Sunday, September 25, 2011

Want to start a business? Sorry, not unless it's OK with your competitors.

In 2009, St. Louis entrepreneur Michael Munie wanted to expand his moving business to operate throughout the state of Missouri, and asked the state for a permit. However, under a 70-year-old law, the Missouri Department of Transportation cannot issue a permit without notifying the existing moving companies and giving them a chance to object. Of course, four of them did object, arguing that a new moving business could result in a "substantial diversion of traffic" from their own businesses. If I'm not mistaken, we used to call that "competition," and it used to be considered a good thing because it brought lower prices and economic opportunity.

After the existing companies submitted their objection, Munie was forced to go to a hearing and prove to a panel of bureaucrats that there is a "public need" for a new moving company. Sadly, I am not making this up. For the Missouri Department of Transportation, competition is apparently a bad thing, and it is only permissible to start a business if there is a "public need" for it.

This is not unique to the moving industry, either. The Florida House of Representatives recently tried to end heavy-handed licensing requirements that made it extremely hard for people to set up shop as interior designers. A fierce battle ensued in the legislature. Licensed interior designers warned lawmakers that ending license requirements for interior designers would result in "88,000 deaths every year" from poor fabric selection. "Do you know the color schemes that affect your salivation, your autonomic nervous system?" inquired one professor.

The state attorney general's office, however, has admitted that unlicensed interior designers pose no actual threat to public safety. Floridians need not worry about fatal color schemes.

With the help of government, Missouri moving companies and Florida interior designers have basically formed cartels, making it next to impossible for new people to enter those fields. Unless government gets out of the way, other cartels will be sure to follow.


  1. I recall reading somewhere that there could be no long term monopoly or cartel without either direct or indirect government support.

  2. You can't have a cartel without government support, for sure. There have been a few monopolies that have succeeded without government: Standard Oil in the 19th century, and De Beers. But in general I agree with you.