A Meriden businessman is suing the state because he said they're refusing to let him open a business.
Steve Martorelli wants to offer limo service and said he's got a business plan so good, he can save customers big bucks.
"One day I was calling around for some limos and found out the price was very expensive," Martorelli said. "I was doing my homework and I realized, hey, we could buy a limo and offer the service for half the price."
Martorelli said he dug into the regulations. Martorelli needed a permit from the Connecticut Department of Transportation.
DOT officials checked his background and his business plan. They even wanted to know that he'd found qualified drivers.
"Believe me that was tough because people were coming to my office and saying 'oh, you don't even have a limo company?' And that was tough but I was able to line up some skilled drivers," Martorelli said.
Martorelli said he jumped through every hoop and thought he was a great candidate for the two licenses, for two limos allowed by law. Except for one obscure requirement, the law states applicants have to prove that their community needs more limos, which is also known as public convenience and necessity requirement.
"I asked the woman, 'what does that mean?' And she said, 'No one really knows what it means,'" Martorelli said.
Applicants typically prove it by bringing potential customers to their application hearing to say they wanted a limo on a certain night but all were booked. But Martorelli said he wasn't motivated by people who wanted limos, but couldn't find one. He thought he'd find brand-new customers, who couldn't afford a limo before.
"If you can offer service at half the price of the competitor, there's a whole market of people out there," Martorelli said.
But the state didn't buy the unusual argument and Martorelli's application was denied. So he sued and the I-Team was in the courtroom earlier this month for the hearing before judge Eliot Prescott. Martorelli and attorney Michael Feldman argued that substantially lower price always serves a community need.
"I can't think of a better, more elegant, and simple way of establishing a public need than to say: 'I'm here, I'm qualified, I'm suitable to provide these, and I'm capable of doing it at half the price,'" Feldman said.
Martorelli and Feldman know that no one has been successful on the hard-to-define "public need" requirement through lower prices alone. So they're also asking Prescott to throw out the entire law as unconstitutional, especially since a limo company that already has permits can get permits to add two more cars to their fleet every year, while Martorelli can't get any permits unless he proves they're needed. Either way there's more limos on the road, but the standards are different.
"This is a law that provides for unequal treatment, it applies differently to Steven than it does to Premiere Limo, and it does so for no rational reason," Feldman said.
Getting a judge to rule that a decades-old law is unconstitutional is a tough fight to win, but Prescott challenged Assistant Attorney General Charles Walsh on why he shouldn't. Walsh was assigned to defend the law.
"And what is the regulatory interest in not giving out new licenses if there is no demand?" Prescott asked.
"If you were to have a marketplace based solely on rates you would have a race to the bottom where you would flood the marketplace and you would possibly compromise the public safety where vehicles may not be maintained in a proper manner," Walsh said.
Supporters of the law said a price war would be dangerous for limo passengers and argue that even if the law is stifling competition, lawmakers should decide on how to change it.
"Your honor, I think that's a question for the Legislature to answer and not for this court," Walsh said.
The argument is this: if an entrepreneur wants to open an ice cream shop right next to an existing ice cream shop, he can do so as long as he meets all the health codes and other laws. Whether there's enough of a community need to make his business successful is up to him to decide. But for limos the standard is different.
The state can decide, there's already no need and the new business won't be allowed. The I-team went to a longtime limo company owner to find out why the industry fights hard to keep this standard.
"I think this industry is different in that respect, Eric, because the potential for catastrophe is much greater moving people on the roads, hundreds of people a day and there's already some safeguards in place for a restaurant let's say, they would have to meet department of health standards, and this is the standard that the state has to ensure that there's not an overloaded territory," said Mark DiChiara, of Gateway Limousine.
DiChiara was adamant that the need requirement increases safety because he said in a price war the quickest way to save money is to cut down on maintenance.
"Because you lose the case doesn't mean it's an insiders only game, it means you didn't present a valid argument to support your case," DiChiara said.
The I-Team found in the transcript of Martorelli's hearing at DOT that the only opposition to his application came from nearby Premiere Limousine.
At the hearing, they didn't talk about safety or maintenance, or quality. When asked if their interest in the hearing was to keep out a potential competitor, officials at Premiere Limousine said "correct. That's exactly what I would say."
"If he did not prove the need then there should not be a permit," said Steve DiMarco, who is the owner of Premiere Limousine. "That would be our opinion."
DiMarco told I-Team that one line of the transcript is misleading. DiMarco claimed while any good business fights the competition, their interest is mostly in making sure every applicant meets all the requirements of the law.
DiMarco said he was denied the first time he applied. He eventually got one permit in 1984, and now has 140.
"We had to prove a need and necessity and the first time we didn't prove that need and that's why we were denied," DiMarco said. "So I think if you go in there and you prove a need and that the public's behind you and have you all these customers that want to do business with you and you can provide a service that another company can't, why not? He should be able to get his permit."
Martorelli's argument is that because others proved need once, doesn't mean it's doing anything but protecting the current limo companies now.
"There are regulations and laws that require seatbelts, that require safe equipment and safe drivers," Feldman said. "That's how you regulate safety, not by having some concept of public need that no one understands."
No matter how Prescott rules an appeal is likely. Either way Martorelli said, he's going to fight for the chance to prove that he's a good enough businessman to win over customers. Whether they know they need him or not.
Copyright 2013 WFSB (Meredith Corporation). All rights reserved.