What Is Unfair Competition?

By Kozlowski, James | Parks & Recreation, August 2003 | Go to article overview
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What Is Unfair Competition?

Kozlowski, James, Parks & Recreation

State bills would ban public competition with private business.

As characterized by one state supreme court, "[t]he argument that local governments may not operate enterprises unless it can be shown that private enterprise is 'unwilling or unable' to engage in the proposed activity is essentially a contention that the municipal operations of the enterprise would create an unfair competition." In response to such arguments of unfair competition, this court noted, as a general rule, government-"owned and operated enterprises have been permitted to engage in head-to-head competition with privately owned companies." Madison Cablevision Inc. v. City of Morganton, 325 N.C. 634, 386 S.E.2d 200 (N.C. 12/07/1989). Similarly, park and recreation agencies may compete with recreational opportunities available through private commercial enterprises, as long as such facilities and programs provide public benefits that are expressly or impliedly authorized under state law. Earlier this year, two companion bills were introduced into the General Assembly of Pennsylvania, House Kill 298 and Senate Rill 321, to prohibit such "government competition with private enterprise" in an effort "to enhance the efficient provision of goods and services to the public."

Legislate Competition Prohibition?

The declared policy of the bills is to "protect economic opportunities for private enterprise against unfair competition by government agencies." The bills define "private enterprise" as "[a]n individual, firm, partnership, joint venture, corporation, association or any other legal entity engaging in the manufacturing, processing, sale, offering for sale, rental, leasing, delivery, dispensing, distributing or advertising of goods or services for profit."

According to the president and CEO of a commercial racquet and fitness club who helped draft the proposed legislation, "It is terribly unfair for local and state government to use taxpayer money to create enterprises that compete with small businesses... including local governments building and selling memberships to glof courses, swimming pools and fitness centers." (Emphasis added.)

Within the context of the bills, government competition is defined as the "provision of goods or services to the public by government agencies that are essentially the same as those offered by private enterprise." Prohibited government competition would also include any intergovernmental or interagency agreement that subsidises "any charitable or not-for-profit institution which would use such support to compete against private enterprise."

Existing government competition with private enterprise is permitted to continue under the bills, but "may not exceed the scope of the competition" that would exist on the effective date, if the bills become law. In addition, there's an exception in the bills for "[t]he development, management and operation of state parks, historical monuments and hiking or equestrian trails."

The bills also provide an exception for "government functions" and "essential services." Government functions include operating a governmental agency or department and the "fulfillment of the legal obligations of the agency." Essential services include, but aren't necessarily limited to, "water supply, sewers, garbage and trash removal, recycling, utilities, streets and roads, public transportation and public transportation infrastructure, and state and local correctional facilities." However, if private industry can provide essential services, the bill would require government agencies and authorities to "entertain bids from private enterprise and, if practicable, contract with private enterprise to provide essential services."

Under the proposed legislation, individuals or entities alleging that "a government agency is participating in commercial activity resulting in competition with private enterprise" could petition a state court to issue an injunction ordering the agency to "abate the government competition with private enterprise.

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What Is Unfair Competition?


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