AG Hunter Lowers Boom on Barrier to Entry; Legislature Should Follow His Lead

Jan 27, 2020 | Blog | 0 comments

Even as the Oklahoma Supreme Court struck down a recent alcohol distribution law, the Attorney General paved the way for the state’s Alcoholic Beverage Law Enforcement Commission (ABLE) to remove an obstacle from the expansion of liquor store competition – finding that Oklahoma’s five-year in-state residency requirement before one can own a liquor store likely runs afoul of the U.S. Constitution and recent U.S. Supreme Court precedent.

The AG’s opinion, issued at the end of December, informs the state’s alcohol commission that portions of the state constitution (Article 28A, Section 4(A) & (B)) are unenforceable. These provisions require that ABLE issue a Retail Spirits License or Wine and Spirits Wholesaler License only to someone who has been a resident of Oklahoma for the previous five years. Presumably ABLE, who requested the opinion, will now begin issuing licenses to otherwise qualified applicants regardless of how long they have lived in Oklahoma.

Tennessee had a similar provision, though only a two-year residency requirement. Last year the law was declared unenforceable because it conflicts with the dormant aspect of the federal constitution’s Commerce Clause. This is the part of the constitution that gives Congress the power to regulate commerce among the states. In addition to affirmatively granting this power, courts have long held that it implied states do NOT have the power to regulate interstate commerce in ways that harmed other states, or residents of other states.

While the state’s liquor laws are still plagued with crony policies, this is a small victory. Consumers win when they have more options. Licensing makes it harder for new competitors to enter a market. In this instance, liquor licensees in the state were effectively insulated from all out-of-state competition. Who would recognize a market opportunity, move across state lines to fill it, and then wait a non-productive five years before doing so? Almost no one. The true goal of the law was to make sure only “True Oklahomans” – those who live here by accident of birth – could sell liquor. Outsiders who recognize a need and seek to help Oklahomans by providing a service are out of luck.

Excluding out-of-state entrepreneurs and professionals, or making it more difficult for them to enter the state, is something of a grand tradition in Oklahoma. Attorneys who pass the bar exam in another state are only deemed competent to work in Oklahoma if they have practiced law continuously for FIVE of the last seven years. Those who pass Oklahoma’s bar are full-fledged attorneys from the time of their swearing in.

Another example is Polygraph Examiners, who are granted reciprocity if they are from a state with equivalent licensing requirements, which also grants reciprocity, but only IF they have first practiced there for TWO years. Funeral Directors wanting to move into Oklahoma must have a license from a state with similar licensing requirements (which is problematic since few states require such burdensome standards) and FIVE years of experience.

Cosmetologists who went to school in a state without a licensing board are out of luck completely. Oklahoma will not accept training reported directly from a cosmetology school outside the state – only from another licensing agency. Not only does Oklahoma’s legislature evidently believe this state’s cosmetologists are unable to compete with those from out of state, it must also see our cosmetology schools as somehow lesser than their out-of-state rivals.

We ought to be embarrassed by this. Legislatures of old seemed to think Oklahomans were not bright enough to compete with newcomers. They may also have believed Sooners required more consumer protection than residents of other states (though this is less likely, since licensing does very little to actually protect consumers). While these laws were mostly passed well before anyone presently in the state house took office, it remains a mystery why so little has been done to repeal them. Oklahomans are not any more in need of paternalism or protectionism than anyone else. We can recognize and seize entrepreneurial opportunity as well as anyone else – especially in our own back yard. And we are just as capable of using Yelp or Angie’s list to check a practitioner’s reputation – as anyone else. It’s time the laws of the state reflect this reality.

Mike Davis is a Research Fellow at 1889 Institute. He can be reached at mdavis@1889institute.org.

The opinions expressed in this blog are those of the author, and do not necessarily reflect the official position of 1889 Institute.