Regulatory Barriers

Regulatory barriers are government-granted exclusive rights, licenses, or regulatory hurdles that limit or prevent competition. These create durable competitive advantages in regulated industries.

Buffett's View

Buffett has long favored businesses with regulatory protection. In his 2009 letter:

"Our regulated utility businesses benefit from government-granted monopolies. Competition is limited by the nature of the industry."

Types of Regulatory Barriers

1. Utilities: Electricity, water, gas — natural monopolies with rate regulation
2. Licenses: Pharmaceutical patents, broadcasting rights
3. Franchises: Taxi medallions (historically), gambling licenses
4. Environmental permits: Rare permits for mining, drilling, or waste disposal

Key Consideration

Regulatory moats can be double-edged — government that grants protection can also withdraw it through deregulation or price controls. Buffett prefers regulatory moats where the government is a "customer" rather than a "regulator" setting prices.