NFIB

Should Public Corporations be Allowed to Exercise Regulatory Powers?

Date: March 05, 2019

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In an ideal world government would seek to minimize regulatory burdens on small business. Unfortunately, due to political and ideological reasons regulators too often cross the bounds or reason when it comes to business regulation.

That’s exactly what’s happened in Association of American Railroads v. Department of Transportation. At issue is a federal enactment in which Congress conferred power on Amtrak to control regulation of the railroad industry. The question in a nutshell: can Congress authorize a government-run (for-profit) corporation to impose regulation?

Understandably, private sector businesses in the railroad industry were alarmed by this grant of regulatory power because Amtrak is a competitor. And NFIB was alarmed by the precedent this would set if allowed to stand. To be sure, there are other public corporations that compete with private sector businesses in various ways. For that matter, we often hear complaints from small businesses about unfair competition from public entities that are providing goods or services at below market rates—thanks to taxpayer subsidies.

One can only imagine how a public corporation might use regulatory powers to eliminate competition from small business. In fact, our readers may recall that we recently asked the Supreme Court to take up a similar case, where we saw a public corporation using the power of eminent domain anti-competitively to displace competition. And we’ve talked in the past about how this sort of conduct raises serious anti-trust issues at the state and local level. But federal antitrust law does not constrain Congress. Indeed, the only restraint on Congress is the Constitution. So, the question is whether Congress violated the Constitution when it chose to give Amtrak regulatory powers?

In our amicus brief, we argue that the Constitution requires regulation come from a disinterested party, not from someone who stands to benefit financially. Therefore, the Due Process Clause forbids Congress from conferring regulatory powers on a public corporation that is competing with private business. Indeed, one of the oldest and most foundational rules in English and American law is the idea that the law must serve legitimate public ends, not private (self-serving) interests. In other words, the regulator must act like an impartial referee, and cannot be a competitor in the game. Let’s hope the Supreme Court agrees.

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