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Constitutional Limits on Price and Rent Control: The Lessons of Utility Regulation

Publication Title

Washington University Law Quarterly

Abstract

The federal price control cases demonstrate that three factors play a predominant role in making the Hope doctrine inapplicable to particular types of price control: (1) the justification for the price regulation; (2) the duration of the regulation; and (3) the ability of a firm to withdraw from the regulated business. This Article initially explains the Supreme Court's reliance on the three factors in upholding the constitutionality of federal price controls that did not meet the Hope standards. Part II examines the relationship between the ability to withdraw from a price-controlled business and the constitutional standards governing the price control. This Part considers how a firm decides whether to remain in a particular business and how non-legal barriers to exit affect that decision. The Part also examines the barriers that result from investment in specialized assets and analyzes recent price regulation cases in which courts examined the relevance of non-legal barriers to exit. Part II then examines the legal restrictions on exit from the rent-controlled residential leasing business, including the restrictions on demolition and condominium conversion, and concludes that rent control must satisfy the Hope doctrine because the legal restrictions comprise an effective barrier to exit. Finally, Part III applies the constitutional limits on utility ratemaking to determine the constitutionality of the typical standards used in rent control.

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