Last fall, Barak Richman and I had a friendly exchange on this blog about whether antitrust law should apply to restrictive practices governing rabbinical hiring. Our debate raised the question of whether antitrust norms are appropriate for regulating competition within religious organizations. Two recent judicial decisions, one involving Benedictine monks in Louisiana and the other involving a Hutterite colony in Montana, raise questions about commercial competition between religious and secular organizations.
The Benedictine monks case arose out of Hurricane Katrina, which destroyed part of the St. Joseph’s Abbey’s pine timberlands. The abbey traditionally harvested pines to support itself. In need of an alternative source of income, the monks decided to get into the casket business, hand-making two models of “blessed” pine caskets in their workshop. Before they had sold a single casket, the monks received a cease and desist order from the Louisiana State Board of Embalmers and Funeral Directors. The monks were informed that they were not allowed to sell caskets unless they “become a licensed funeral establishment, which would require a layout parlor for 30 people, a display area for the coffins, the employment of a licensed funeral director and an embalming room.” These conditions meant, in effect, that the monks were prohibited from getting into the casket business. The monks brought a constitutional challenge and recently won a surprising victory in the United States Court of Appeals for the Fifth Circuit, which held that “mere economic protection of a particular industry” is not “a legitimate governmental purpose.”
The Montana case concerns a Lehrerleut Hutterite colony in Big Sky, Montana. The Hutterites live communally, renouncing all private ownership of property and contributing labor to supply the colony’s needs. Although the Hutterites speak a German dialect, refrain from participation in the political process, and are largely separated from the outside world, they apparently perform some outside construction projects for hire. Until 2009, the Hutterites were exempted from Montana’s worker’s compensation insurance obligations. Rival contractors complained that the Hutterites were able to underbid them because of the cost advantage from not having to carry worker’s comp. The state legislature responded by amending its workers’ comp statute to cover the Hutterites. The Hutterites challenged the statutory amendment on free exercise of religion grounds, but lost in the Montana Supreme Court. A petition for certiorari in the U.S. Supreme Court is currently pending.
The Louisiana and Montana cases raise very different constitutional questions, but exemplify a common fact–when religious organizations enter commercial markets, they are often disruptive competitors. In economic theory, a disruptive competitor is one that plays by different rules than other market participants and hence forces other producers to adjust their competitive strategies. For example, firms that bring new technologies or distribution systems or lower cost structures to markets are said to be disruptive competitors.
Disruptive competition is usually considered a good thing. Markets often become too cozy, complacent, and habit-bound for the good of consumers and even other competitors. Disruptive competitors shake things up and promote greater efficiency and innovation.
I’m not claiming that the Benedictines or Hutterites deserve to win their cases just because they are disruptive competitors. But when I see business interests invoking state regulations to stymie competition from small communities of monks and farmers, I can’t help rooting for the little guys.
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Dan, very interesting. I suppose workers in religious communities might also be more willing to donate their time to the enterprise, or accept lower wages. Would this sort of comparative advantage also qualify as disruptive competition?
Mark, I think it would qualify as disruptive competition, but there’s obviously a question whether that sort of disruptive competition is desirable. If volunteer laborers prevent paid laborers from earning a living or depress their wages, the paid laborers are going to have a gripe. I’m not sure, though, that it’s a gripe the law should accept. The volunteer laborers are taking a position that the output they produce (i.e., education, cleaning up parks and rivers, medical services, providing for the needy, etc.) should be available at a lower cost, I don’t know why society should side with requiring it to be made available at a higher cost.