industry is a legitimate governmental purpose … It is aptly described as a naked transfer of wealth.” The Sixth Circuit Court of Appeals agrees, and has held that“[P]rotecting a discrete interest group from economic competition is not a legitimate governmental purpose.” The United States Supreme Court held in City of Philadelphia v. State of New Jersey that “where simple economic protectionism is effected by state legislation, a virtually per se rule of invalidity has been erected.” However, that case has been limited to its particular facts under the United States Constitution’s Interstate Commerce Clause.