The only legitimate purpose of government licensing is to protect public health and safety.  That’s why almost nobody objects to regulations that require buses, for example, to be insured, well-maintained, and operated by a qualified driver.

But in the transportation industry, an entrepreneur has to do more than satisfy objective criteria like these.  To receive a “jitney” license, which is required to pick up and drop off passengers along a fixed route, State law and City ordinances require an entrepreneur to prove that his or her new venture also serves “public convenience and necessity.”

Unfortunately for entrepreneurs, a proposed transportation business is only “convenient and necessary” if the entrepreneur can prove to the government that there is a market for the new business that existing companies cannot satisfy.  It is not enough, in other words, for an entrepreneur to show that he or she will provide consumers better service at a better price.  He or she has to further show that existing companies cannot meet the demand, which is often difficult to accomplish because existing companies regularly oppose new jitney licenses.

This approach turns the ordinary principles of entrepreneurship upside down.  Instead of consumers and businesspeople deciding whether a new service is needed in a free market, bureaucrats—in close consultation with a start-up business’s would-be competitors—make that decision.  In practice, the public convenience and necessity standard is so arbitrary and so hostile to honest entrepreneurship that enterprising citizens are routinely prevented from pursuing their dreams.

No one understands the unfairness of the public convenience and necessity standard better than Erroll Tyler.  After two years and two applications, he still does not have the jitney license he requires to start his amphibious vehicle tour service because Cambridge bureaucrats decided that the City does not “need” him.  Not only does Cambridge’s decision cost the City jobs and drive up prices by reducing competition, it violates Tyler’s right to earn an honest living in the occupation of his choice without arbitrary government interference.

That’s why on July 26, 2006, Tyler joined with the Institute for Justice to file a third jitney license application and fight for his right to earn an honest living.  If Cambridge does not grant his certificate, the Institute for Justice will take this case to State regulators, and, if necessary, to the courts of law.

 

Introduction

Erroll Tyler is an aspiring African-American entrepreneur, but the City of Cambridge, Mass., has told the would-be jitney driver to hit the road, or rather, don’t hit the road . . . just get lost in its bureaucratic shuffle.  After two years and two applications, Tyler has been denied the “jitney”[i] license he needs to start his tour business because City bureaucrats decided that Cambridge does not “need” him.  Tyler maintains that consumers—not government officials—should decide whether his service is needed.

Tyler’s dream is to open Nautical Tours, which will operate two amphibious vehicles called “Hydra-Terras” on the streets of Cambridge and Boston and on the waters of Boston Harbor and the Charles River.  To be able to pick up and drop off passengers along a fixed route in Cambridge, however, State law requires Tyler to obtain a jitney license from the City.[ii]

This statute, which was enacted generations ago to protect railroads from motor vehicle competition, [iii] gives cities like Cambridge the discretion to deny any license the City believes does not serve “public convenience and necessity.”  Owing to its anti-competitive origins, the pubic convenience and necessity standard turns the ordinary rules of business upside down by forcing an entrepreneur, like Tyler, to prove to government officials that there is a “need” for his new venture that existing companies cannot satisfy.  In practice, the public convenience and necessity standard is so arbitrary and so hostile to honest entrepreneurship that enterprising citizens are routinely prevented from pursuing their dreams.  This approach is fundamentally inconsistent with the American tradition of letting the free market, not the whims of bureaucrats, decide what the public wants.  If the service Tyler seeks to provide is not convenient or necessary, it will not attract a consumer following and it will go out of business; but the government should not bar Tyler from trying to make a go of his dream.

Not only does the public convenience and necessity standard cost jobs and drive up prices by reducing competition, it also violates the constitutional right to earn an honest living in the occupation of one’s choice.  Although Cambridge may have a legitimate interest in licensing jitneys in a way that directly protects public health and safety—ensuring that the vehicles are safe and insured and that the drivers pass background checks, etc.—it is unconstitutional to forbid Tyler from opening his business simply to shield other companies from competition.

That is why on July 26, 2006, the Arlington, Va.-based Institute for Justice joined with Tyler to file a third jitney license application and fight for his right to pursue his living without arbitrary government interference.  If the Cambridge City Council denies, or fails to decide on, this application within 60 days, IJ will appeal to the Massachusetts Department of Telecommunications and Energy,[iv] and, if necessary, to a court of law.

 

Nautical Tours

Tyler plans to run Nautical Tours’ two Hydra-Terras along a fixed route through the historic parts of Cambridge and Boston.  Each trip will culminate in a cruise through Boston Harbor or up the Charles River, which separates Boston and Cambridge.

Unlike the amphibious vehicles currently being used in Boston, which are simply refurbished World War II infantry landing craft, Hydra-Terras are state-of-the-art and built specifically for tourism.[v]  The Hydra-Terra is certified by the Coast Guard for travel in all navigable waters, and each of Tyler’s drivers will be a licensed captain with extensive safety training.  Because of its ingenious design, Hydra-Terras are the safest amphibious vehicles on the market.  In addition, the 2007 models Tyler plans to use come with an ultra-clean burning diesel engine that emits 90 percent fewer pollutants than the standard “California emissions” engine found on ordinary tour buses, making Nautical Tours an instant leader in eco-friendly tourism.  Finally, Tyler plans to equip his Hydra-Terras with a GPS-linked personal narration system that will automatically come on in any of several languages whenever the vehicle passes a notable site.  An added advantage of this personal narration system is that by using headphones rather than on-board loud speakers the Hydra-Terras will not produce any disruptive noise like other open-air tour services.  Thus Nautical Tours will offer its passengers the safest and most rewarding experience possible while having a minimal impact on the community.

Tyler plans to exemplify the sort of entrepreneurship that Cambridge claims to want.  For example, even though his tourist season will only run from April to mid-November, Tyler will keep his employees on year-round, including a paid six-week vacation from mid-November through the New Year.  The first three months of each year will be devoted to safety training and employee education in topics like public speaking, customer service and marketing.  Tyler believes that total dedication to his employees will translate into total dedication to his customers.

Finally, Nautical Tours will also have a positive presence in the community.  Tyler has formed a not-for-profit subsidiary that will use the Hydra-Terras for a variety of free educational programs.  The subsidiary will also sponsor music, theater and entrepreneurship programs for young people.  In Tyler’s view, the success of Nautical Tours will not simply be measured on its balance sheet, but also in how it enriches Cambridge.

 

The Public Convenience and Necessity Standard

Tyler needs, but so far has been unable to get, a jitney license to be able to pick up and drop off passengers along a fixed route in Cambridge.  Jitneys are governed by Chapter 159A of the General Laws of Massachusetts.[vi]

Chapter 159A was enacted in 1916 for the purpose of protecting railroads from the burgeoning bus industry.[vii]  In Brockton, Mass., in 1919, for example, the City Council revoked all the licenses of the thriving jitney business after the Eastern Massachusetts Street Railway Company complained that it was losing money on a particular streetcar route.[viii]  The Supreme Judicial Court upheld the revocations on the ground that the City Council concluded that the “public,” which apparently did not include the jitney services’ customers, “preferred” streetcars.  The streetcars and railways triumphed across the country, reducing the nation’s estimated 62,000 licensed jitneys in 1915 to almost zero by 1920.[ix]

The protectionist roots of Chapter 159A have created a jitney industry in Massachusetts in which the ordinary principles of entrepreneurship are turned upside down.  Rather than specify that a jitney license will issue if an applicant establishes that it is no danger to the public,[x] Chapter 159A does not set forth any criteria at all for granting a license.  In the absence of any statutory guidance, cities, like Cambridge, typically require an applicant to prove that “public convenience and necessity” require a new jitney service.[xi]  In practice, this means that an applicant must prove that there is a market for the applicant’s proposed transportation service and that existing companies cannot satisfy that market.[xii]

It is not enough for an applicant to demonstrate that it will provide better service at a better price.  On the contrary, a jitney application can be denied under the public convenience and necessity standard if an applicant threatens to undermine an existing company’s market share.[xiii]  In fact, it has been common over the history of Chapter 159A for existing companies to appear in opposition at public hearings on a jitney license application.  In Deacon Transp., Inc. v. Dep’t of Pub. Util., for example, an entrepreneur who wanted to bring a unique sightseeing concept to Boston had his jitney license application opposed by existing tour companies that argued that they should be given the first opportunity to capitalize on the entrepreneur’s breakthrough idea.[xiv]  Thus innovative entrepreneurs like Tyler, who are committed to providing absolutely the best service possible, are put in the awkward position during the jitney license application process of trying to convince a panel of bureaucrats that they will not out-perform their future competitors.

In addition to frustrating Tyler, the arbitrary and anti-competitive aspects of trying to get a jitney license have all but eliminated a natural form of grassroots entrepreneurship: jitney vans.[xv]  Chapter 159A renders it virtually impossible for someone to buy a van or small bus and offer transportation services to the community.  Not only would jitney vans provide opportunities for otherwise unskilled entrepreneurs (because they typically don’t require a great deal of financial capital or formal education), they would be a tremendous asset to low-income neighborhoods that are often underserved by public transportation.[xvi]  Furthermore, allowing grassroots entrepreneurs to open their own jitney services in response to market interest would diversify and decentralize a city’s transportation infrastructure.  This would make a city far less vulnerable to the sort of crippling transportation strikes that continually paralyze New York City.

The late Jane Jacobs—recognized around the world for her expertise in urban design—was dismayed that cities across North America have effectively banned the sort of jitney vans she used on her many vacations to the Caribbean.[xvii]  In her view, jitney vans were a flexible “ground-up” solution to transportation issues that enabled a community to develop according to its own preferences and economic life.  In contrast to this efficient and organic approach, Cambridge and other cities across Massachusetts, as with most of the nation, have adopted a “top-down” framework in which bureaucrats, rather than the marketplace, decide according to their own personal criteria whether a new jitney service is “needed.”  Unsurprisingly, as Tyler’s case illustrates, this “top-down” approach is arbitrary and suppresses the sort of healthy competition that everywhere else in the economy creates jobs and lowers prices for consumers.

The arbitrary public convenience and necessity standard is not confined to jitneys.  It applies in almost every transportation context, including taxis[xviii] and the transportation of property by motor vehicle.[xix]  The “top-down” approach is just as pernicious in these contexts as it is with respect to jitneys.  In Boston in the late 1980s, for example, one entrepreneur’s effort to get one new taxi medallion issued by the Boston Police Commissioner became a protracted 13-year battle in the Massachusetts courts after existing taxi companies intervened to maintain their stranglehold on the market.[xx]  Despite overwhelming evidence to the contrary, these companies did everything possible to convince State regulators that “public convenience and necessity” mandated preventing even one more car from taking to the road.  The people of Massachusetts would enjoy more liberty and greater prosperity if, rather than bureaucrats applying an arbitrary standard under pressure from existing companies, entrepreneurs and consumers were the ones deciding whether a particular transportation business is “needed.”

 

Erroll Tyler’s Bureaucratic Nightmare

Erroll Tyler has been trying to get a jitney license for two and a half years.  So far, Cambridge seems determined to keep his amphibious tour business in dry dock.  Here is what Tyler has had to put up with.

Tyler first applied to the Cambridge License Commission, which consists of a chairperson and the police and fire chiefs, on December 16, 2003.  The Commission held a hearing on January 6, 2004, in which Tyler proposed having two Hydra-Terras pick up and drop off passengers at a fixed location in Cambridge, drive a fixed route through the city and Boston, and enter the Charles River at the Massachusetts Department of Conservation and Recreation’s (DCR) boat launch at the Museum of Science.

The Commission conveyed that it had a very favorable impression of Nautical Tours.  Rather than issue him a jitney license, however, the Commission asked Tyler to first secure permission to use the boat ramp at the Museum of Science, at which time the Commission said it would formally vote.  After waiting eight futile months without a response from the DCR, which refused even to set a timetable for deciding, Tyler changed his plan.  Rather than putting in at the Museum of Science, he would simply use a public boat ramp in Charlestown.  With this new initiative, Tyler returned to the Cambridge License Commission expecting it to quickly issue his jitney license.

Unfortunately, the composition of the License Commission had changed.  The new chairperson told him he would have to apply again.  Tyler explained that nothing about his application had changed other than his intention to use the public ramp in Charlestown.  The License Commission agreed that Tyler would not have to submit any new documents, just another $140 application fee, which he did on December 29, 2004, a year after his first application.

On January 25, 2005, the License Commission convened a hearing on Tyler’s second application.  This time, however, the mood was distinctly different.  Where the Commission had been solicitous the year before, it was now inexplicably hostile.  In a letter dated February 1, 2005, the License Commission informed Tyler that it had voted 3-0 to deny his jitney application, principally because Cambridge supposedly doesn’t “need” another “trolley” tour.[xxi]  Never mind that Nautical Tours is not a trolley tour, and never mind that Cambridge has nothing like what Nautical Tours will offer. 

As a City ordinance requires, the License Commission notified the City Manager of its decision, who then put Tyler’s application on the agenda of a March 14, 2005, City Council meeting.[xxii]  Tyler arrived ready to share his vision for how Nautical Tours would provide a memorable experience for visitors while upholding the highest standards of corporate responsibility.

When his turn arrived, however, the City Council simply bypassed him, pretending that he wasn’t on the agenda and indeed that he wasn’t even there.  Councilor Denise Simmons, who has steadfastly supported Tyler’s right to a fair hearing, objected, but to no avail.  In a classic example of bureaucratic absurdity, it was pointless for the City Council to put Tyler on the March 14, 2005, agenda in the first place because under Cambridge Ordinance 5.20.360(B), the Council lost its power to review the Commission’s decision on February 27, 60 days after he applied.

No one explained this to Tyler.  In fact, the City misled him.  The jitney application form specifically says that the City Council, not the License Commission, makes the final decisions.[xxiii]  This is why Tyler continued to wait so patiently for the City Council to vote on the Commission’s recommended denial.

The City also did not explain to Tyler that he could appeal an adverse decision to the Massachusetts Department of Telecommunications and Energy (DTE).  Under Chapter 159A, the DTE has the authority to overrule a City’s jitney license denial, but the appeal must be filed with the DTE no later than 65 days after the original application was filed.[xxiv]  So not only was it a waste of time for Tyler to make his scheduled appearance on March 14, 2005, before the Cambridge City Council (where he was bypassed anyway), his patience cost him his right to appeal.

Tyler’s only chance is to go back to the License Commission with a third application.  This time, however, with the help of the Institute for Justice, the City of Cambridge will be held accountable.

 

About Erroll Tyler

Erroll Tyler was born and raised in the towns of Medford and Melrose, Mass., which are part of greater Boston.  He attended college at San Diego State in California and played semi-professional football for several years.  He has spent the last 14 years working for one of the nation’s leading specialty limousine companies, eventually rising to become their national director of training.  Wanting to travel less and work on Nautical Tours, Tyler now supervises his firm’s Boston-area accounts.

Tyler firmly believes in the principles of economic liberty and competition.  He is not only fighting for his own rights, but for the rights of entrepreneurs across Massachusetts.

 

The Importance of Economic Liberty

Tyler’s efforts to secure a jitney license are not just about putting amphibious vehicles on the streets of Cambridge.  They are also about getting Cambridge to recognize what has always been an essential part of the American Dream:  the right to earn an honest living free from unreasonable or discriminatory government interference.  Our nation’s history and traditions recognize that there is dignity in honest work and that pointless government interference is an insult to this dignity.  The right to engage in honest work is also fundamental to good citizenship because it is the cornerstone of independence and responsibility.

The demise of economic liberty began almost as soon as it achieved its most important recognition.  After the Civil War, emancipated slaves counted economic liberty as among the most significant of their new civil rights.  However, to protect entrenched white businessmen from competition, Southern governments soon suppressed economic opportunities for their newest citizens by heavily regulating entry into trades and business.  The national government tried to curtail these abuses by enacting the Civil Rights Act of 1866 and the Fourteenth Amendment to the U.S. Constitution, both of which sought to protect the economic liberty of all Americans by forbidding states from abridging the “privileges or immunities” of American citizenship, which included the right to earn an honest living in the lawful occupation of one’s choice.

But in the 1873 Slaughter-House Cases, a sharply divided U.S. Supreme Court read the Privileges or Immunities Clause out of the U.S. Constitution by a mere 5-4 vote.  That decision gave states carte blanche to enact shameful Jim Crow-era laws that restricted economic opportunities for black Americans.  In addition to oppressing their black citizens, the states also used their now-unchecked regulatory power to protect all sorts of entrenched interests.  Relying on the line of cases going back through the New Deal to the Slaughter-House Cases, states continue to erect arbitrary barriers to entry into many trades and professions.  As is the case with the public convenience and necessity standard under Chapter 159A and other statutes, these onerous restrictions often far exceed those necessary to protect public health and safety, thus revealing their real purpose—the protection of established businesses from fair competition.

 

Institute for Justice Team

The lead attorney in this case for the Institute for Justice is staff attorney Jeff Rowes, who specializes in economic liberty and property rights cases.  He will be joined by Chip Mellor, IJ’s president and general counsel.

Founded in 1991, the Institute for Justice has successfully represented entrepreneurs nationwide who fought arbitrary government regulation.

 

• Craigmiles v. Giles
  The Institute for Justice suit led a federal court to strike down Tennessee’s casket sales licensing scheme as unconstitutional, a decision that was upheld unanimously by the 6th Circuit Court of Appeals and not appealed.  This marked the first federal appeals court victory for economic liberty since the New Deal.

• Clutter v. Transportation Services Authority
  IJ busted up Las Vegas’ entrenched limousine cartel that had stifled competition by blocking new entrants.

• Jones v. Temmer
  IJ helped three would-be cab company owners overcome Colorado’s 50-year-old taxicab cartel.  (IJ then helped break down government-sanctioned taxi monopolies in Indianapolis and Cincinnati.)
  
  
• Ricketts v. City of New York
  IJ’s advocacy helped strike down the New York City Council’s veto of new van services.

• Swedenburg v. Kelly
  IJ’s suit on behalf of Virginia and California vintners as well as New York wine consumers led the U.S. Supreme Court to declare unconstitutional New York State’s laws that barred the interstate direct shipment of wine to New York consumers.

• Taucher v. Born
  IJ set an early and important precedent extending First Amendment protection to software developers and Internet publishers.  The CFTC had sought to license these individuals.

• Wexler v. City of New Orleans
  IJ won an important First Amendment victory on behalf of book vendors in New Orleans when a federal court struck down as unconstitutional the City of New Orleans’ blanket ban on selling books on the street.

• Cornwell v. California Board of Barbering and Cosmetology
  IJ represented African hairbraiders to defeat California’s cosmetology licensing requirements.

• Anderson v. Minnesota Board of Barber and Cosmetologist Examiners
  IJ represented African hairbraiders to defeat Minnesota’s cosmetology licensing requirements.

• Farmer v. Arizona Board of Cosmetology
  Institute for Justice Arizona Chapter (IJ-AZ) filed a lawsuit on behalf of braider Essence Farmer to dismantle Arizona’s onerous cosmetology regime, which required braiders to attend 1,600 hours of courses that taught nothing about braiding.  As a result of the case, Arizona’s legislature exempted braiders from the regime.

• Armstrong v. Lunsford
  This case successfully challenged Mississippi’s cosmetology regulations, which barred braiders from practicing their craft.  Prior to receiving a ruling from the court, Mississippi’s legislature exempted braiders from the cosmetology licensing requirement in 2005.  This result allows IJ’s client to continue to practice without obtaining a license.

• Diaw v. Washington State Cosmetology, Barbering, Esthetics, and Manicuring Advisory Board
  After being sued by the IJ’s Washington Chapter, Washington State’s Department of Licensing filed an “Interpretative Statement” exempting braiders from the State’s cosmetology licensing requirements.

• Uqdah v. D.C. Board of Cosmetology
  IJ’s work in court and the court of public opinion on behalf of D.C. hairbraiders led the District of Columbia to deregulate the cosmetology industry.

 

For more information, contact:

 

            John E. Kramer (Vice President for Communications)
            Lisa Knepper (Director of Communications)
            Institute for Justice
901 N. Glebe Road, Suite 900
Arlington, VA  22203

(703) 682-9320