Federalist Society Explores Regulatory Hurdles in “Sharing” Economy

Ryan T. Darby Ryan T. Darby Leave a Comment

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The Federalist Society’s recent Western Conference focused upon the innovative new “sharing” economy, and the looming regulatory threats.

The afternoon panel featured attorneys Katie Chen from Lyft and Andrea Lobato from Airbnb, who discussed the legal and regulatory challenges facing their services, as well as the opportunities they offer to consumers. Ride-sharing and room-sharing have grown tremendously popular overnight, and more traditional providers—such as taxi companies and hoteliers—are pushing back by lobbying government to crack down on these upstarts through tighter regulations.

I found it noteworthy that these services are very cognizant of the regulatory risk, and proactively attempting to mitigate it through quality control measures. Ride- and room-sharing services offer rating services that immediately allow users to rate their driver or host, and vice versa. This ensures a quality service and quality clientele, the latter of which is especially important to neighbors of Airbnb hosts who understandably want to avoid unruly or unsafe guests. In fact, Ms. Chen specifically stated that Airbnb encourages unhappy neighbors to report disruptions so it can address those issues. Proactively engaging the community is important for keeping regulators at bay.

That’s not to say that there are no challenges here. Some Airbnb hosts have encountered legal problems regarding improper subleases and HOA violations, and “surge pricing” by Über and Lyft has drawn negative publicity (even though consumers are made well aware of it, and it’s an efficient means of allocating limited supply during high-demand periods). Nonetheless, these are innovative companies led by smart and creative thinkers, so I’m confident that they will devise pro-consumer solutions to these issues.

Of course, their success is contingent upon the government not pulling the rug out from under them.

Evan Baehr of Outbox offered an instructive lesson on the power of government to destroy. Outbox was an innovative startup whose mission was to collect its subscribers’ mail from the post office, and immediately scan and e-mail it. This allowed customers to retrieve their mail more quickly, reduce clutter, and opt out of unwanted advertisements. Unfortunately, Postmaster General Patrick Donahoe squashed the idea by frankly telling Mr. Baehr that mail recipients aren’t his customers, but rather the “several hundred volume mailers, and my product to them is the guaranteed delivery of their mail onto the kitchen tables of Americans.”

As Mr. Baehr observed from his experience, private enterprise can’t succeed when it’s being regulated by its competitor. The possibility of older “legacy” competitors capturing their respective regulators and legislators is a very real threat to the sharing economy. As co-panelist Stephen Miller surmised, increased regulation is inevitable; the real question is what these companies—and we as consumers—can do to allow these services to continue to thrive and satisfy their customers.

Ryan T. Darby is the president of the San Diego Chapter of the Federalist Society, a legal organization founded on the principles that the state exists to preserve freedom, that the separation of governmental powers is central to our Constitution, and that it is emphatically the province and duty of the judiciary to say what the law is, not what it should be. The Federalist Society takes no position on particular legal or public policy initiatives. Any expressions of opinion are those of the author.

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