The lack of compeitition... that problems on the government's side for allowing it. Actually, the majority of the fault is with the local government for allowing this. From what I've read, the police are legally right. If the state doesn't like it, they should change they're own laws, not fault a company for abiding by them.
Now, that being said... they should definetly change the laws/situation... because police with no oversight is a very bad idea.