The Licensing of Commercial Activity in New Zealand

Abstract

State intervention in market activity has been prevalent. It has included controls upon entry into spheres of commercial activity. Licensing has generally been the mechanism used in two situations, viz. to impose quantitative controls or qualitative controls that have conferred discretionary powers upon the licenser. This study of fourteen areas of licensed activity reveals that in those areas the necessity for licensing (or its continuation) has not always been adequately established. Pressure groups have been influential. Incentives to protect vested interests may, especially with quantitative licensing, have been high. The effectiveness of the controls is open to question. So is the appropriateness of adjudicative procedures, as opposed to market forces, as a regulatory agent. The social and economic cost of licensing has not been insignificant. Quantitative licensing has subjected aspiring participants in an activity to the exercise of wide discretionary power. In the quantitative area also, licensing tribunals have often been accorded a wide discretion, largely because of the use of imprecise statutory formulae. Moreover, quantitative restrictions on entry have in some cases created 'closed shops’ to which further entry has not been possible. In other industries new entrants have succeeded only after expending a good deal of energy, effort and expense. Success in gaining entry has often paid handsome financial dividends. Quantitative entry restrictions have not always ensured that the most able have participated in the controlled activity and may have encouraged complacency and inefficiency. There have also been other social and economic costs. Avoidance and evasion have been features of both quantitative and qualitative licensing demonstrating, perhaps, that law makers have been inclined to over-estimate the effectiveness of the law. Calls for consolidation or extension of control have sometimes been generated as a result. The alternatives to licensing have seldom been adequately considered, if they have been considered at all. Such alternatives might have been equally, if not more, effective and less onerous.