Can Uber, the Shared Economy Outrun Busybody Regulators?

EspañolLast week, the Virginia Department of Motor Vehicles sent out cease-and-desist letters to ridesharing services Uber and Lyft, throwing throngs of Washington yuppies into panic about how they will get around when traveling south of the Potomac.  DMV Commissioner Richard Holcomb claims that the two companies’ services “are not ridesharing arrangements as defined in Virginia law” exempt from regulation because their drivers receive payment.

While most commentators in the days hence have largely focused on how valuable the two companies services are, the real story may be the outrage itself.

Within hours of the letters being sent, Uber had sent out a mass email reassuring their Virginia customers that they would continue service while urging them to express their disapproval to Commissioner Holcomb via email and phone as well as with the Twitter hashtag #VAneedsUber. The latter has hence become a trending topic on the microblogging website in the D.C. area.

Uber is no stranger to legal troubles and, in fact, has successfully wielded public outrage as a weapon to ward off regulatory attacks many times in past. They’ve repelled bureaucratic wrath in almost every major city they’ve set up shop — D.C., San Francisco, Los Angeles, Chicago, and New York, to name a few.

In locations where their services were illegal because of anachronistic codes, Uber has worked with policymakers to facilitate a friendlier regulatory environment. Such is the case in Colorado, which became the first state just this week to pass legislation explicitly regulating mobile application-based ridesharing services. But even in more politically hostile environments, Uber has forged ahead against government protests. Such is the case in Austin, Miami, and Orlando, where the service launched last week despite despite warnings that their service is illegal in each locality.

Why is Uber going on the offense against governments that most businesses would cower to? The company is so battle-born after past regulatory conflicts that their employees have even dubbed a name for their tactics — “The Playbook.” As founder and CEO Travis Kalanick explained to Inc. last fall, “Uber riders are the most affluent, influential people in their cities. When we get to a critical mass, it becomes impossible to shut us down.”

Kalanick’s statement says much more about the power of the sharing economy than any analysis ever could. Regulatory barriers to competition are nothing new. From taxi drivers lobbying for a medallion system to brick-and-mortar restaurants calling for stricter regulations on food trucks, special interest groups have been restricting competition for decades. For most of recent political history, this cronyism has gone largely ignored because of the concentrated benefits of the policies and diffuse costs of opposing them.

For example, it would be better for consumers to have more taxicab drivers on the streets instead of a cities implementing quotas on new drivers, as with a medallion system. However, the average rider thinks little about taxicab policy short of the awkward conversation they make with their cab driver en route to the airport.

But now in our age of social media, expressing political disapproval is as easy as a 100-word email or 140-character Tweet — which is precisely why companies like Uber are not afraid of being bold. They have the digital power of the people on their side, in a way that was all but impossible only a few years ago.

In this manner, the emerging sharing economy could be a major paradigm shift, not just in how consumers share property, but in how they ward off government regulation. Busybody bureaucrats will have a tougher time stifling innovative services like Uber with such a loyal and vocal customer base on their side.

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