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Can The Government Outlaw Groupon Discounts?

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Published on Apr 26, 2012

Can the government bar entrepreneurs from offering competitive prices, online discounts and prompt service merely to protect politically powerful insiders from competition?

That is the question the Institute for Justice (IJ) and its clients seek to answer though a federal lawsuit they have filed challenging Portland, Oregon's anticompetitive limousine and sedan regulations.

In 2009, the Portland City Council passed two measures designed to protect the city's taxicab companies from competition at the expense of both consumers and limousine and sedan services.

Not surprisingly, Portland's taxicab companies requested these regulations. What is surprising is that Portland agreed to impose higher transportation costs on Portlanders and put strict limits on limo and sedan entrepreneurs, just to make it easier for the city's taxicab companies to make more money.

Recently, the city's Revenue Bureau clamped down on Groupon.com promotions offered by two Portland limo and sedan companies, Towncar.com and Fiesta Limousine. When the companies offered discounted fares to their customers city enforcers immediately threatened the companies with a combined $895,000 in fines and suspension of their operating permits. In response to the controversy, the city has publicly stated that its job is to protect taxicab companies from competition by enforcing anti-consumer rules.

Portland cannot constitutionally seek to protect taxicab businesses from competition at everyone else's expense.

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