Businesses and industries too often seek to use the power of    the state to eliminate or impair their competitors. Such    protectionist proposals end up hurting consumers because they    result in less choice, reduced convenience, and higher prices.    A new protectionist effort is currently underway in Utah, a    politically red state with a Republican governor and a state    legislature completely controlled by the GOP.  
    The target of this latest ill-advised push is Zenefits, a San    Francisco-based startup company launched in 2013. As TechCrunch    describes it, Zenefits helps businesses by providing a    cloud-based dashboard to HR departments designed to help small    businesses manage hiring, termination and all the benefits and    payroll details necessary in-between those events. Zenefits    also connects companies with health insurance providers.  
    This cutting edge startup has experienced great success early    on in large part because, as the aforementioned TechCrunch    article points out, Zenefits makes it justthat much    easierto manage the insurance piece once a business    has authorized the company as its broker. And, as a result,    more traditional insurance brokers are finding it difficult to    compete with the companys business model.  
    Utahs traditional insurance brokerage community is none too    pleased about having to compete with Zenefits. On November 20,    Utah Insurance Commissioner Todd Kiser sent a letter to    Zenefits, informing the company that it is violating Utah    inducement and rebating laws because it offers its software for    free. Kiser said the company should be assessed $5,000 for each    violation and twice the profit generated per violation. Because    of this, Zenefits would currently be on the hook for at $97,000    penalty.  
    Kiser told Zenefits that it could come into compliance with    state law by raising prices and ceasing to advertise. Zenefits    does not charge businesses for their software, but they    generate a profit from commission paid by the insurance    providers with which they connect their clients. Zenefits    understandably does not wish to go along with Kisers orders.    Its worth noting that Commissioner Kiser was an insurance    broker for 25 years prior to being elected to the state    legislature. Kisers dictate, at the expense of small    businesses, will protect brick-and-mortar brokerages like the    one he used to run. He even said, in his own words, the ease    of using Zenefits is part of the reason why he went after    them.  
    So in Utah, its apparently a bad thing for a new company to    make it easier for employers to operate their business. Thats    an odd approach and one that wont help the state market itself    to companies looking to move to and create jobs in Utah. Its    also at odds with Utah Gov. Gary Herberts stated commitment to    foster and support tech innovation in the state. Other states    have smartly welcomed Zenefits.  
    According to Mark J. Perry, a scholar at the     American Enterprise Institute, its classic    government-enforced protectionism that protects existing,    incumbent high-cost industries from the competition of    efficient, low-cost startup rivals. And its also, as Perry    puts it, a classic case of regulatory capture, which is when    a regulator eventually becomes dominated by the very industry    it was supposed regulate.  
    Its a shame that Utah officials are targeting a company that    is creating jobs and helping local small business. According    Fortune    Magazine, Zenefits has 2000 paying clients and 450 employees.    The San Francisco-based company has signed a development deal    with Arizona to add 1,300 jobs there in the next three years.    After raising $66 million in a June funding round and being    referred to as the    hottest deal in Silicon Valley, the startup, valued at    $500 million, and its job-creating capacity are poised for    further expansion.  
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Republican Crony Capitalism On Display Out West