MALOCLUSION DENTAL Y LOS SIGNOS TEMPRANOS

2.4.1 The Concept of a Business Affected With the Public Interest

It is useful to consider at this stage the historical background to the evolution of public utility services as this serves to throw some light on the basis for regulatory intervention in their activities.

The utility company is a comparatively recent phenomenon which really only developed in its recognisable contemporary form over the course of the last century, in conjunction with the evolution of the modem city and its associated services. The supply of piped gas and water, and later in the 19th century the public reticulation of electricity, followed later by the growth of domestic telephone services, led to corresponding regulatory development in the utility area. However, the conceptual origins of utility services predate the provision of those services in their modem form. As was noted above, monopoly privileges originated at a much earlier stage in English history and achieved prominence during the Tudor and Stuart periods. They arose in the context of the guilds, of patent rights for individual inventors and in relation to the foreign trading concessions granted to the early chartered companies such as the East India Company. At common law certain essential occupations and callings were also identified and made the subject of special obligations.

Thus, at a comparatively early stage in English legal history, ferry proprietors were permitted monopoly rights in respect of their particular routes, subject to controls by the courts over the reasonableness of their toll charges, in retum for an obligation to provide an adequate and seaworthy s e r v i c e . ^ 3

43, See Storey, "Origin and Monopoly Rights of Ancient Ferries" (1914-15) 63 U Pa LR 718 at 729: "The public aid is also shown in the fact that the English courts always construed the ancient ferry franchise to be an exclusive monopoly. This is interesting in view o f the well settled rule that all grants from the Crown are construed strongly against the grantee. The basic reason for this ruling is found in the utilitarian policy that what is best for the greatest number. In 1444 Chief Justice Newton gave as the reason for this protection that the ferry man was

The courts gave a specific remedy to a ferryman, allowing protection against competition. This was conferred initially by way of an action upon the case and later in equity, or at the instigation of the Crown, on the basis of the prerogative writ of quo warranto.^^

Sir Matthew Hale, in his influential treatise De Portibus Maris, published posthumously by Hargrave in 1787 over a century after Hale's death in 1676, drew attention to the public interest element which he considered affected certain occupations, such as the proprietors of public wharves, operators of crane services and similar persons.^^ The list of public occupations was gradually expanded and eventually included bakers, brewers, cab drivers, carriers, inn keepers, millers, blacksmiths, surgeons and tailors as well as the traditional categories of ferrymen and wharfingers.^*^ Even before this time the English courts had begun to recognise the element of public service implicit in a number of these occupations.^^ In the case of

compellable to have adequate service and keep the ferry in proper condition. If he was bound to do this, then the law must in turn protect him from competition which would likely be ruinous to him. The courts were never alarmed over such a monopoly because the toll could only be reasonable, and hence they had the complete supervision of them."

44. For examples of these different procedures see Blissett v Hart (1744) Willes 508, 125 ER 1293;

Churchman v Tunstall (1659) Hardr 162, 145 ER 432; Cory v Yarmouth and Norwich Ry Co.

(1844) 3 Hare 593, 67 ER516.

45. Hale referred to the fact that even though the wharf or crane might be established as a private business, such facilities nevertheless effectively enjoyed monopoly rights simply because there might be no other licensed wharf in the vicinity. In such cases the law imposed an obligation on the proprietor to only charge at a moderate rate. As Hale put it: "...the duties must be reasonable and moderate, though settled by the King's licence or charter. For now the wharf and crane and other conveniences are affected with a public interest and they cease to be Juris privati only; as if a man set out a street in new building on his own land, it is now no longer bare private interest, but is affected by a public interest." (See Hargrave, Collection o f Tracts relative to the Law o f England at 77.) See also on this topic de Smith, Woolf and Jowell, Judicial Review o f Administrative Action (Sweet & Maxwell, London, 5th ed, 1995), para 3-011. For recent discussions of the life and work o f Sir Matthew Hale see D Yale, Hale as a legal historian. Selden Society lecture delivered in the Old Hall o f Lincoln's Inn, 7 July 1976 (Selden Society, London, 1976); Cromartie, Sir Matthew Hale 1609-1676: Law, religion and natural philosophy

(Cambridge Studies in Early Modem British History, Cambridge UP, Cambridge, 1995). 46. For a general discussion of these developments in both the English and United States contexts

see Phillips, The Regulation o f Public Utilities - Theory and Practice (Public Utilities Reports Inc, Arlington, 1984) at pp 75-84. The excerpt from Sir Matthew Hale's work which is quoted in note 45, supra, was cited with approval by the Supreme Court o f the United States in the leading case o f Munn v Illinois 94 US 113 at 131-132 (1877) by Chief Justice Waite.

47. See for example Rich v Kneeland (1613) Cro Jac 330, 79 ER 282; Jackson v Rogers (1683) 2 Show 327, 89 ER 968; Lane v Cotton (1701) 1 Ld Raym 646 at 654; 91 ER 1332 at 1336: "If a man takes upon him a public employment, he is bound to serve the public as far as the

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ferries, such recognition extended back as far as the fifteenth century ^8 The use of the term "common" in this context referred to an occupation with a public element, in the sense that those carrying it on were not only available to serve the public generally but were also subject to a certain degree of state control. A recent study by Craig in this area has noted the evolution of common callings and their relationship to the exercise of monopoly power.^^

Hale's principle of "business affected with a public interest" proved remarkably durable, both in England and Commonwealth jurisdictions, as well as in the United States, and influenced the case law in this area well into the present century,^® although, as will be seen later, the extension of his principle by the United States Supreme Court to justify the validity of general regulatory statutes proved to be controversial. The source of this controversy arose in part fi’om the broad analogies which were drawn in some of the earlier American authorities between Lord Hale's traditional categories, such as wharves and ferrymen, and other more modem undertakings less directly connected

employment extends; and for refusal an action lies, as against a farrier refusing to shoe a horse, against an innkeeper refusing a guest, when he has room, against a carrier refusing to carry goods, when he has convenience, his waggon not being full." These developments were noted by Pound in his pioneering work. The Spirit o f the Common Law (Marshall Jones Co, Boston, 1921) at p 14. See also Editorial Note, "An historical perspective on utilities" (1990) 1 Util LR 3.

48. See for example Trespass on the Case in Regard to Certain Mills (1444) YB 22 Hen VI, f 14, where Newton J in the Court o f Common Pleas, contrasting the position o f a feny operator with that of competing mills, observed; "...in your case you are required to maintain the ferry and to operate it, and repair it for the convenience o f the common people..."

49. See Craig, "Constitutions, Property and Regulation" [1991] Public Law 538 at p 540: "...the origin of the term common calling was simply a service that was available to the public generally, a "holding out". There could therefore be common carriers, common inn keepers, and common millers. Those who exercised a common calling had a duty to serve at a reasonable price. Historically, this obligation appears to have evolved due to economic and social conditions. In times of social hardship, such as the period following the Black Death, it might be possible for a tradesman to exact "any price he pleased". The obligation to serve at reasonable prices was intended to counteract this potential for abuse of market power. As the law developed, the types of industry which retained the label "common" tended to be those which possessed a monopoly character, such as railways and public utilities." In a similar vein see Adler, ""Business Jurisprudence" (1914) 28 Harv LR 135 at pp 153-158; Arterbum, ""The Origin and First Test of Public Callings"" (1926-27) 75 U Penn LR 411.

50. For a comprehensive recent discussion of these principles, tracing the enduring influence of Hale"s views on public utilities law, see Taggart, ""Public Utilities and Public Law"" in Joseph (ed), Essc^s on the New Zealand Constitution (Law Book Co, Sydney, 1995). These principles also took root in Scotland, as Professor Prosser has pointed out. See Prosser, ""Privatisation, Regulation and Public Services"" [1994] Jur Rev 3 at 10, citing Aiton v Stephen (1876) 3 R (HL) 4.

with the provision of services in the public interest, such as grain warehousing, sales of theatre tickets, fees of employment agencies and sales of petrol for motor vehicles.^ ^ However the idea that a utility company has an obligation in the public interest to supply all of its customers without discrimination and at a reasonable price is one which has found favour at some time or another in almost all common law jurisdictions.^^

These developments in the legal concept of the public utility were paralleled at the level of economic theory by corresponding theoretical analysis. The classical economists, such as Adam Smith, far from being opposed to all government intervention in economic affairs (as some, more recent commentators might have us believe) recognised the reality that economic regulation by the state was likely to remain inevitable.53 xhis was especially the case given the propensity of merchants and others to use every available opportunity to preserve their own position.^"^

It may be, as later critics (notably Marx) have argued, that theories such as those advanced by Smith and other accounts of the processes of capitalism from this period failed to envisage the changed circumstances of the next two centuries, including wholesale industrialisation, massive unemployment, the growth of international

51. For a discussion of the application in the United States of Hale's ideas in this area see Hamilton, "Affectation with Public Interest" (1930) 39 Yale U 1089 at 1089-1090; Jones, supra note 34; McAllister, "Lord Hale and Business Affected with a Public Interest" (1930) 43 Harv LR 759. 52. A selection of cases illustrating this principle or derivations from it is set out in Taggart, supra

note 50. Some examples are: Allnutt v Inglis (1810) 12 East 527, 104 ER 206; Minister o f Justice fo r the Dominion o f Canada v City o f Levis [1919] AC 505 (PC); State Advances Superintendent v Auckland City Corporation and the One Tree Hill Borough [1932] NZLR

1709; St Lawrence Rendering Co. Ltd v Cornwall [1951] 4 DLR 790; Nebbia v New York 291 US 502(1954).

53. Smith, The Wealth o f Nations, supra note 8, Book 1, p 159, on the regulation of the price of bread: "Where there is an exclusive corporation, it may perhaps be proper to regulate the price of the first necessary of life. But where there is none, the competition will regulate it much better than any assize." See also Book 11, pp 344-345 (on the need for regulation o f the issue o f promissory notes by bankers as a means o f effecting payment to traders): "Such regulations may, no doubt, be considered as in some respect a violation of natural liberty. But those exertions of the natural liberty of a few individuals which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments; of the most free, as well as of the most despotical."

54. Smith, supra note 8, Book 111 at p 437: "All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim o f the masters of mankind. As soon, therefore, as they could find a means of consuming the whole value o f the rents themselves, they had no disposition to share them with any other persons."

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oligopolies of immense power and seemingly uncontrollable economic fluctuations.^^ While such criticisms may be justified in part, they would have required Smith to have a much clearer crystal ball than not only all of his contemporaries but also many who came later. Smith himself was under no illusions that the unrestrained quest for profit on the part of merchants and landowners could have detrimental effects.^^ He was also among the first to identify the consequences of market failure and the need to impose external controls where this had occurred.

It was not long before some of Adam Smith's successors recognised the need to control the activities of the emerging public utility companies in the public interest. The Scottish economist John Ramsey McCulloch, writing in 1825, advanced the view that the dividends of public utility companies ought to be made subject to control by the state in order to prevent those companies exploiting their monopoly positions.^^ Others, such as John Stuart Mill, believed that monopoly power would gradually be eliminated by the pervasive effect of competition.^^

Perceptions of the need to control natural monopoly power in the public interest are therefore not new. Indeed they predate the modem public utility company by several hundred years. Sir Matthew Hale would have had little difficulty in comprehending the need for enforceable regulatory powers in the economic sphere in the twentieth centuiy. The striking thing is that so many of the lessons of the past have tended to be ignored in the present.

55. For a recent defence o f Smith's approach in the light o f these criticisms see the biography by Ross, The Life o f Adam Smith (Clarendon Press, Oxford, 1995), who notes at p 420: "...in facing up to a world where there is roguery and oppression, he counsels self-command, not abnegation. In all this, he strikes the casual reader as not cynical but realistic."

56. See for example the passage quoted in note 54, supra.

57. See McCulloch, The Principles o f Political Economy (Routledge/Thoemmes Press, London, 1995, facsimile reprint o f 4th ed, 1849, first published Edinburgh, 1825) at p 299: "Still, however, there are many cases in which it is for the public advantage that companies with such [natural monopoly] privileges should be established, under proper regulations [l]n authorising the establishment of companies for such purposes, such conditions should be inserted in the acts as may be adequate for the protection of the public interests. This important consideration has, however, been far too little attended to."

58. See Mill, Principles o f Political Economy (1948, reprinted Augustus M Kelley, New York, 1961) at p 67, where the author noted that competition was "... making itself felt more and more through the principal branches of retail trade in the large towns."

2.4.2 The United States Approach to the Public Utility Concept

As in England, the American courts were prepared to recognise at an early stage the validity of exclusive franchises for particular activities, such as turnpikes, ferries, canals and bridges.59 However, as the nineteenth century progressed, courts in the United States came to recognise that the concept of the grant of an exclusive privilege, especially of an essentially private nature, was likely to constrain industrial and commercial development and these earlier judicial approaches gradually gave way to an acceptance of the need for greater competition in such areas.^®

The enthusiasm with which the American courts embraced the concept of an activity or business affected with a public interest, at least during the period from 1876 to 1950, also serves in some measure to explain the divergent approaches to public utility regulation which developed in the United Kingdom and the United States. At least one writer has sought to identify the British approach to public utility regulation as being analogous in its rationale to the views expressed in the dissenting judgments in Munn v

Illinois, a n d in other later judgments of the US courts which have expressed similar

views. These are that industries exhibiting monopolistic features are not liable to government control by virtue of their inherent differences from other industries (in terms of the presence or absence of a public interest element) but simply because of the potential for abuse which is inherent in the exercise of monopoly power.^2

59. See for example Burrows v Pixley 1 Root 362 (1792, Conn); Livingston v Van Ingen 9 Johns 507, 573 (1812, NY); Charles River Bridge v Warren Bridge 7 Pick 344, 456 (1829, Mass). For a discussion o f the early American cases see Horwitz, The Transformation o f American Law 1780-1860 (Harvard UP, Cambridge, Mass., 1977), chapter IV, pp 116-122.

60. See Horwitz, ibid at pp 138-139: "In short, by the time the Charles River Bridge case was decided by the Supreme Court [in 1837, following the first instance decision of the Massachusetts Court in 1829 cited in note 59], recognition of the need to prevent future exclusive monopolies for transportation was no longer confined to a portion of the political spectrum. The only substantial disagreement turned on the proper means for avoiding the consequences of earlier monopolies... Within less than a generation, judges and jurists had come to agree that a policy in favor of competition was a sine qua non for future economic development."

61. Supra note 46.

62. Dimock, British Public Utilities and National Development (George Allen & Unwin Ltd, London, 1933), at pp 23-24: "In America the public utility concept has had the effect of creating two fairly distinct categories o f business: the private and the public. In England there has been no such clear-cut division. Governmental supervision has been merely a matter o f degree. Practically every business is subject to public interference in certain respects. Furthermore,

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Finally on this aspect, in an age when public law doctrines are more frequently (and quite properly) invoked to accommodate issues of evolving regulatory policy, the continuing relevance of common law concepts of public service in the area of economic regulation should not be underestimated, as at least two US writers on the subject have recognised.^3 Haar and Fessier traced the evolution of the common law obligation of service and its application in a more concrete context to the Town of Shaw in Mississippi, where the provision of public utility services to the rich and poor sections of the town during the 1960s was manifestly disproportionate, to say the least. Litigation based on Constitutional principles such as non-discrimination was ultimately successful in obliging the local authority in that case to change its policies relating to