Imagine what would happen if an entrepreneurial Montreal tech whiz dared to launch a milk-sharing app. It would link Quebec dairy farmers looking to sell (rather than dump) regular excess supply with local cheese makers or restaurants via their smartphones. Tentative name: Moober.
It wouldn't be five minutes before Quebec's omnipotent farmers' union and provincial bureaucrats moved to shut the operation down, charging Moober with violating the sacrosanct rules of supply management that have "stabilized" the province's milk market for five decades.
From milk to maple syrup, supply management is seen in Quebec as a way to impose order on a messy free market. No matter its costs to consumers or its economic inefficiencies, no Quebec government wishes to see the current system disrupted by innovative upstarts.
Protecting the value of producer quotas takes precedence over everything else. Opening up supply-managed sectors to competition would render those quotas worthless, wiping out the effective pension plans of thousands of farmers. The Quebec government would be compelled – morally, but perhaps even legally – to compensate them, costing it billions it doesn't have.
This same logic explains why Quebec moved this month to side with the taxi industry in its existential struggle with Uber, the ride-sharing service that has bulldozed the rules of the road to upend urban transportation services almost everywhere.
A May 12 bill tabled by Liberal Premier Philippe Couillard's government would force Uber drivers to buy or rent a taxi permit and comply with a host of other regulations, such as the purchase of commercial insurance and background checks, that already apply to the traditional taxi business.
Quebec's proposed law, which goes further than other attempts to regulate ride sharing in North America, would effectively make Uber's services uneconomical.
Uber maintains that three-quarters of its drivers work fewer than 20 hours a week, while a similar proportion generate less than $5,000 a year in revenue. For most, driving for Uber is a complementary source of income and it would not be worth their while to rent a taxi permit, much less buy one. Hence, the bill, if adopted, would drive Uber out of the Quebec market.
"The alternative, which was looked at, would be to end the [current] system and buy out [exisiting] taxi permits," Quebec Finance Minister Carlos Leitao said this month. "There, we're talking about several hundred million dollars."
Supply management – in this case, limiting the pool of potential taxi competitors – won out again. The bill shows the lengths Quebec governments will go to stifle innovation in the name of the status quo. Scant regard seems to have been given to the longer-term costs of discouraging entrepreneurs, gouging consumers or preventing a more efficient delivery of services.
Members of the Quebec Liberal Party's youth wing came out strongly against the bill. "We can't plant ourselves in the middle of the river and stop the current," one young Liberal told Le Journal de Montréal. But in the end, the government was unmoved. Even Mario Dumont, the former leader of the defunct free-market Action Démocratique du Québec, defended the government, calling the bill "probably the best option available for a minister forced to proceed by elimination between unfair, impractical or unrealistic options."
Uber didn't help its case by flouting existing laws and bragging about it. That might work in places with a more libertarian bent, but Quebec is not one of those. Neither, apparently, is Austin, Tex., despite the city's reputation as a hub for hipsters and techies. Residents there voted this month to require Uber drivers to undergo fingerprint background checks, prompting Uber to suspend its services.
Uber has opted for the carrot over the stick in Quebec. This week, it proposed to pay an annual $100,000 administration fee and charge up to 35 cents per ride, in lieu of requiring its drivers to hold a taxi permit. The fees would generate about $3-million a year for the province. Another 7 cents per ride would be collected and forwarded to the provincial automobile insurance board. And Uber drivers would begin collecting federal and Quebec sales taxes.
Mr. Couillard rejected the proposal, saying, without a hint of irony, that Uber "must innovate more, go farther with their proposition than they have." It's a question, he said, "of fairness and social justice."
It's not clear what's fair and socially just about rewarding the rent-seeking behaviour of the taxi industry at the expense of consumers and suppressing economic efficiencies that benefit everyone. But in the capital of supply management, whether it's Uber or Moober, woe is she who would disrupt the sacred cows.