Ohio Says No to Monopolies: Now What?

Following adoption of Issue 2 this week (full text available here), Ohio's constitution imposes special burdens on ballot initiatives that grant "monopoly, oligopoly[,] . . . cartel," set tax rates, or grant or other special commercial benefits. By its terms, the language added by Issue 2 purports to prohibit such things outright, but if an initiative attracts the necessary petition signatures, it can still be proposed to voters as two separate ballot questions.  The first question must be the following:  "Shall the petitioner, in violation of [the Issue 2 language], be authorized to initiate a constitutional amendment that grants or creates a monopoly, oligopoly, or cartel, specifies or determines a tax rate, or confers a commercial interest, commercial right, or commercial license that is not available to other similarly situated persons?" The second question is then approval of the initiative itself, and voters must approve both questions.

So, Issue 2 does not exactly forbid constitutional monopolies. It requires voters first to consciously approve an exception to the general ban on them, and then separately to approve an initiative itself. Obviously, the point is to emphasize for voters that by approving an initiative, they are granting a monopoly. And given the magnitude of Issue 3’s defeat on Tuesday—by a margin of nearly 2-to-1, even though opinion polls suggest significant popular support for legalization—it seems that branding an initiative a “monopoly” may have more or less prohibitive effect.

Issue 2 is by no means the only state constitutional rule on monopoly. In fact, about a third of the states have constitutional provisions prohibiting any state granted monopolies, including those granted by the state legislature (see the discussion beginning at p. 1067 of this interesting historical paper).

During the course of the campaign critics of Issue 2 voiced several concerns about its unintended consequences. It’s hard to know exactly how each of those issues might play out, but in my judgment they seem probably rather overstated. Above all, critics have worried that Issue 2 might inadvertently block initiatives well beyond the seemingly abusive plans for which it was designed, like the casino initiative of 2009 or the monopoly marijuana plan of this year’s Issue 3. The words “monopoly, oligopoly or cartel” are not exactly precise or well defined terms, and Issue 2 also applies to any “commercial interest, commercial right, or commercial license.” And after all, the initial judgment whether an initiative triggers the language of Issue 2 is to be made by the Ballot Board, a five member bipartisan board chaired by the Secretary of State, and a group perhaps not free from ideology or opportunism. Probably the most serious concern along this line is that Issue 2 could be held to prohibit labor-related initiatives, since organized workers might be described by some as a “cartel,” and labor has “interests” and “rights” that could be said to be “commercial.”

Only time will tell of course, and anything is possible, but I think these concerns are probably overstated. Initiatives are not that often introduced that not only confer a benefit of some commercial value, but confer it in the discriminatory fashion required by Issue 2. Issue 2 prohibits the grant of benefits only when they are “not then available to other similarly situated persons or nonpublic entities.” Labor initiatives, for example, ought to affect all workers who are "similarly situated" in the same way. And while it is true that the initial application of Issue 2 will be the hands of the Ballot Board, and that Board for political reasons might well stretch to find some disfavored proposal to grant illicit benefits, its decisions are subject to legal challenge. (It was argued by some critics that the Ballot Board would not be subject to judicial review, because Issue 2 requires the Board only to render its “opinion” on applicability. But that seems pretty unlikely, as Issue 2 explicitly gives the Ohio Supreme Court jurisdiction “in any action that relates to [Issue 2].”)

One quite separate issue that perhaps is more serious is Issue 2’s applicability to initiatives that “specify or determine a tax rate.” This language seems likely to have been included by anti-legalization legislators, who were aware that another legalization petition pending for 2016 includes a tax provision. (This is the effort of Ohioans to End Prohibition.) Whether Issue 2 really will apply to that new petition, simply because it sets a tax rate, apparently depends on a technical question of interpretation. As I said, Issue 2 plainly seems to require discriminatory grants of benefits—grants that don’t affect all “similarly situated” persons in the same way. Arguably, however, that one solitary phrase “specify or determine a tax rate” might not be modified by the very last clause of Issue 2’s operative provision, which requires that benefits are subject to Issue 2 only when they are not available to “similarly situated persons.” Again I tend to think that would be an unlikely result, since it would render the prohibition on tax rates quite out of character with everything else in Issue 2, all of which is aimed only at discriminatory benefits. But on this issue only time will tell, and it seems fairly likely the matter will be litigated during 2016.

But otherwise, in the end I would guess the largest consequence is that we just won't see any more attempts like the Issue 3 marijuana effort or the 2009 casino initiative.  Issue 2 will be largely a dead letter, and won't often be invoked to challenge initiatives disfavored by the Ballot Board. But by keeping monopoly efforts off the ballots it will have done an important service.

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