Arizona Law Journal of Emerging Technology, Vol. 1, Issue 1
20 Pages Posted: 18 Mar 2017 Last revised: 7 May 2017
Date Written: May 5, 2017
Innovative technologies that connect service providers to consumers are changing the way people live, work, and travel. From Uber and Lyft in transportation to Airbnb in lodging — and smaller platforms for everything from home cosmetology services to babysitters — people are using finding new ways to trade goods and services. Consumers gain greater access to products and services at lower costs, and pioneering individuals and businesses are reaching markets they would not otherwise have reached.
Unfortunately, many state and local governments, as well as the federal government, have reacted not by welcoming these new developments, but by imposing antiquated or incongruent rules that shut down these innovative ways of communicating about and facilitating the exchange of goods and services.
Behind these restrictions is often the notion that new economic conditions require new forms of regulation. But in fact, much of the “sharing economy” is not really new at all. Rather, these businesses help facilitate transactions, or advertise services that have themselves been around for a long time. Often, what makes the sharing economy unique is not that it sells new things — it usually does not — but that it helps people learn about, or reduces the transaction costs involving, things that are not new. But the sharing of information is different than other activities, especially because the sharing of information is specifically protected by the First Amendment. Thus, when discussing the regulation of the sharing economy, it is important to keep these principles in mind: just because the mode of advertising an activity has changed does not mean that government must impose new regulations on a long-standing activity. Likewise, government ought not regulate purely communicative activities as if they were the same as the underlying practice being advertised: advertising a car ride is not the same thing as selling a car ride. And if one has a right to let a guest stay in one’s home for money, that right does not change just because one advertises that fact in a new way. Ignoring these principles leads to regulatory mismatch.
This article makes the case against this mismatch using three case studies. First, this article addresses home-sharing, a new term for a centuries-old practice of homeowners allowing overnight guests in their homes. Lawmakers nationwide are cracking down on homeowners’ ability to use the internet to offer their homes for rent. Next, this article discusses Angels on Earth, a dispatch service that connects people who are homebound due to age or medical condition with salon and spa services. Although its services only involved the exchange of information, bureaucrats tried to force Angels on Earth into the same regulatory framework as the cosmetologists it deployed — a classic instance of regulatory mismatch. Finally, this article tells the story of Flytenow, an innovate startup that allows private pilots to share travel plans and trip expenses with passengers. Simply because Flytenow created a more efficient way to promote that longstanding and lawful practice, the federal government adopted new regulations that shut the business down completely. These cases illustrate the absurdity of applying new regulations to longstanding practices — or shoehorning new businesses into old regulations — simply because technology has made the voluntary, harmless, and lawful exchange of goods and services more efficient.
Keywords: sharing economy, shared economy, home sharing, home-sharing, homesharing, Flytenow, Airbnb, Homeaway, property rights, economic liberty, cosmetology, commercial speech, Reed v. Town of Gilbert, content-based speech restrictions
JEL Classification: K10, K11, K23, L86