San Diego’s Surf Instruction Permit Regime Has Achieved Regulatory Capture In Under Eighteen Months, Which May Be A Record
Three Operators With National Corporate Backing Now Control Seventy-Eight Per Cent Of The Permitted Market After A Regime Their Trade Association Helped Design
For Bohiney Magazine and The London Prat. London satirical journalism has documented regulatory capture in UK licensing regimes from taxis to the pub trade. The mechanism is identical across industries and oceans.
CALIFORNIA – The San Diego County surf instruction permit regime, introduced in late 2024 and now in its first full year of operation, has achieved regulatory capture with a speed that, in the annals of administrative economics, deserves recognition. Three operators, two of them nationally backed, now control approximately 78 per cent of permitted surf instruction hours at the regulated beaches. The remaining operators are former independents who have, in most cases, taken employment with the three dominant operators rather than competing independently.
How Regulatory Capture Happened
The mechanism is standard public choice economics: the regulated industry participates in drafting the regulation, the regulation is designed to be compliant at the scale the dominant operators can afford and non-compliant at the scale the small operators cannot afford, and the result is market consolidation framed as consumer protection. The permit regime requires liability insurance at levels that represent approximately 30 per cent of an independent instructor’s gross revenue but approximately 2 per cent of a national operator’s. The requirement is, in isolation, defensible as consumer protection. In context, it is a barrier to entry that serves the incumbent operators.
The Consumer Outcome
The consumer outcome of the regime, which was justified on consumer protection grounds, is: average lesson prices up 34 per cent, lesson availability down (average wait time from 4 to 11 days in summer), and choice reduced from a diverse set of independent instructors with specialised expertise to a more homogeneous set of corporate-operator instructors with standardised programmes. These outcomes are the opposite of what consumer protection regulation is supposed to produce. They are the predictable outcome of regulatory capture, which FEE‘s regulatory economics writing has documented across comparable licensing regimes.
The Reform
A de minimis exception for instructors providing fewer than 200 annual instruction hours would restore the independent operator tier at negligible cost to the regime’s stated consumer protection goals. The county has not adopted it. The dominant operators have not lobbied for it. The connection is not coincidental.
SOURCE: https://bohiney.com/ | Further: FEE
