How Unions Exploit Anti-Competitive, Private Interest Law-Making

Occupational licensing laws aren’t the only realm in which government deprives us of the freedom of economic choice simply to serve private interest groups. Consider the United Food and Commercial Workers’ war on non-union grocery stores like Wal-Mart.

In many communities, union supporters persuade local officials to use zoning restrictions to bar the opening of Wal-Mart Supercenters or other stores, often using rhetoric about preserving the “local feeing” of “small towns.” In reality, these laws exist to force you to pay more for groceries, not to advance the public good, but to promote the interests of unions that can’t compete fairly in the labor market. This special-interest legislation, however, is allowed by courts that simply look the other way under the “rational basis” test.

Take, for example, the case of Hernandez v. Hanford. That case didn’t involve grocery stores, but furniture stores, yet the principle is the same. The city allowed furniture sales only in one specific place — thus forcing people to travel farther or pay more for furniture they needed. When one store tried to sell furniture outside this region, the established furniture stores complained(not consumers, mind you, who were happy to have more choices for furniture). The city had actually carved out a special exception in its law for Target, because they didn’t want to lose that store. But other stores were barred from selling furniture, solely to serve the interests of established stores. Still, the California Supreme Court upheld this restriction, writing

language [in some precedents] could be interpreted to suggest that a zoning ordinance is valid only when the ordinance has merely an “indirect impact” on economic competition, and never when the regulation of economic competition is a direct and intended effect of the ordinance…. [This] would be inaccurate…. [M]ore recent decisions have upheld zoning actions even when regulation of economic competition reasonably could be viewed as a direct and intended effect of a challenged zoning action, so long as the primary purpose of the zoning action — that is, its principal and ultimate objective — is to achieve a valid public purpose such as furthering a municipality’s general plan for controlled growth or for localized commercial development, rather than simply to serve an impermissible anticompetitive private purpose such as investing a favored private business with monopoly power or excluding an unpopular company from the community.

What can this realistically mean? If promoting the commercial success of those merchants located in one specific neighborhood (“localized commercial development”) qualifies as a “public” goal, then anything does, because every private interest group is going to claim that giving them special privileges is somehow good for the public.

Given the leniency of the “rational basis” test, courts are systematically incapable of distinguishing private from public interests. In Kelo, the Supreme Court allowed the government to seize property and give it to private developers for their own private use, because this would have some sort of “public” benefit. The Hanford decision adopts basically the same rationale for zoning laws. It allows private interest groups to wield zoning laws to protect themselves from competition or to advance their private interests, at the expense of the consumer and with no realistic connection to protecting the public from harms — all with little meaningful judicial review.

Another interesting example of private interest lawmaking is pending before the California Supreme Court right now. The case of California Grocers Association v. Los Angeles involves a city ordinance that restricts the right of businesses to terminate certain employees. If company A buys grocery store B, company A may not fire grocery store B’s employees for six months. When it enacted this restriction, the city claimed it was a public health measure, designed to ensure that supervisors who know how to handle food would stick around to teach the newbies how to do it. Except that — surprise! — the restriction doesn’t apply to managers. And, of course, the law doesn’t apply to union stores.

As I argued in PLF’s friend of the court brief, this law creates a sort of type of “featherbedding,” only this time it forces non-union employers to retain unnecessary employees, as a way of driving up their costs and decreasing their competitive advantage over union shops. This restriction doesn’t really protect the public, even arguably — it advances the interests of politically influential unions, as represented by a group called “LAANE,” Los Angeles Alliance for a New Economy (presumably, not a free economy).

Cass Sunstein once used the term “naked preferences” to describe “the distribution of resources or opportunities to one group rather than another solely on the ground that those favored have exercised the raw political power to obtain what they want.” When government yields to activists who want to use zoning laws to forbid the opening of Wal-Marts, or health and safety regulations to increase the costs of non-union businesses, it isn’t serving the public interest, as required by the principles of due process of law — it’s acting out of pure political will; out of pure arbitrariness. Yet because courts refuse to treat economic liberty with the same seriousness that they accord other realms of liberty, such abuses continue, and the courts remain silent.

Comments are closed.