Regulatory Capture and Prior Restraint in Washington, D.C. as Court Rules Against Tour Guides

photo credit: biblicone
A U.S. District Court judge has ruled against Tania Edwards and Bill Main, owners of the “Segs in the City” tour-by-Segway service in Washington, D.C. With the help of the libertarian Institute for Justice, the pair brought a suit against the D.C. Department of Community and Regulatory Affairs, alleging that occupational licensing requirements hamper free speech–an effort that, for the time being, has failed:

A federal judge handed down a lesson about the U.S. Constitution to tour guides in the nation’s capital Friday, ruling against two “Segway safari” operators who say the District’s licensing rules violated their freedom of speech.

U.S. District Judge Paul L. Friedman of the District declined to suspend Washington’s eight-month-old professional licensing requirement for sight-seeing guides, saying they were unlikely to prevail in further litigation.

Philadelphia in 2009 stopped enforcing its licensing plan after a similar legal challenge, citing a budget shortfall.

In the District, however, Friedman ruled in 27-page opinion, “The Court concludes that the plain reading of the municipal regulations shows that they are directed at plaintiffs’ conduct — not their speech.”

“Clearly, the promotion of a major industry and the protection of the general welfare of society are significant government interests,” Friedman wrote, warranting a history test and criminal check for people who guide or direct sightseers for pay.

Because Edwards and Main lack proper licenses, each could face up to three months in prison.

Tourism is the 2nd largest industry in the nation’s capital, behind government, and licensing regulations are designed to prevent commercial fraud. But despite the money that pours into the city annually as global visitors flock to the area on personal and business travel, the industry is curiously small:

Tourism ranks behind only government as a local industry in D.C. — 15 million visitors spend more than $5 billion a year in the region. The District licenses about 900 tour guides.

So there’s no doubt that, in terms of real dollars, tourism is a major industry–whether or not that should be a significant government interest is a completely separate discussion–but is the general welfare of society really at stake here? That certainly isn’t clear, particularly when word travels fast in this town, and that any tour guide business deliberately committing commercial fraud by lying about D.C.’s history to its consumers would quickly be sniffed out as phony and go out of business. It also isn’t clear to what extent tour guides account for D.C.’s annual tourism income.

Call me crazy, but I just don’t think many people would believe that Paul Bunyan dug the Tidal Basin so his pet the Loch Ness Monster could have a swimming hole near the Jefferson Memorial.

I also don’t think that, as long as the seat of the federal government is in Washington, people will stop coming to the D.C. area anytime soon and spending exorbitant amounts of money on tourism, restaurants, and hotels, just because maybe one or two bad apples give phony tours. It’s certainly not clear that this was ever the case with Edwards, Main, or Segs in the City, and three months in prison for lacking a professional license for something as innocuous as guided tours of a famous city seems like cruel and unusual punishment.

But the economic impacts of fraudulent tour guides–imagined, predicted, or real–aren’t what this case is about. This case is about free speech, and compulsory tour guide licensing exercises prior restraint on people who are just trying to make a living–something you’d think we’d want to make easier during a down economy with unemployment near 10% nationwide.

Institute for Justice staff attorney Robert McNamara explains:

The licensing process is expensive and time-consuming (rife with fees, forms and a written examination), but Bill and Tonia’s chief objection to the licensing program is one of principle: They believe that the government has no role in deciding who may (or may not) speak. Their customers can decide for themselves whether Bill and Tonia are worth listening to.

That is enough for Bill and Tonia’s customers, and that should be—must be—enough for D.C.’s city government as well. As the U.S. Supreme Court has repeatedly made clear, the First Amendment embraces a free marketplace of ideas. D.C.’s attempt to prevent guides like Bill and Tonia from bringing their ideas to market simply cannot stand.

Although IJ is arguing this case under the First Amendment to the Constitution, it is important to keep in mind that this law is just like the countless occupational-licensing requirements that IJ has challenged in the past: a barrier to entrepreneurship that does nothing at all to protect consumers. This case is simply an illustration of the expansiveness of mandatory occupational licensing. There is virtually nothing government thinks you should be able to do without its permission, not even describing things.

But exercising prior restraint isn’t the only problem with D.C.’s tour guide licensing requirement. Like McNamara says, the D.C. Professional Sightseeing Tour Guide Basic Business License application (PDF) requires (among other things) that people:

• Be able to speak, read, and write English (sorry foreigners, you can’t move to D.C. and found a tour business that caters to people who speak to your native language unless you first learn English)
• Take a test
• Have a notary public to certify the application

Application fees are $65.00, and first-time test fees are $200.00. If you fail, subsequent re-examinations are $115.00 apiece. See also the seven pages of regulations with which licensed tour guides must comply, as well as all other related forms. Basically, people recently out of a job looking to become entrepreneurs in D.C.’s tourism market could very quickly find themselves jumping through hoops, cutting through red tape, and even further down on their luck.

And this could very well be by design. Here’s another interesting tidbit from the Washington Post:

Congress acted after Washington Post editors bemoaned the spectacle of the nation’s “citizens, visitors to the Capital, ‘fed up’ on the great mass of misinformation” peddled by “self-styled” tour guides.

So the licensing requirements originated out of anecdotal evidence only that economic harm was coming to the city and her tourism, and WaPo’s editors started grousing about it. One has to wonder to what extent the District’s biggest newspaper vaulted the “issue” to the forefront of government’s business to help small but likely wealthy business owners secure additional commercial rents. I’d be really interested to know what kind of money the Post makes annually off tourism advertising.

In any case, even absent editorial malfeasance, the result is the same: tour guide licenses secure commercial rents for the 900 people operating “above-board” tour guide shops around town, not to mention giving them more price-setting power, and they keep everyone else out. Sadly, not even First Amendment precedent was enough to help Edwards and Main. Hopefully they’ll appeal–in the meantime, I recommend The Right to Earn a Living: Economic Freedom and the Law by Timothy Sandefur. Oh, and check out this video from the folks at the Institute for Justice:

Hat tip: Paul Mazzuca