By James R. Copland and Isaac Gorodetski
The challenges of operating a small business in America are well-documented: Studies show that only 50 percent of new enterprises survive more than four years across all industries.
In North Carolina today, entrepreneurs have to worry about not only financial failure but also the looming danger of a criminal record. A report we published earlier this month reveals how North Carolina’s legislature — more so than those of neighboring states — has continued to make crimes out of ordinary business practices, threatening unsuspecting entrepreneurs in the state with jail time for unknowing violation of the state’s regulatory code.
One such business owner was Steven Pruner, who sold hot dogs from a mobile food cart outside Duke University Medical Center. Pruner lacked the proper license — and indeed was unable to acquire one, since he owned no restaurant or commissary — which led officials to arrest him in 2011 and charge him with a crime carrying a sentence of 45 days in the custody of Durham County’s sheriff.
Unfortunately, making crimes out of regulatory infractions is not an uncommon feature of North Carolina law, but rather the norm. The state legislature has an established practice of delegating criminal authority to state administrative agencies and local boards via “catch-all” provisions that make it a crime to violate any rules they promulgate. The legislature has also delegated the authority to create crimes to private licensing boards overseeing the practice of professions like medicine, dentistry and nutrition.
One case involving the state’s delegation of criminal lawmaking to private bodies has now made its way to the U.S. Supreme Court — over the not-quite-so-obvious crime of helping people whiten their teeth. Enforcing its state-delegated authority to police the practice of dentistry, the N.C. State Board of Dental Examiners sent cease-and-desist letters to teeth-whitening providers in local malls and the landlords who rented them kiosk space.
The Federal Trade Commission has taken the position that the dental board’s actions are anti-competitive and violate the nation’s antitrust laws, in the case now pending before the highest court in the land. Whichever side prevails legally, the case exemplifies how private bodies deputized to create regulatory crimes are likely to act to protect their economic interests — in this case, the hefty fees dentists can collect for teeth whitening in their offices.
Although most of us are not likely to run hot dog stands or teeth-whitening kiosks, another recent case exemplifies just how seriously the Tar Heel state’s sweeping morass of regulatory crimes may threaten our liberty. After battling life-threatening diabetes, state resident Steve Cooksey started an Internet blog on which he shared his experiences, described how a new diet helped him overcome his serious condition, and answered questions posed by blog readers.
According to the N.C. Board of Dietetics and Nutrition — to which the state legislature has delegated criminal-enforcement authority in its field — Cooksey was engaged in the unlicensed practice of “dietetics” and thus automatically guilty of a misdemeanor.
It’s hard to see how Cooksey’s blog could have endangered the public health: His website notified readers that he was neither a doctor nor a nutritionist. Rather than protecting the public, the state board’s prohibition on dispensing “free dietary advice” is most likely designed to protect the economic interests of dieticians.
And that prohibition is broad: As defined by the board, Cooksey’s crime would extend to ordinary advice exchanged in private emails and telephone calls with his friends and readers.
The reach of criminal law in North Carolina today is vast. The state’s 765-section criminal code is significantly larger than the comparable sections of neighboring South Carolina, Georgia, Virginia and Tennessee. Entire sections of the regulatory code — including those concerning agriculture, the environment and public health — make every violation a crime.
On average, state lawmakers are adding 34 new crimes annually — most of which lie outside the formal criminal section of the state’s law.
As the criminal laws and rules pile up, how can existing and prospective business owners be expected to know them all in order to avoid breaking the law? To be sure, mammoth companies like Bank of America or Duke Energy can follow the rules, staffed as they are with teams of lawyers and compliance officers. But the state’s entrepreneurs and small business owners — the chief job-creators and the engines of economic growth — are constantly in peril of prosecution; and while knowledge of the law is virtually impossible, ignorance of the law is no defense.
The criminal law is vital to protecting us from violent and property crimes and real frauds that inflict economic harms, but criminal penalties should not be associated with ordinary business practices that violate one of a vast array of regulations. Too often, regulatory crimes are little more than the byproduct of lobbying efforts by anti-competitive special interests.
By potentially ensnaring small businesses, such crimes hamper the state’s economic recovery. By threatening civilians with jail time for innocent conduct, such crimes endanger our liberty.
State legislators should reduce the threat of prosecution hanging over the heads of business owners by eliminating unnecessary crimes, re-examining the catch-all provisions that delegate criminal lawmaking to unelected bodies, and ensuring that unknowing violations of regulations that are not essential to the public safety do not lead to jail time for individuals.
James R. Copland and Isaac Gorodetski are director and deputy director, respectively, of the Manhattan Institute’s Center for Legal Policy and authors of a new report, “Overcriminalizing the Old North State: A Primer and Possible Reforms for North Carolina.”