Ask the people building Tesla Motors’ new factory near Reno, or practically anyone who works in economic development: Nevada is a business-friendly state.
Steve Saxon, a Sacramento businessman trying to expand across the state line, isn’t buying the idea that Nevada is a wide-open free-market frontier. The owner of Affordable Moving & Storage in south Sacramento has just filed a lawsuit against Nevada over what he claims is a huge barrier to competition.
The suit attempts to overturn the state law that governs how Nevada doles out business licenses for moving companies, limousine services and other transportation-related businesses. Saxon is represented by the Pacific Legal Foundation, an influential Sacramento legal think tank that specializes in conservative causes.
According to the lawsuit, filed last week in U.S. District Court in Las Vegas, the state denies licenses to companies that would pose a competitive threat to existing businesses. The law says licenses won’t be granted to companies that will “unreasonably and adversely affect other carriers.”
Saxon says the law protects “the good old boys” who are already doing business in Nevada.
“It’s basically protecting the ones that are already in place, and preventing new ones from coming in,” Saxon said in an interview at his office in south Sacramento, where he runs a fleet of 10 trucks. “There’s a very few companies in Reno; they’ve got a monopoly.”
The lawsuit comes as Nevada officials are wrestling with a controversy over Uber, the ridesharing company that drew protests from Las Vegas taxi operators and has essentially been kicked out of the state by the courts.
State officials wouldn’t comment on the lawsuit from Sacramento. But they took issue with the claim that Nevada has closed its doors to new competition. The Nevada Transportation Authority, which oversees licensing, has rejected just 11 of the 324 applications it has received since 2009 from limo services, moving companies and other transportation companies.
As for moving companies in particular, the authority received 52 applications, and “not a single application ... was denied,” said spokeswoman Teri Williams of the authority’s parent agency, the Nevada Department of Business & Industry. “The statistics speak for themselves.”
Nevada’s regulation of transportation companies has its roots in the late 1960s, when rival taxi drivers were having physical altercations in Las Vegas and casino executives feared tourists would be frightened off.
The result was a licensing regimen that has been expanded to include moving vans, limos, charter buses and more. But instead of protecting stray tourists, critics say the system is designed to shield existing companies from unwanted competition.
“That approach works for market incumbents,” said Clark Neily, a lawyer with the conservative Institute for Justice in Virginia. In the late 1990s, he went to court in Las Vegas in an unsuccessful attempt to have the system discarded.
In the latest lawsuit, the owners of Affordable Moving have been joined by a Reno limousine service that was denied permission to expand its fleet last summer. Both plaintiffs are being represented for free by the Pacific Legal Foundation, a Sacramento nonprofit that takes on conservative causes in courtrooms around the country.
The foundation has filed similar lawsuits in four other states, and last year won a big court victory overturning Kentucky’s law on licensing moving-van companies.
Timothy Sandefur, principal attorney at the foundation, said approximately two dozen states still have comparable laws on the books. But he said Nevada’s tops them all.
“Nevada’s licensing requirement … is the most anti-competitive licensing law in the nation,” Sandefur said.
If a transportation company seeks a Nevada business license, formally known as a certificate of public convenience and necessity, the case goes before the Transportation Authority. Existing competitors can protest, and the burden of proof is on the applicant to show it won’t harm the established order. The system amounts to a “competitor’s veto,” according to the lawsuit.
The law itself says the goal is “to discourage any practices which would tend to increase or create competition that may be detrimental to the traveling and shipping public or the motor carrier business within this state.”
Sandefur acknowledged the irony behind the lawsuit– a California company complaining about barriers to doing business in Nevada. The state has long been active in poaching businesses from California by touting its low taxes and accommodating regulatory climate. It won the biggest economic-development dogfight in years last September, when it persuaded Palo Alto’s Tesla to build its 6,500-employee, $5 billion battery factory at an industrial park east of Reno. Besides $1.2 billion in tax breaks and other incentives, Nevada also gave the electric-car maker freedom from much of the red tape it would have confronted elsewhere.
None of that is changed by the Pacific Legal Foundation lawsuit, said Joe Vranich, a corporate relocation consultant in Irvine and frequent critic of California’s business climate. Vranich, who runs Spectrum Locations Solutions, said Nevada remains a state with far more pluses than minuses for businesses.
“This would be an aberration,” Vranich said. “There are aberrations within every state. I’m sure I could find something wrong in every state.”
He said the Nevada licensing laws are somewhat comparable to restrictions on the number of taxicab medallions allotted by major cities.
The lawsuit comes as states such as California struggle to devise regulatory schemes for new ridesharing services such as Uber and Lyft.
Uber shut down in Nevada in November, two months after beginning operations, after a Washoe County judge issued a preliminary injunction preventing the service from operating statewide. The San Francisco company, which connects customers with drivers using their personal cars, declined to seek a Nevada business license, arguing that it’s a technology company, not a transportation operator. State authorities impounded more than a dozen cars operated by Uber drivers.
Saxon first ran into the Nevada laws about a decade ago, when he ran a taxi company and was thinking of moving into Reno. Friendly taxi operators in Reno told him not to bother; the state’s laws would keep him out.
A decade later, Saxon, 54, has personal reasons for wanting to expand Affordable Moving to Reno. He plans to hand the business over to his son, who wants to move there. A preliminary look at the regulatory climate showed that little has changed and getting a license would be an uphill battle.
“I feel like we’re in a Third World country here,” Saxon said. “I feel like it’s a dictatorship.”
Call The Bee’s Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.