Category Archives: Regulation of the Day

When you sit down at a Mediterranean restaurant, your server will typically set down some bread on the table, then pour some olive oil into a saucer or small bowl for dipping. Many restaurants also keep small jugs of olive oil as part of their table setting for general use. It’s a delicious way to begin a meal.

New European Union regulations are set to change this centuries-long practice. Starting January 1, 2014, any olive oil served at table “must be in pre-packaged, factory bottles with a tamper-proof dispensing nozzle and labelling in line with tight EU standards.” That means no more saucers of oil for dipping, and no more refillable jugs at the table.

Most complaints about the rule have been directed at the EU’s micromanagemerial tendencies, and there is certainly something to it. But there is also a public choice angle that’s worth looking at.

Many restaurants buy their olive oil from small family farms that aren’t able to comply with the new labeling and sealing standards. Restaurants buy from them because many diners prefer their olive oil to the more homogenous product put out by larger firms. These larger firms are also precisely the people who will benefit from the new rules. A public choice theorist would point out that the big producers very likely had something to do with pushing for their passage, and their added business comes at the expense of smaller farms – and consumers’ palettes.

This kind of rent-seeking behavior is all too common. And the more regulations there are, the more rent-seeking one sees. These olive oil rules are only the latest example. Most supporters of the rule might be motivated by health and safety, but certain other supporters are more concerned with securing an artificial competitive advantage for themselves.

Nathan Duszynski is 13 years old and lives in Holland, Michigan. His stepfather has multiple sclerosis. His mother has epilepsy. Neither is able to work.

To help out with his family’s expenses, Nathan started mowing lawns and soon saved up the $1,200 or so that he needed to buy a hot dog cart. That way he could make even more money.

The owner of a local sporting goods store was even kind enough to allow Nathan to set up shop in his store’s parking lot. But regulators shut Nathan down ten minutes after opening up shop for the first time. He had yet to sell his first hot dog. Turns out that food carts are illegal in Holland unless they’re connected to a brick-and-mortar restaurant.

Seeing as many cities across the country have unaffiliated food carts and no evidence of consumer harm, there can only be one explanation for Holland’s hot dog cart ban: rent-seeking. Restaurants don’t want to deal with the competition, so they convinced the government to do their dirty work for them.

Because of this rent-seeking, Nathan and his family are now homeless.

Our friends at the Mackinac Center have spoken with the family:

“Nate and I are now in a shelter,” Lynette Johnson said. “Doug can’t stay with us because he takes prescription narcotics to deal with his pain and the shelter does not allow him with those kinds of drugs.”

She said the situation has been stressful on the family. Lynette is afraid to be away from her husband in case she has a seizure.

Nathan has still been working hard. He’s selling hot dogs at private events, which is legal. But according to a local paper, it’s still difficult:

The cart is the only solid income the family can rely on, said Lynette. But the business is in jeopardy due to the family’s financial situation…

The reason, she said, is that each event requires a new health department permit, and the cost varies between West Michigan municipalities. The last event, a private wedding reception on Friday, cost about $200 for the permit.

Coupled with food and supply cost, they barely broke even, she said.

Nathan now has a web site for Nathan’s Hot Dog Hut, where you can make a donation via PayPal. Nathan writes, “If you believe in free enterprise and can help with the costs of my fight with City Hall and the losses we have sustained so far please donate what you can to help us and those others in similar situations by clicking the button below.”

Here’s hoping Nathan wins his fight. Everyone has the right to make an honest living — even if their competitors would rather they didn’t.

A cool startup company called Uber operates in about half a dozen cities in the U.S. and Canada, and is growing fast. Think of them as an on-demand cab service. Using their smartphone application, you request a car, and a few minutes later a professional driver in a black Lincoln Town Car will pick you up where you stand and take you where you need to go. Their system even sends you a text message to let you know when your driver is about to arrive.

Customers who don’t like Town Cars can request an SUV instead. Since Uber keeps your credit card information on file, payment is both cashless and automatic, and you do not tip your driver.

It’s an innovative business model, and customers rave about the service. No wonder the local taxi industry in Washington, D.C. sees Uber as a threat. There are two ways they can deal with it. One is to compete. The other is to use regulation to drive it out of business. Guess which option they chose?

Back in January, a shady sting operation led by Taxi Commissioner Ron Linton nearly put Uber out of business in DC, even though it failed to find any rules violations.

Today, the D.C. City Council was set to vote on an amendment from Councilmember Mary Cheh that would make it illegal for Uber to charge less than five times the minimum cab fare in D.C., currently $15. This would put a stop to UberX, a cheaper service using less flashy cars. UberX is already available in New York, and the company is planning on bringing it to Washington.

The price for Uber X is a $5 base fee, plus $3.25 per mile, so any trip under 3 miles or so would be cheaper than what the rent-seeking amendment would require.

In other words, Cheh would rather her constituents to pay more for transportation instead of less. Even in a city as cynical as Washington, this is difficult to spin as pro-consumer.

After a heartening consumer uproar, Councilmember Mary Cheh withdrew her amendment. Another Councilmember, Jack Evans, said he received more than 5,000 emails encouraging him to oppose the rent-seeking amendment.

It may return as a separate bill in the fall, but for now, Uber has won and the rent-seekers have lost.

There is reason to be optimistic that future rent-seeking attempts will also fail. Most companies become invertebrates when government comes calling, but Uber seems to have a spine. Leading up to the day of the amendment’s scheduled vote, CEO Travis Kalanick said,”We won’t stand for a DC Council price floor that limits innovation and hurts consumers. Uber DC’s minimum fare is now dropped to $12 for the remainder of July in protest.”

That’s the kind of attitude we like to see. D.C.’s taxi industry could learn a lot from Uber. Instead of purchasing corrupt politicians, they should offer a better service at a lower price. That way, everyone wins.