Posts tagged as:

small business

“… because of the economy of scale they have in managing such compliance issues.” [Coyote, in a letter to the dean of the Harvard Business School taking off on the Edelman case]

{ 1 comment }

Update: while the resulting regulatory costs could sink kitchen-table-based producers, the regulations don’t appear to be new [Reddit, Medical Daily; links and description updated] “Why aren’t underpants a medical device?” [Reddit commenter]

{ 3 comments }

Another hidden gift inside the Affordable Care Act: mandatory calorie labeling for many restaurant menus. Walter Olson comments on the complications and potential unintended consequences of such a mandate.

My new Cato podcast: the new FDA calorie labeling rules apply to not-so-big chains (20 +) of grocery stores and amusement facilities as well as restaurants, and make it less likely that servers and local managers will manage to vary from rigidly standardized recipes, menu listings and portion sizes based on knowledge of their local customers, temporary availability of attractive ingredients, and so forth. That won’t matter much for food servers who already design their offerings in a lab, but spells trouble for those whose offerings are more localized or unpredictable (earlier). Coverage by Ed Morrissey of what the scheme would mean for a 21-unit pizza chain is linked here.

In January, David Boaz commented on the parallel vending machine calorie label mandate:

In my experience, vending machines shuffle their offerings fairly frequently. If the machine operators have to change the calorie information displayed every time they swap potato chips for corn chips, then $2,200 [per operator per year] seems like a conservative estimate of costs. But then, as Hillary Clinton said when it was suggested that her own health care plan would bankrupt small businesses, “I can’t be responsible for every undercapitalized small business in America.”

Happy Thanksgiving!

More: Baylen Linnekin. And Julie Gunlock recalls her own days working in a supermarket deli. Goodbye, making up prepared salads in single-serving containers from whatever produce happened to be in overstock at the time. Hello, food waste!

{ 0 comments }

I’m quoted in this Reason TV segment by Zach Weissmueller on the problem of municipalities that stake their finances on overzealous fee collection:

“When you have towns like those in St. Louis County that get in some cases, 40 percent of their municipal revenue in fines and fees, they have chosen a very expensive way of taxing their population, one that creates maximum hassle and maximum hostility,” says Walter Olson, senior fellow at the Cato Institute and publisher of the blog Overlawyered.

Aside from Ferguson, Mo., the piece uses as examples the notorious Los Angeles suburb of Bell, Calif., exposed in a scandal as being run for the benefit of its managers, and — a smart choice — Detroit, a city with a long-time adversarial stance toward its small businesses and others trying to do everyday business in the town:

…what really grants Detroit this honor is “Operation Compliance,” an initiative pushed by former mayor David Bing aimed at bringing all of Detroit’s small businesses up to code through costly permitting. The initiative launched with the stated goal of shutting down 20 businesses a week.

{ 2 comments }

The panel is packed with big names and many of them offer suggestions with a law or regulation angle, including Philip K. Howard (“Radically Simplify Law”), Derek Khanna (rethink patent and copyright law; related, Ramesh Ponnuru), Morris Kleiner (reform occupational licensure; related, Steven Teles), Arnold Kling (“Sidestep the FCC and the FDA”), Robert Litan (admit more high-skill immigrants and reform employment of teachers; similarly on immigration, Alex Nowrasteh), Adam Thierer (emphasize “permissionless innovation”), and Peter Van Doren (relax zoning so to ease movement of workers to high-wage cities).

{ 1 comment }

An observation from John Goodman via David Henderson:

Almost all government restrictions on our freedom are indirect. They are imposed on us by way of some business. In fact, laws that directly restrict the freedom of the individual are rare and almost always controversial….

But the vast majority of government encroachments on your freedom of action come about through laws that constrain an employer or a seller – without much controversy. …

After proceeding through examples from workplace safety regulation, liquor control, medical device regulation, occupational licensure, and other areas, Goodman adds:

Let’s take one more example from the health care field. The Obama administration is about to impose new regulations affecting home health care workers. They must receive minimum wages and overtime pay. But as far as I can tell, this rule applies only to workers who are employed by agencies and not to workers who are directly hired by an elderly or disabled patient. No matter how they are employed, the economic effects will be the same – a blow to the seniors and people with disabilities. In one case the effects would be visible; in the other they would be invisible. It’s hard to avoid the conclusion that if there were no agencies in home health care, there would be no new regulations.

The growth of the firm may be inevitable, desirable, or both for separate reasons, but it also makes regulation more feasible by generating an entity more suitable for bearing the regulatory harness. Incidentally, is blocking the Obama home health carer overtime regulations a high priority for the incoming Republican Congress, and if not, why not?

{ 0 comments }

Netscape founder Marc Andreessen, quoted in New York magazine “Intelligencer”:

If you have been in an Uber car and gotten pulled over and had the car seized out from under the driver when you were like in the middle of a trip that you were otherwise having a good time on, you might be a little bit radicalized. You might all of a sudden think, Wait a minute, what just happened, and why did it happen? And then you might discover what the taxi companies did over the last 50 years to wire up city governments and all the corruption that’s taken place. And you might say, “Wait a minute.” There’s this myth that government regulation is well intentioned and benign, and implemented properly. That’s the myth. And then when people actually run into this in the real world, they’re, “Oh [...] I didn’t realize.”

One of my favorite things of all time is George McGovern, who ran for president in ’72 as a hyperliberal. Of course Nixon [beat him badly]. And in 1992 he wrote a column for The Wall Street Journal which told the story of his life after he left politics, when he bought an inn in Connecticut. And he said, “Oh my God, I didn’t realize.” And the “Oh my God, I didn’t realize” was: I did not realize what a layered impact 50 or 100 years of regulations and laws applied on small-­business owners actually meant.

{ 1 comment }

If you hire some consenting but unlicensed neighbor for a not-very-big repair or construction job in California, there’s now a greater chance he or she will be headed for jail, no matter how happy you may be with the quality of the work. Gov. Jerry Brown has signed S.B. 315 (text, progress, promotional fact sheet), described by its sponsor, Sen. Ted Lieu (D-Beverly Hills), as a measure “to help curb California’s underground economy.” The measure would step up penalties and enforcement against persons who advertise for, or perform, repair and construction work with a value of $500 or more, counting parts and material as well as labor. (By its terms, the bill appears to apply to someone who offers to do a $500 job for your office that consists of procuring a $400 item and adding $100 for the labor of installing it.) First offenses are subject to six months in jail and a $5,000 fine, and subsequent offenses are treated yet more harshly.

There’s more. The bill, according to its legislative summary, “would additionally require that the enforcement division, when participating in the activities of the Joint Enforcement Strike Force on the Underground Economy, be granted free access to all places of labor,” at least in business locations. (Yes, “all”; you only thought your property was private.) And although the literature on the bill refers repeatedly to the need to curb “cheating” contractors, the penalties apply no matter how satisfied you may be with the contractor’s work.

That’s because protecting customers isn’t actually the point. Such is the political grip of occupational licensure lobbies that the bill passed unanimously in both houses of the California legislature with support from licensed repair and construction contractors. Lieu: “Groups supporting SB 315 are: Contractors State License Board (sponsor); Air Conditioning and Refrigeration Contractors Association; Air Conditioning Sheet Metal Association; American Subcontractors Association, California Inc.; California Chapters of the National Electrical Contractors Association; California Landscape Contractors Association; California Legislative Conference of the Plumbing, Heating and Piping Industry; California Professional Association of Specialty Contractors; United Contractors.”

In short, this is the sort of thing the California legislature does when it wants to think of itself as pro-business: it extends criminal liability for doing business in any other than the authorized way.

More: I’ve got some further thoughts at Cato at Liberty: “The costs of occupational licensure are many. Not least is that it gives established businesses a stake in making government more powerful and invasive.” And am I the only one who interprets the bill as aimed at Craigslist and at sharing-economy interfaces that match odd jobs with persons willing to do them, even if it is not announced as such? More on the law from Steven Greenhut (who was on the story before I was).

{ 5 comments }

Like most courts to consider the issue, the California Supreme Court in a case involving Domino’s Pizza has held that a franchisor generally cannot be held liable for the independently made employment decisions of one of its franchisees. Who would disagree with that commonsense view? Well, the Obama National Labor Relations Board (NLRB), as well as three liberal dissenters on the seven-member California court, who would have left it up to case-by-case jury factual balancing, an arrangement likely to coax settlement offers from risk-averse franchisor defendants. [Daniel Fisher, Forbes, also; Shaw Valenza; Fox Rothschild; Gordon Rees; related, Epoch Times last week quoting me; earlier here, here, and here]

Aaron Schepler, Quarles & Brady;

In the supreme court’s view, the fact that Domino’s exercised extensive control over the manner in which the franchisee operates its business was merely a way to ensure the uniformity of the customer experience at its franchised outlets. As the court explained, this uniformity actually benefits both parties to the franchise relationship because “chain-wide variations … can affect product quality, customer service, trade name, business methods, public reputation, and commercial image” and, thus, the value of the brand. And because “comprehensive operating system[s]” are present in nearly every franchise relationship, those systems standing alone could not reasonably “constitute[] the ‘control’ needed to support vicarious liability claims like those raised here.”

{ 3 comments }

In this Cato podcast (7:01), I talk with Caleb Brown about the National Labor Relations Board’s groundbreaking attempt last week to tag McDonald’s with liability for labor violations found at its independently owned local operators. (Reportage: Steven Greenhouse, NYT; Jon Hyman; Diana Furchtgott-Roth/RCP) It’s a drastic departure from current law that would carry implications for outsourcing more generally: a food company that contracts with independent farmers to grow a particular crop, for example, might wind up being liable for the farmers’ treatment of farm workers, a company that outsources its cafeteria, vehicle maintenance, or janitorial services to outside vendors might become legally responsible for ensuring the labor-law compliance of those contractors, and so forth.

The McDonald’s case is the first of what is expected to be multiple cases filed by the NLRB’s general counsel (akin to a prosecutor), and the full Board has not ruled on the resulting complaints, although given the union-friendly role of the Obama NLRB that is likely to be little more than a formality. The initiative will inevitably land in the courts, which have not always been friendly toward Obama regulatory adventurism, and perhaps eventually the Supreme Court.

One consequence, successful or otherwise, if this ploy works: by treating legally distinct entities that contract with each other as if they were parts of a single vertically integrated enterprise, progressive labor law thinkers will create an incentive for giantism to become more real, by giving fast-food franchisers, for example, legal reason to move toward company-owned rather than independently-owned store arrangements. Not for the first time, the law would mow down the ranks of mid-sized businesses in favor of large or nothing. Commentary from others: Megan McArdle; Stephen Bainbridge; Catherine Fisk, On Labor (supporting the idea); Steve Caldeira, The Hill; Alex Bolt. And a relevant House hearing.

{ 6 comments }

A theme we’ve touched on before in this space. [The Economist]

Bureaucracy and taxes in Greece strangle a woman’s dream of a baking business before she even gets it properly launched [Despina Antypa, New York Times via Dan Mitchell]:

…as happens so often in Greece, the bureaucrats had other plans. In a country where you are viewed favorably when you spend money but are considered a criminal when you make it, starting a business is a nightmare. The demands are outrageous, and include a requirement that the business pay taxes in advance equal to 50 percent of estimated profit in the first two years. And the taxes are collected even if the business suffers a loss. I needed only 20 square meters for my baking business, but inspectors told me they could not give me permission for less than 150 square meters. I was obliged to have a separate toilet for customers even though I would not have any customers visit. The fire department wanted a security exit in the same place where the municipality demanded a wall be built. … I, like thousands of others trying to start businesses, learned that I would be at the mercy of public employees who interpreted the laws so they could profit themselves.

More: Hans Bader.

{ 3 comments }

So instead it will require private businesses to invest in security measures. I explain in a new Cato post. In January I noted an unsuccessful bill in the Maryland legislature to require gas station owners to maintain videocamera system.

{ 1 comment }

Yes! Following an enormous outcry from cheese makers, commentators, and the general public, the agency beats a hasty retreat. Commentator/ Pepperdine lawprof Greg McNeil has the details at Forbes (and his earlier commentary on the legalities of the agency’s action is also informative). Earlier here.

In a classic bureaucratic move, the agency denied it had actually issued a new policy (technically true, if you accept the premise that a policy letter from its chief person in charge of cheese regulation is not the same as a formally adopted new policy) and left itself the discretion to adopt such a policy in future if it wishes (merely declaring itself open to persuasion that wood shelving might prove compatible with the FSMA).

McNeal:

This is also a lesson for people in other regulated industries. When government officials make pronouncements that don’t seem grounded in law or policy, and threaten your livelihood with an enforcement action, you must organize and fight back. While specialized industries may think that nobody cares, the fight over aged cheese proves that people’s voices can be heard…

There is a less optimistic version, however. It happens that a large number of editors, commentators, and others among the chattering classes are both personally interested in the availability of fine cheese and familiar enough with the process by which it is made to be un-cowed by claims of superior agency expertise. That might also be true of a few other issues here and there — cottage food sold at farmer’s markets, artisanal brewing practices — but it’s inevitably not going to be true of hundreds of other issues that arise under the new Food Safety Modernization Act. In a similar way, the outcry against CPSIA, the Consumer Product Safety Improvement Act, rose to a politically effective level only on a selected few issues (publishers and libraries got a fix so that older children’s books would not have to be trashed; youth motorsports eventually obtained an exemption, and so forth) but large numbers of smaller children’s products and specialties whose makers had less of a political voice simply disappeared.

More: Andrew Coulson, Cato, and on the trade aspects, K. William Watson; Chuck Ross, Daily Caller (quoting me at length for which thanks). On the FDA’s new statement: “Typical bureaucratic doublespeak that seems meant to maximize uncertainty for the regulated community” [Eric Bott of Wisconsin Manufacturers and Commerce] “This was the worst possible outcome. It reinforces elites’ view that regulators are reasonable and wise and will fix mistakes.” [@random_eddie] “Pay no attention to the Leviathan behind the cheesecloth” [Scott Lincicome, in an exchange after a writer at Slate observed that "Libertarians aren't the only ones" who might want to keep board-aged cheese legal] (Vox, Reason, Carly Ledbetter/HuffPo; & welcome Instapundit, Alexander Cohen/Atlas Society, Q and O readers)

{ 25 comments }

In North Carolina, lawmakers seem inclined to favor the big distributors, who as a group are major campaign donors. [NBC Charlotte]

{ 2 comments }

Licensed to grill

by Walter Olson on September 12, 2013

CBS New York reports breathlessly on underground dinner parties in New York — people invite strangers into their homes! And charge them money! — and quotes an ex-official who says it should be illegal unless they get a restaurant-type license. [CBS New York (auto-plays video ad), Shackford] Radley Balko, on Twitter: “Reporter astonished that New Yorkers invite people into their homes for dinner without notifying the local politburo.” More: J.D. Tuccille.

{ 7 comments }

When Congress passed the Food Safety Modernization Act in 2011, some (I included) warned that it would lay serious regulatory burdens on small producers and distributors of food, threatening to drive many of them out of markets even when their products posed no actual material risk. Lawmakers gestured toward relief for small producers in an amendment, but apparently “gestured” is the operative word. “Now that those who will be regulated under the Act have had time to review and consider the FDA’s proposed FSMA rules, small farmers …are panicking. And with good reason.” [Baylen Linnekin, Reason, earlier; Daren Bakst, Heritage; "New federal regulations could threaten local farms," Michael Tabor and Nick Maravell, The Gazette (suburban Maryland)]

{ 5 comments }

Nick Sibilla of the Institute for Justice says the re-regulation plan has some devilish details:

Portions of the current proposal could cripple entrepreneurship. For starters, food trucks that park at an expired meter could face $2,000 fines for a first-time offense. From there on, fines would escalate quickly, reaching $4,000 for the second infraction, $8,000 for the third, and $16,000 onwards. In D.C., this would be a Class 1 infraction, the same legal category as possessing explosives without a license.

Earlier here; more background, NBC Washington.

{ 1 comment }