‘Sharing Economy’ Companies Go Legit

By Michelle Quinn
San Jose Mercury News.

The strategy of “sharing economy” companies has been to go into new markets and ask for forgiveness, not permission, when regulators and lawmakers begin to raise concerns.

That approach seems to be working, but for how long?

At a time when both Uber, valued at $17 billion or so, and Airbnb, worth $10 billion, are reportedly heading toward a public offering, they will need to assure investors that they know how to work with local officials.

Airbnb proved that point last week when the San Francisco Board of Supervisors voted to make home-sharing legal, with caveats.

Legal legitimacy came to the firm six years after it was founded in the city.

But the San Francisco vote was just one of many showdowns taking place around the country between companies like Airbnb and Uber on one side and regulators on the other.

Recently, Virginia passed a law to permit ridesharing services like Uber and Lyft. While the law was being debated, the services had continued to operate despite state-issued cease-and-desist letters. The same playbook (cease-and-desist letters, a scramble to change the laws) appears to be operating in Anchorage, Alaska.

“It’s not a good way to start a relationship,” the city’s municipal attorney, Dennis Wheeler, told the Alaska Dispatch News.
Of course, the sharing economy can’t help but stir up conflict.

These companies disrupt existing industries like the hotel and taxi businesses. Lawmakers and regulators, perhaps pressured by the traditional businesses, start to closely scrutinize the practices of these sharing companies.

While the new businesses are breaking the laws, they are also winning fans among users who are making money and customers who like the service.

So while regulators threaten, lawmakers who face their constituents in public meetings try to find a compromise and get new laws written.

“It’s a natural process they are going through from the Pacific Northwest to Florida,” said Robert Callahan, the California executive director of The Internet Association, which counts Airbnb, Uber and Lyft among its 28 members.

“There are a lot of cities out there and a lot of different rules,” he said. “One thing they do know is that the constituents of the city are clamoring for the services to be viable and available.”

Despite fighting on numerous battlefronts, Uber chief executive Travis Kalanick has maintained a combative approach.

“If other companies are able to operate and there’s no enforcement of the regulations or laws, than we’re going to take that as tacit approval,” he said to a recent gathering of U.S. mayors, according to press reports.

The company recently hired David Plouffe, a veteran of the Obama presidential campaign, as the firm’s senior vice president of policy and strategy.

In a blog post announcing Plouffe’s hire, Kalanick said that “we are in the middle of a political campaign and it turns out the candidate is Uber.”

Airbnb has perhaps taken a more conciliatory tone in working with local officials.

The company gained approval in Portland and agreed to start collecting taxes. Airbnb has agreed to do the same in San Francisco, where the company and other peer-to-peer home-sharing sites had violated the city’s little-enforced ban on residential rentals of less than 30 days.

Some supervisors said Airbnb should also pay $25 million in uncollected taxes that it owed, taxes that hotels have to pay. But that effort failed.

Often breaking a law can force needed changes, said Janelle Orsi, executive director of the Sustainable Economies Law Center in Oakland.

“Truthfully what people want to do in the sharing economy is often illegal,” she said. “And I’m secretly glad they do it.”
But there are costs.

“They are undercutting and undermining the purpose of the law,” she said. “Cities need to act fast to protect these things.”
Sharing economy companies also need to take an inventory of whether these city-by-city battles, though they face powerful industry forces, can be handled in a more diplomatic way.

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