The “competitor’s veto” is a regulatory arrangement in which existing businesses are given the power to prevent or burden new competitors. On The Bob Zadek Show the phrase is used by host Bob Zadek to connect two otherwise distant episodes: the late nineteenth- and early twentieth-century regulation of Chinese restaurants and laundries, and a modern North Carolina food-truck dispute. In both, Zadek argues, government power is enlisted to protect established operators from competition rather than to serve any genuine public purpose.
The historical form: licensing and certificates of need
In the episode on the war on Chinese restaurants, Zadek describes the competitor’s veto as a technique with deep roots. He says he has done more than one show on certificates of need and what is called a “competitor’s veto,” and he points to statutes in the moving and healthcare industries—recently struck down in Kentucky and in Tennessee—that said a new moving company could not open unless its competitors certified that more competition was needed. Zadek’s framing is that this technique, used “a hundred and something years ago,” is still being used today, and that the effort was simply to bar competition The War on Chinese Restaurants with Gabriel Chin (2017).
The historical instance Zadek cites is the refusal of licenses for Chinese restaurants. He recalls the government making a determination that no more licenses would be issued “because we have enough in Boston,” and he characterizes the whole apparatus as an effort by “all of the power establishment” to prevent an immigrant from offering a good-tasting food product at a low price. Guest Jack Chin, a law professor, adds that Chinese immigrants could not naturalize under federal law restricting naturalization on the basis of race, and that many professions were restricted to U.S. citizens, so the ability of Chinese to make a living was left to the discretion of governmental authorities. Chin notes that if a person could not start a restaurant in Boston, they would go to Springfield and see if they would be given a chance The War on Chinese Restaurants with Gabriel Chin (2017).
Chin also describes how the private-booth ordinances worked as a competitor’s veto in practice. He says the first private-booth ordinance he could find was in Ogden, Utah, and that it seems clear the competitors of Chinese restaurants—the so-called American restaurants—generated the ordinance to force their competitors to engage in expensive renovations. In 1917, the U.S. Public Health Service drafted a model ordinance prohibiting private booths, citing the danger presented by chop suey restaurants. Chin’s reading is that the ordinance was less about public health and safety than about taking business from Chinese restaurants The War on Chinese Restaurants with Gabriel Chin (2017).
Police power as a substitute for law
When legislative weapons failed or were held unconstitutional, Zadek says, the police began taking matters into their own hands. Chin describes instances in the early twentieth century, particularly after the Elsie Sigel murder, in which police would decree that no white women would work in Chinese restaurants, calling it a public health danger, or would block off Chinatown in Washington or New York and require whites to leave by midnight. Chin, who had been a criminal lawyer in New York, says he was amazed that the New York Police Department in 1910 and 1918 would take it upon itself to decide who could walk the streets. Zadek characterizes this as action without statutory authority and with lax oversight The War on Chinese Restaurants with Gabriel Chin (2017).
Zadek also draws in the opium connection. Chin explains that there was a fear people were going to Chinese restaurants to buy opium, though opium and cocaine were legal products at the time—one could buy patent medicines containing opium, morphine or cocaine at a pharmacy without a prescription. He says a 1909 law, the same year as the Elsie Sigel murder, prohibited importation of smoking opium, and that this led over time to more federal drug regulation. Chin’s point is that opium was not treated as a serious problem when mainly white women used it, but became a target when associated with Chinese The War on Chinese Restaurants with Gabriel Chin (2017).
The modern form: food trucks in Farmville
In the 2022 episode on the food-truck case, Zadek defines the competitor’s veto more directly: economists have a phrase for it, and it describes how local governments have statutory protection of existing businesses against competition. He says the competitor’s veto is not uncommon in local law, county and city ordinances around the country, and that it has many forms. In the Farmville dispute, he says, the competitor to the food truck—the restaurant—has a veto by which it can effectively prohibit a competitor from operating Food Truck v. Farmville (2022).
Guest Jessica Thompson of the Pacific Legal Foundation describes the case of Mark Shirley, a North Carolina food-truck owner. She says the town council’s refrain was that food trucks needed to contribute their “fair share,” and that the council discussed using the proceeds to buy equipment for the Parks and Rec Department so the Boys and Girls Club would have bats and gloves. In North Carolina, she explains, towns lack authority to tax businesses at will; they may charge regulatory fees only to cover the cost of regulation. The permit fee for a food truck rose from $100 a year to $75 a day—$7,800 a year—for operating two days a week. By contrast, she says, Durham, North Carolina charges $10.40 for a year. She also describes a proximity restriction requiring Mark to operate 100 feet from the parcel line, a restriction brick-and-mortar restaurants can waive, which she argues shows the true purpose is protection of those restaurants from competition Food Truck v. Farmville (2022).
Thompson says the town council had it in mind to make it more difficult for food trucks after some brick-and-mortar restaurants complained, and that several citizens spoke at the town hall meeting in support of having another lunch option. She describes the legal theories: a challenge to the permit fee, a claim under the North Carolina Constitution’s protection of the right to the fruits of one’s own labor in Article 1, Section 1, and an equal protection claim. The fruits-of-labor provision, she says, protects the right to earn a living from an ordinary occupation, and the proximity restriction is an arbitrary interference with that right Food Truck v. Farmville (2022).
Across episodes
The two episodes treat the competitor’s veto as the same phenomenon across more than a century. In the earlier episode, Zadek and Jack Chin describe licensing refusals, certificates of need, private-booth ordinances and police harassment used against Chinese restaurants and laundries in the late nineteenth and early twentieth centuries. In the later episode, Zadek and Jessica Thompson describe a modern food-truck ordinance in Farmville, North Carolina, with a steep permit fee and a proximity restriction that brick-and-mortar restaurants can waive. What changes between the treatments is the legal vocabulary—from licensing and certificates of need to regulatory fees and equal protection—and the forum, from Boston and Ogden to a North Carolina town. What does not change, on Zadek’s account, is the underlying technique of using government power to protect incumbents from competition.
What the sources do not cover
The excerpts do not state the outcome of the Farmville litigation, nor the name of any bill or ordinance beyond the general descriptions given. They do not identify the court or the amendment on which any case turned, and the historical segment breaks off mid-sentence before Zadek finishes his remark about Tadich’s and Sam’s. The excerpts also do not give a founding date or principle for the Pacific Legal Foundation beyond its description as a public interest law firm representing clients pro bono.