Tennessee Passes Bill to Allow In-Home Beauty Services

Press Release, Nashville, Tenn., April  25, 2018 —Late yesterday afternoon, the Tennessee a bill to allow in-home beauty services across Tennessee.  State Senator Steve Dickerson, R-Nashville, State Representative Sam Whitson, R-Franklin, and State Representative Jason Powell, D-Nashville, were the primary sponsors of the bill.  Once signed by Governor Haslam, the reform will allow Tennesseans to purchase beauty services in the privacy of their own homes and businesses.

General Assembly completed the final step in passing

The bill follows The Tennessee Board of Cosmetology and Barber Examiners’s 2016 decision to issue a cease-and-desist letter and file a formal complaint against Belle—a popular Nashville-based technology company that provides on-demand health and beauty services—for bringing “highly disturbing” competition into Tennessee’s beauty industry.  The Board initially alleged that Belle was violating the state’s cosmetology laws, but withdrew its complaint after Belle formally contested the Board’s allegations.  The Board’s decision to withdraw its complaint was covered widely in local, state, and national media, including Forbes, Yahoo, Reason, the Nashville Business Journal, the Memphis Commercial Appeal, and the Daily Signal, among others.

“With the passing of this bill, Tennesseans will now have the right to enjoy concierge cosmetology services just like many other Americans,” said Armand Lauzon, CEO of Belle.  “Beyond that, it grants tens of thousands of cosmetologists access to the American dream by legalizing entrepreneurship in the industry. The General Assembly should be very proud of this needed reform.”

“Passage of this bill represents another step in our state to remove barriers that interfere with Tennesseans achieving the American Dream,” added Senator Dickerson.

The reform passed unanimously in the Tennessee State Senate, and it succeeded by a margin of 81-6 in the Tennessee House. Along with the bill’s sponsors, Tennessee House Speaker Beth Harwell, R-Nashville, was instrumental in its passage.  “I was proud to support this legislation repealing a burdensome regulation. Entrepreneurs across the state will now be able to provide convenient services to Tennesseans, and create prosperity for themselves and their families,” said Speaker Harwell.

“In 2016, the Tennessee Board of Cosmetology unlawfully attempted to shut down one of Nashville’s most exciting new tech companies for the sole purpose of protecting an outdated industry competitor from competition,” said Daniel Horwitz, Belle’s attorney and lobbyist.  “This important reform ensures that the Board of Cosmetology will be prevented from engaging in such lawless behavior ever again.”

Rod Williams' comment: Congratulation to Daniel Horwitz, Belle, and all those involved in this fight. It is worth keeping in mind that often the biggest enemy of free enterprise are not socialist but those engaged in commerce who want to use the power of government to protect themselves from competition. The way the Belle service works is like this. If, for example, a women is preparing for a wedding or some special occasion and wants a make-up artist to come to her home and make her beautiful, she could use the Belle app to connect to a make-up artist. Much the way Airbnb or Uber works, Belle simply connects the person wanting the service with those wanting to provide the service. Licensed cosmetologist complained and the Board of Cosmetology tried to put Belle out of business.

Top Stories

Drop the Shampoo and Step Away From the Hair

Justin Owen

BY JUSTIN OWEN, The Beacon Center - In the spring of 2014, a Memphis beauty salon got busy, and the shop owner asked one of the manicurists to help wash a few ladies’ hair to help them catch up. As she swirled the shampoo into one customer’s scalp, in walked a government agent who caught her red-handed breaking the law. How on earth was she breaking the law, you ask? She had the audacity to shampoo someone’s hair without a government license.

The poor manicurist was fined $1,000 for the heinous act of cleansing heads without being licensed as a “shampoo technician.” Yes, in Tennessee, you must first obtain government’s permission before washing hair. And you have to obtain a license to do 110 other jobs as well.

Occupational licensing is out of control. As if requiring government approval to practice a trade wasn’t bad enough, most licensing schemes come with expensive entry fees, unnecessary tests, and sometimes even schooling. Of course, this makes sense for doctors and lawyers, but these rules even apply to you if you want to be a makeup artist, locksmith, massage therapist, or “milk sampler” (whatever that is).

The cost of getting a job

Many occupations that necessitate a license are considered low- or moderate-income jobs. Tennessee requires a license for 53 such occupations, more than 41 other states. The average cost to obtain a license for these jobs is $218, with more than seven months of training in advance.

Makeup artists, for example, must spend $190, spend 175 days in school, and take two exams before picking up the eyeliner. Shampoo technicians must spend 70 days in the classroom (amounting to about $3,000 in tuition costs), take two exams, and fork over $140 for a license. For many Tennesseans seeking to enter these fields, licensing schemes put these jobs out of reach.

All this for what?

Proponents of licensing laws claim they are necessary to protect consumers. Yet, the vast majority of licensed trades have absolutely no relation to health, safety, and welfare. For example, according to the Institute for Justice, “the average cosmetologist spends 372 days in training; the average EMT only 33.” You read that right. It takes 10 times longer to be approved to cut hair than to save someone’s life.

Most licensing laws harm consumers by driving up prices and limiting their choices. That’s why these laws are often proposed and lobbied for by those already in a given occupation. They are a great way to use the heavy hand of government to limit oneself from competition.

The solution

Rather than impose costly and harmful licensing laws on Tennesseans just seeking to earn an honest living, we should reward them for wanting to work hard and provide for their family. That’s what the Right to Earn a Living Act would do, slated to be heard in the legislature this week. The bill would require a review of all existing licensing schemes, make it harder to enact new ones, and give those harmed by licensing laws the opportunity to challenge their necessity. For Tennesseans like the manicurist who is $1,000 poorer because she touched someone’s hair, the Right to Earn a Living Act is long overdue.

My Comment: I am pleased to see this initiative.  I am not one who thinks just anyone should be allowed to claim to be a doctor or a lawyer. I want my doctor and attorney to be licensed.  Maybe even the beautician who deals with harsh chemicals should be licensed; but, the girl who washes your hair? The purpose of many license seems to serve no other purpose than to protect those who are already in the business from competition. I think there should be a top-to-bottom review of every professional license issued by the state. There should be hearing and a determination of these three things: (1) Is this license justified, (2) if it is, is the amount of educations required appropriate or excessive, and (3) if someone is licensed in another state should we honor that license. I also think that every license program of the state should have a sunset provision and be reevaluated every so often to see if the license is still appropriate.

Back in 1980 when I was elected to serve in the Metro Council, one of the first issues with which I was confronted was a bill to repeal the licensing requirement for movie theater projectionist. I know 1980 seems like a long time ago, but even by 1980 multiplex cinemas was the norm and a "projectionist" job was to insert the videotape cassette into the machine.  Yet, Metro had a requirement that each theater screen have a projectionist. At one time I assume being a projectionist was a skilled job and there was a risk of fire associated with running a movie projector. Times changed and yet the unions heavily lobbied the Council to try and stop the Council from repealing the law that required a licensed projectionist operate each movie projector. The Council did repeal that requirement but it was not unanimous.

Professional license has less to do with protecting the public than it does protecting those already in the field from competition. We have some current ridiculous examples of unnecessary license requirements. We have immigrants from African countries who do traditional African hair weaving, but in Tennessee they are breaking the law if they do that without a license.

Top Stories

Will Nashville allow transportation innovation? Ride app service Uber wants to enter Nashville Market.

Uber is a service that operates in several American cities and cities in foreign countries that uses a smartphone app to connect providers of transportation with customers. As it stands now, they cannot operate in Nashville.

Nashville is one of the most restrictive, anti-free market, anti-transportation innovation cites in the world. Paris, San Fransisco and New York City are more pro-free enterprise than Nashville.  Nashville's view of transportation regulation seems to be to protect the luxury limo companies from competition and to protect existing taxi companies from competition and the public be damned. While most cities have a maximum fare that limousines can charge, Nashville is only one of seven cities in America that have a minimum fee that can be charged.

In today's Tennessee Michael case writes, "A controversial Metro ordinance requiring a $45 minimum fee for rides in vehicles for hire has kept San Francisco-based Uber, which has become a fixture in big cities ranging from New York to Charlotte, N.C., out of Music City."

With the opening of the humongous Music City Center however, Nashville's powerful may be realizing that their anti-competitive and anti-innovation policies cannot provide the services necessary to meet the needs of conventioneers. The new convention center is expected to host a 5000-plus people convention about every eleven days. These people will need a lot more transportation than is currently available. Also, many of these people will be from other cities that have Uber or similar services or they will have done business or attended conventions in cites with these type services. They will be dismayed to find that these services are not available in Nashville. For all of our new "it" city luster. we will still leave an impression that we are a backwater Podunk.

Cass writes, "Paul Kuhn, a retired investment adviser in Nashville, swears by the simplicity and security of Uber, which he has used frequently in Chicago, New York, San Francisco and Paris." People like Paul Kuhn are going to want that service in Nashville.

It looks like Mayor Dean is on board with changing the law to welcome Uber. Ouoted in the story is Dean spokeswoman Bonna Johnson: 

It’s important that Nashville offers the most up-to-date transit options as the city becomes an even greater destination for businesses, conventions and tourist travelers and to improve services to residents. In most major cities, the marketplace offers consumers an array of convenient choices, and Mayor Dean is well aware that there is interest from both consumers and transportation suppliers in having a variety of alternatives available in our city.

How did we get in this position of being one of the most protectionist, anti-market cities in America? In Nashville about 2007 or so, an innovative service appeared that offered a service that was somewhat of a hybrid between a taxi and a limousine. The vehicles were usually black sedans, driven by neat uniformed drivers. The cars were luxury and clean without being  ostentatious and they were cheaper than a limo and much nicer than a taxi. These black sedans were cutting into the business of the established luxury limousine companies.

In June 2010 the Nashville Metropolitan City Council passed legislation raising the city's minimum fee for limo and sedan rentals, bumping it from $25 to $45. Drivers were prohibited by law from charging less. Other new regulations forbid limo companies from using leased vehicles, required cars to be dispatched only from the place of business, compelled companies to wait 15 minutes before picking up a client, permitted only one customer per hour, banned parking in front of hotels and bars to wait for customers, required companies to replace all sedans and SUVs over seven-years-old and all limos 10-years-old and older and prohibited vehicles older than five years from entering into service.

Like most bills before the Metro Council, this one passed unanimously. Even the council members who we think of as conservative, like Robert Duvall and Duane Dominy and a handful of other "conservatives" supported the bill. Since then however, Robert Duvall has redeemed himself by advocating for repeal.

There were a couple attempts to repeal the price fixing bill but they failed. The most recent attempt was in January 2012 and was led by Council Member Davette Blalock. That bill was deferred indefinitely when a pre-vote head count revealed their was not enough votes to pass it. Many of those who had previously voted for the price-fixing bill were prepared to support the repeal but there not enough votes to pass it.  Again, it was disappointing to see who some of those were who lined up against it. One of the lead opponents was Councilman Charlie Tygert who is considered a conservative on the Council.

This story of Metro's struggle to squash competition and protect the well-connected has had many chapters, including transportation inspectors impersonating police officers to harass "black sedan" drivers, a court case where the Institute for Justice took on the city but lost,  champions for civil rights and immigrant rights joining with advocates of free markets and small government to advocate for greater competition, and denunciation of Nashville's policy by commentator such as George Will and John Stossel.

Now with Dean on board, apparently, and with the Chamber of Commerce realizing we need more transportation and transportation options, maybe Nashville can stop being one of the most protectionist, anti-free market cities in America. If the council won't oppose price fixing on principle because it the right thing to do, maybe they will do it because Mayor Dean and the powerful realize it is hurting the city and we need markets. Maybe.

For background on Nashville's anti-competitive legislation and price-fixing policies,  follow this link: Limo price fixing.

Top Stories

The TLC should do more: lift the industry's artificial permit cap

City approves more taxis for Nashville

by Joey Garrison, The Tennessean, Jan 31, 2013 - ...A Metro commission that regulates the city’s cab industry voted to increase Nashville’s taxi fleet by 17 percent Thursday after authorizing the formation of three new taxi companies, including one launched by Somali-American immigrants, which will become Nashville’s second driver-owned taxi business.
....
TENN-CAB will join Volunteer Taxi, an Ethiopian-led company — approved in August — as Nashville’s lone driver-owned companies. The commission Thursday agreed to allow Volunteer Taxi to operate 15 more vehicles on top of the 30 it has today. It denied additional permits ..... (Read more)

Commentary by Daniel Horwitz

The TLC should lift the industry's artificial permit cap

Daniel Horwitz

I've attended almost every single TLC hearing since November of 2010, and today was the first time that I can recall the Commissioners contemplating what I consider to be the proper result on this matter: granting all qualified taxi companies whatever number of permits they request, and then letting the market work itself out to determine who wins and who loses.  

If you take them at their word, the TLC Commissioners have thus far been unwilling to lift the artificial cap on taxi permits because they fear that doing so will effectively dilute the profits of Nashville's existing taxicab drivers.  Since our city's cab drivers are among the lowest paid workers in the entire United States, the thinking goes, reducing their income even further would be extremely undesirable.  

 

What the Commission has consistently failed to understand, of course, is the fact that opening up the market and maximizing competition in the taxi industry would actually increase drivers' profits dramatically, since doing so would force companies to compete with one another on the price of "licks" and driver benefits.  (Licks, for those who aren't familiar with the quirks of the industry, are the weekly lease payments that taxi drivers have to pay their parent companies in exchange for access to a taxi permit.)  Since licks represent drivers' single largest business expense by far, the effect that a free market would have on the average cab driver's bottom line would be extraordinary.  

Due to the absence of free competition in the taxi industry, Taxi USA owner Michael Solomon, for example, is able to force his drivers to pay him $225 per week (almost $12,000/year) for the mere privilege of being able to drive a taxi in Nashville.  In exchange for this borderline usurious fee, however, the drivers themselves get almost nothing, as they still have to pick up the full costs of car ownership, car maintenance, gasoline and other expenses themselves.  In contrast, Volunteer Taxi -- the new driver-owned taxi coop approved last August -- is currently able to charge its members just $130 per week in lick fees despite the huge upfront costs that the company has incurred as a result of having to hire new management staff, set up a dispatch service, and repaint and reequip its cars.  Notably, Volunteer Taxi's lick price also comes with an employee benefits package, which unscrupulous companies like Taxi USA would never offer their drivers under any circumstances.  

To be clear, the one and only reason why Volunteer Taxi's drivers are comparatively well-off today is that they own their own taxi permits.  As noted above, however, the total number of taxi permits allowed in Nashville has been and continues to be artificially restricted by the Transportation Licensing Commission, so most drivers aren't so lucky.  If this artificial permit cap were set aside, however, the benefit of a greatly reduced lick price would immediately accrue to all of Nashville's taxi drivers, with some estimating that the average lick price would fall between 50% and 80% industry-wide overnight.  Though opposed by some due to the moderate increase in competition for customers that would also result from opening the industry, this is probably the single best thing that could happen to Nashville's cab drivers other than seeing the IRS and Department of Labor crack down on companies like Taxi USA for improperly designating its employees as independent contractors in an effort to avoid paying FICA taxes and provide health insurance, minimum wage and overtime benefits.  

Finally, left completely out of the discussion so far (and appropriately so, since the TLC never appears to care about us) is the effect that an open taxi industry would have on consumers, who would immediately be able to enjoy more cabs on the streets, improved competition with respect to quality of service, and potentially even reduced prices.  Indeed, this alone is all the justification that the TLC should need to lift the industry's artificial permit cap forever (something which, as I've argued repeatedly, is actually constitutionally compelled by Article I Section 8 of the Constitution of Tennessee pursuant to cases like this one).  A recent $172,810 study commissioned by Mayor Dean that concluded that taxi service in Nashville was God-awful obviously wasn't considered compelling enough, but perhaps if Nashville had a DUI problem, somebody in the Metro Council or the Mayor's Office might be motivated to care about the fact that it's legitimately impossible to hail a cab downtown every Saturday night.  I won't hold my breath, though, and expect that I'll have to express my frustration at the ballot box instead.  

Top Stories

Institute for Justice wins Hairbraider’s Constitutional Rights case in Utah

In a major victory for economic liberty, a federal court ruled this week that Utah’s requirement that hairbraiders have a government-issued cosmetology license is unconstitutional.  Along with the Institute for Justice and local counsel. Jestina Clayton filed suit to fight the state’s anti-competitive cosmetology regulations and won. The above video tells her story.

The Institute for Justice is the organization representing the Nashville limo owners who are suing metro seeking to overturn Metro's limousine price-fixing bill. Until June 2010, limousine service was largely unregulated in Nashville and limo's were a luxury service. However, a new service appeared on the scene a few years earlier which was not a taxi but was a service cheaper than a limo. This new service did not use the stretch limousine vehicle but used black sedans.

This service was started by Ali Bokhari, who emigrated from Pakistan in 2000, and ended up in Nashville.  He saw an opportunity for a new kind of livery service and he developed a successful business model. From starting with one car, his business has grown to a fleet of 20 cars plus 15 independent owner-operators who work for him. Seeing his success, others started providing the same service. This new type of service was popular. Instead of paying $45 or more for a limo to take one from the airport to a downtown hotel, this new service only charged $25. Also, a lot of clients preferred the less ostentatious black sedan over the stretch limousine.

There was problem however.  The big well-connected limo companies were losing customers to the sedan companies so they went to Metro Council and got a bill passed that essentially would put the sedan companies out of business and make them operate like traditional limo companies. The regulation they drafted established a minimum $45 fee for a limo ride.  The Metro Council passed their anti-competitive bill in June 2010 and no one in the Council, not even the self-identified constitution-loving, free-market advocating conservatives, opposed the bill.

In addition to the new minimum fare requirement, the new law did a lot of other things designed to restrict the ability of the sedan companies to provide the service they were providing. The new law did such things as permit only one fare per hour; require a central dispatch office, which has the effect of prohibiting clients from directly contacted the driver by cell phone and thus prohibiting the single-car, owner-operator; established discriminatory vehicle age and mileage requirements on sedans which are more restrictive than those on the limo body type vehicle; and more. These regulation had nothing to do with health and safety but were designed for no other purpose than to squash the competition.

In April 2011, Metro Livery and two other economy limo companies filed a federal lawsuit challenging the constitutionality of the new regulation and the minimum fee. The Institute for Justice, a libertarian public interest law firm represented the livery companies. Metro sued to dismiss the law suit and that law suit failed. 

On January 20^th, 2012 the motion to dismiss was heard in the U.S. District Court for the Middle District of Tennessee and the court denied the motion. That ruling emphasized that “Courts have repeatedly recognized that protecting a discrete interest group from economic competition is not a legitimate governmental purpose,” quoting Craigmiles v. Giles, a 2002 case that the Institute for Justice won on behalf of some casket retailers in Tennessee. The casket retailers in that case were being locked out of the marketplace by a group of well-connected companies. The casket retailers won their case.  In dismissing Metro’s motion to dismiss the Metro Livery case, the court recognized precedent in holding that legislating for no other purpose than protecting industry insiders is illegitimate.

 
Any day now, the court may rule on Nashville's limo price fixing bill. Let us hope economic liberty prevails again. 

Top Stories

Taxi Licensing Commission still dysfunctional and unconcerned

by Daniel Horwitz

The Metro Taxi Licensing Commission met Thursday and here are a few interesting things that occurred that the Commissioners could not have appeared to care less about:

Cab Companies Continued to whine about competition

Notwithstanding the existing cab companies' repeated assurances that no new cab companies are necessary because they are already providing exceptional customer service to the people of Nashville, the RPM taxi report very explicitly and quite scathingly concluded that "[n]o company was exempt from poor service— there were multiple instances of poor service on rides from all of the companies" (p. 3-24).  Additionally, given that RPM's secret shoppers also concluded that "United Cab’s arrival time also appeared to be longer than the other taxi companies," that "United Cab drivers were more often found to be either refusing credit cards or very reluctant to accept them," and that United Cab's atrocious customer service was the "most egregious of all" because its drivers "would appear to be routinely overcharging their unsuspecting customers" (p. 3-24), today's comments from the United Cab executive who cried that the closed industry was being unfairly crucified by the media were particularly entertaining.  

Cab company owners can continue to whine about the extreme unfairness of having some potential competition in Nashville's taxi industry, but for years now they've enjoyed all the profit without doing any of the work.  As I've previously noted in great detail, the only people who do any work or take any risks at all are the drivers themselves.  

Cab company owners continue to lie about their "fleets"

There is really no other way to say this, but when cab company owners like Taxi USA's Michael Solomon and Checker Cab's Mulugeta Abebe make grand promises about their "fleets" of taxis, they are lying.  These owners don't actually own any cabs.  They merely own the permits that give people the lawful ability to drive cabs, and they sublease these permits to actual cab drivers for between $150 and $205 per week (p. 1-4).  In sum, the five current "cab companies" in Nashville (which, it should be noted, actually describe themselves as "franchising companies") are outrageously profitable but completely unnecessary middle men who provide absolutely no goods or services whatsoever to the community.  

If we're going to be dealing with facts, there are 585 total permitted cabs in Nashville, and the RPM transportation consultants clearly stated that "virtually all of the regular taxicabs are owned by the taxi drivers" (p. 3-1)-- leaving very little room left for any of the current cab company owners' aforementioned "fleets."  Perhaps notably, the study also found that Taxi USA-- Nashville's biggest cab company by far with 205 taxi permits (p. 3-1)-- has only "one company-owned sedan" (p. 3-3).  

MTLC continues to defer new cab permits

The Volunteer Taxi drivers first submitted their permit application in November 2011.  At the November 2011 hearing, the TLC deferred its decision on their application to December 2011.  At the December 2011 hearing, the TLC then placed two future conditions on the granting of Volunteer Taxi's permits, and deferred a final decision until June 2012.  At the June 2012 hearing, the TLC then deferred its decision until today, July 26th.  Today, after wasting hundreds of people's time for about three hours, the TLC again decided to defer a final decision until August, citing their own failure to provide adequate public notice for today's hearing.  

I'm generally very supportive of public servants who volunteer their time for the good of the community, and I don't want to allege bad faith without any specific basis for believing that there's something illicit going on behind the scenes, but this is beyond ridiculous.  Either do the job, or step aside and let someone else do it.  

Daniel Horwitz is a third year law student at Vanderbilt University Law School, where he is the Vice President of Law Students for Social Justice.  He can be contacted at daniel.a.horwitz@vanderbilt.edu. 

Top Stories

The indefensible public policy of shielding big taxi companies from competition

by Daniel Horwitz

Daniel Horwitz

The 149-page final report on “Taxicab and Other Passenger Vehicles for Hire in Nashville” released by the Mayor’s office yesterday has several important implications for the future of Nashville’s transportation industry, only a few of which have been picked up by local news outlets.   

Though I was among the first to question the value of Metro’s $172,810 expenditure on this study, let me also be the first to say that the fact-finding done by RPM Transportation Consultants appears to be exceptional, and that this alone may have been worth the price of admission.  Now that the underlying facts of the industry are no longer in dispute, we can finally shift the conversation to the indefensible public policy components of the current transportation licensing system, and can hold Metro legislators accountable if and when they refuse to reform it. 

The consultants’ final report includes a great many findings about both the taxi industry and the livery industry in Nashville, which I will address in turn.  With respect to the market for taxi services, the most important facts are as follows:

1)   The Transportation Licensing Commission has currently capped the number of taxi permits allowed in Nashville at 585, all of which are owned by one of five private taxi companies.

2)    In order to be able to drive a cab in Nashville, all taxi drivers must pay one of these private taxi companies a weekly fee (known as a “lick”) which ranges from $150/week to $205/week.

3)   Taxi drivers independently own or lease every single cab in Nashville.

4)   Taxi drivers themselves bear all the costs of insurance, gasoline, vehicle maintenance, and credit card processing, and also pay out of pocket for the FBI background check, driver training class, driving test, physical, and eye exam annually required by Metro.

5)    Each of Nashville’s five private taxi companies has designated its drivers as “independent contractors,” meaning that these companies do not have to provide employee benefits like health insurance or workers’ compensation, and also do not have to comply with minimum wage requirements. 

If this doesn't immediately strike you as outrageous, allow me to explain why, as both a consumer of taxi services and someone who cares very deeply about fair working conditions, Nashville’s current taxi licensing system has my blood boiling.  Take, for example, the business model of Taxi USA— Nashville’s largest cab company and the lucky owner of 205 of Nashville’s 585 taxi permits (over 35%).  “Developed in 2006 by two well known taxi industry owners and investors,” according to the consultants’ report, Taxi USA makes money by subleasing each of its 205 taxi permits to individual cab drivers at a rate of $205 per week.  Since most drivers work about 50 weeks each year, Taxi USA’s annual revenues amount to somewhere around $2.1 million annually. 

What operating expenses does Taxi USA have to offset these revenues?  Well, the company doesn't have to purchase any taxis— those are all owned or leased by the drivers themselves.  It also doesn't have to pay for insurance, gasoline, vehicle maintenance, or any other driving-related expenditures— cabbies bear those costs in full as well.  Additionally, rather than having to meet payroll and pay its employees a salary like a normal business, Taxi USA actually gets to charge its employees for the privilege of being able to work (which has got to be the most unbelievable legal scam I’ve ever heard of).  

 Finally, by designating its employees as mere “independent contractors,” Taxi USA’s owners also get to take advantage of a legal loophole that allows them to avoid having to provide employee benefits, and can fire workers who attempt to unionize.  With a system like this, it’s really no wonder that the secret shoppers commissioned by the Metro consultants found that “[n]o company was exempt from poor service.”  Taxi drivers in Nashville are affiliated with their parent companies only on paper, and as such, they have absolutely no incentive to care about the name painted on the side of their cabs.  Notably, unless Volunteer Taxi (Nashville’s first driver-owned and driver-operated taxi company) is granted the 61 permits it has requested on July 26th, the poor quality of taxi service in Nashville is unlikely to change anytime soon.

How exactly do Taxi USA and the other four taxi companies in Nashville get away with a scheme that allows them to generate millions in revenue with almost no operating expenses?  The short answer is that all of Nashville’s 585 taxi permits are owned by one of these five taxi companies, and the TLC has completely shielded these companies from competition by refusing to lift the artificial permit cap.  In terms of actual transportation services, though, 100% of the benefits to the Nashville community are provided by the “independently contracting” drivers themselves— not the “taxi” companies (which actually describe themselves as “franchising” companies anyway). 

Notwithstanding the fact that Michael Solomon, executive Vice President of Taxi USA, has publicly whined that running a taxi franchising company in Nashville is “a challenge” and that “everybody thinks it’s easy,” best I can tell, the job of taxi company management is merely to show up to work once a week, collect money from the drivers, and go home. 

In sum, by artificially restricting the number of taxi permits allowed in Nashville and thereby preventing anyone else from being able to compete, the Transportation Licensing Commission has created five outrageously profitable but completely unnecessary middle men who provide no goods or services whatsoever to the people of Nashville.  (For anyone who cares, this nonsensical system is quite similar to the former version of our Federal student loan program, interestingly enough.) 

Practically speaking, Nashville’s cab drivers are currently paying the equivalent of a $10,000 annual tax for the mere privilege of being able to drive a cab in this city, yet instead of going into Metro’s general fund, this tax is both levied and collected by the owners of the city’s private taxi companies.  Strange as it seems, this is precisely why the Metro consultants found that so many cab drivers actually oppose a fare increase (despite making only about $2.40 per hour after expenses, according to a 2008 preliminary report to the TLC).  If fare prices were to go up, the drivers complained, companies like Taxi USA would simply raise the weekly “lick” (tax) they have to pay, and the drivers themselves wouldn’t see so much as an extra dime.   

The solution to this problem is simple.  Similar to Tennessee’s “shall issue” system for everything from bartender certification licenses to attorneys’ licenses to gun carry permits, anyone who takes the necessary classes and meets Metro’s stated requirements for being able to drive a taxi should be given a taxi permit.  More specifically, anyone who wants to drive a cab in Nashville should be permitted to do so provided that he or she: 1) passes the aforementioned FBI background check, driver training class, driving test, physical, and eye exam required by Metro; and 2) complies with Metro’s maximum fare price and quality control ordinances.   

The notion that the Transportation Licensing Commission can use its power to protect Nashville’s existing taxi oligopoly (cartel) by continually refusing to grant permits to would-be competitors like Volunteer Taxi is absurd, and quite frankly, the Tennessee Supreme Court held that this kind of behavior “clearly violates Article I, Section 8 of the Constitution of Tennessee” all the way back in 1956.  Personally, I don’t blame the Mayor’s Office for this mess at all; to the contrary, in fact, Mayor Dean has gone out of his way to understand the awful working conditions faced by Nashville’s taxi drivers, even though the TLC makes up less than .2% of the overall Metro budget.  But if your Metro Councilman is among those local legislators who oppose free market competition in the taxi industry, you really need to consider voting that person out of office in the next election.

With respect to the livery industry, the consultants’ findings were shorter but no less dire.  (For those who are unfamiliar with either the content or the lobbyist-motivated origin of the Metro livery regulations enacted last year— which require, among other things, that limo companies charge their customers more and wait longer to pick them up— a complete summary can be found here.)  Most importantly, the consultants concluded both that: (1) “there is considerable interest in being able to offer a lower cost sedan service at $25.00, if it is legal,” and (2) “the structure for regulating [sedan] service is reasonable, as is the $45 minimum fare which provides a sufficient ‘differentiator’ between taxi service and [sedan] service.” 

Even for those who are completely unfamiliar with the state of the livery industry in Nashville, there is no need to detail what makes this latter conclusion so stupid.  If there is consumer demand for a service, Metro’s role is not to make the provision of that service illegal.  If I want to take a limo ride for $25, and if the limo company wants to charge me $25 for that ride instead of $45, there isn’t a reason in the world why we should be legally prohibited from entering into that transaction.   

Metro also has no business whatsoever favoring the taxi industry over the livery industry, and given the blind eye that the Metro government has repeatedly turned to the plight of Nashville’s taxi drivers, the notion that these regulations were actually intended to protect taxi drivers is highly disingenuous at best.  At the very least, the attorneys over at the Institute for Justice (who have sued the TLC for “impos[ing] a host of arbitrary and irrational regulations on limousine and sedan services in an unconstitutional effort to eliminate competition in the transportation market and benefit a small group of industry insiders”) can be grateful that Metro’s consultants agreed that the purpose of the recent livery regulations was pure and unfettered economic protectionism, and that these regulations had nothing at all to do with public safety.  And just like the broken taxi licensing system, this mandatory price-fixing scheme similarly justifies voting out your Metro Councilman if he or she refuses to repeal it.  Price-fixing is not the government’s role, and legislators should be punished for sacrificing basic principles like this in order to appease the influential Tennessee livery lobby TennLA.

A former Professor of mine once observed that powerful business interests often follow the strategy “if you can’t beat the competition, make the competition illegal.”  That observation could not be any more true than it is here in Nashville’s transportation market, where entrenched local interests have, to this point, successfully fought tooth and nail to prevent free and fair market competition in the taxi and livery industries.  Without question, the only beneficiaries of the policies that have recently been promulgated by the TLC are the owners of Nashville’s pre-existing cab companies and Nashville’s most expensive limousine companies, whose interests have been steadfastly protected by the Metro government at the expense of both consumers and workers alike.  For obvious reasons, this is completely unacceptable. 

Taxi and limo drivers themselves, many of whom are refugees who proudly accepted American citizenship after arriving here, often lament that they are being denied a fair shot at achieving the American dream.  They are correct.  The right to work and to be free from economic protectionism can be seen as early as the 41st provision of  The Magna Carta of 1215, it was famously reinforced under English law in the landmark “Case of Monopolies” Darcy v .Allen in 1599, and the “sacred right of labor” implicit in the U.S. Constitution itself was referenced by members of our Supreme Court as early as 1872.  

 Whether people who want to earn an honest living should be prohibited from working through intentionally burdensome local regulations is not, and never will be, a partisan issue.  (And just for the record, I’m a Democrat.)  No matter what your political affiliation, we can all agree that these atrocious policies need to end.  If they aren’t repealed soon, the legislators who are responsible for maintaining them need to be replaced.  It’s that simple. 

Daniel Horwitz is a third year law student at Vanderbilt University Law School, where he is the Vice President of Law Students for Social Justice.  He can be contacted at daniel.a.horwitz@vanderbilt.edu.

Top Stories

Volunteer Cab "wins" approval, but may lose by delays. Update 2

Yesterday the Metro Transportation Licensing Commission approved an application from a group of taxi drivers wishing to start there own cab company called Volunteer Cab. However, the approval is contingent on a budget increase to fund more taxi cab inspectors. (link)

What? Would we prohibit new restaurants from opening because we do not have enough restaurant inspectors?  Would we prohibit new home construction because we do not have enough building inspectors. Would we prohibit the licensing of more vehicles because we do not have enough traffic cops? Would we prohibit the opening of new florist shops because we don't have enough florist shop inspectors? I think not.

Karen Johnson

Council Member Karen Johnson who has been a strong advocate for Volunteer Cab arguing for their right to start a new cab company said, "We are working on some things to address this.  Our preference is that they don't have to wait until this time.  We are working with Jerry Maynard to see what other options we have." 

I hope there are other options.  The next Metro Budget is not until June 1. According to the expanded version of this story in the print version of the Tennessean, the cab drivers are currently working for other cab companies and they fear retribution from their current employers due to this effort to start their own cab company. A delay could mean they are all out of work and financially ruined by the time they get final approval to go in business for this new driver-owned cab company. In Nashville most cab drivers own their own cab and pay all of their own expenses but pay a "lick" of between between $150 to $200 a week to the company they are associated with. If a cabbie is fired, his payments on his vehicle and some other expenses continue.

This delay is an injustice. There needs to be major reform of the way taxi cabs and limousines are licensed and regulated. It should not be the mission of the regulatory agencies to protect established businesses from competition.


Update: The City Paper does a much better job of reporting this story than the Tennessean, read here.
Update 2: For a more in-depth report from the Tennessean, see here.

Top Stories

Nashville Limo Price-fixing : Bokhari v. Nashville Press Conference

"These regulations were written by the city's most expensive limousine companies for the city's most expensive limousine companies."

"They were designed to put the affordable competition out of business."

"Customers, not government, should pick winners and losers in the transportation industry."

"This case is a sad example of the city using public power for private gain."

"I came in this county because it is the land of opportunity and freedom. All I need is to be left alone to pursue my American dream."

"There is a bourgeois elite in the limo business that believe that only the very rich should be able to afford limousine service."

Top Stories