Regulatory Chutzpah in Silver Spring

I tend to argue that a lot of local business regulation is really just a mask for rent-seeking by incumbent firms who don’t want competition. But I don’t expect the rent-seeking incumbents to just come out and say that’s what’s happening. And yet here’s Elahe Izadi reporting from Silver Spring on Nando’s Peri-Peri attempting to engage in voluntary exchanges of chicken for money:

he general managers from those four restaurants voiced concern that the addition of Nando’s to the mix would hurt their bottom line. They submitted a letter to the board, protesting the award of the liquor license, arguing it would reduce business for existing restaurants.

The letter literally argues that “[a]pproving any additional licenses in this market would be merely causing more difficulties for existing businesses in an environment in which no additional demand exist.” Even if this is true, it would be an insane reason to deny a license. If we assume a fixed quantity of demand for Silver Spring dining, then it’s perhaps true that opening a Nando’s will drive the Macaroni Grill or the Red Lobster (to name two of the protesting businesses) out of business. But that’s only going to happen if customers prefer Nando’s. A firm that’s only staying in business because it’s persuaded local regulators to block new entrants is not the kind of firm your community needs. If a neighborhood only has the customer base to support four restaurants, then you still want as much competition as possible to ensure that you get the four best dining options possible.

Fortunately, the Montgomery County Department of Liquor Control found this unpersuasive and granted the license. But the fact that restaurants might even think “we don’t want to let competitors take our customers” was a potentially persuasive argument is telling.