May hasn’t gone so hot for some of the sharing economy’s most promising entrepreneurs. 2012 might have hinted of challenges to come, but so far 2013 has overdelivered. In the last two weeks, New York regulators and courts have essentially shut three of these companies down, at least temporarily.
SideCar Technologies, a donation-based rideshare start-up, ceased its New York business after a judge said even free rides from the company would violate the city’s laws governing cars-for-hire, according to the Wall Street Journal.
Then last week, RelayRides, which allows car owners to rent out their vehicles, came under fire from the state Financial Services Department for what officials called “repeated false advertising and violations of insurance law, which are putting the public at risk.” Basically: RelayRides told car owners that the company’s insurance policy covered them 100 percent in the case of a car renter, say, mowing down a pedestrian, but the car owners could actually be found liable.
But the issue really came to a head this week, when a New York judge deemed vacation rental middle-people Airbnb illegal in New York City and New York state. Airbnb’s services violate laws against underground and underregulated hotels, as well as a state-wide ban on short-term rentals enacted in 2011. Airbnb is now lobbying in Albany to change the law, but the East Village host who rented out his apartment for a few days and was made an example of got slapped with a $2,400 fine.
Last year, California cracked down on ridesharing and car-hire start-ups. The state hasn’t shut them down — it’s looking for a way to regulate them within the current system — but it’s asking a lot of the same questions about insurance and liability that are vexing New York.
“It’s a blow for an industry still trying to gain credence with an insurance industry that’s largely still baffled of its very existence,” wrote Richard Nieva at PandoDaily. Of the company’s troubles, RelayRides CEO Andre Haddad said in a statement: “Innovation, by its nature, does not always fit within existing structures.”
These peer-to-peer services definitely don’t — in fact, in a lot of cases, they’re a direct challenge to local business and governance. To some extent, this clash isn’t just expected; it’s a necessary growing pain. After all, services like RelayRides and Airbnb have really wormed their way into our decaying economy.
If I can’t get a cheap place to stay or hail a quick, easy ride, that’s annoying and expensive for me. But that’s nothing compared to the potential consequences for people like my friend Kate, who is underemployed but making a decent wage driving for Lyft. The sharing economy has become just that — an economy — and a lot of people rely on it not just for convenience, but for a living.
Last year, Airbnb CEO Brian Chesky said the site has “helped thousands of people stay in their homes” during times of economic uncertainty, by providing them with another income stream.
The regulated economy has failed Kate and people like her. The sharing economy hasn’t. That’s power. And the more these start-ups become enmeshed in the socioeconomic fabric of an individual place and leverage it, the more powerful they will become.
Will that involve some following of the laws? Well, yes, sure. Maybe smaller, more nimble and more localized start-ups could better navigate these laws — or maybe it’ll take the sheer muscle of national and even international operations to bust past stodgy regulators and crappy municipal codes. Either way, there may be some bumps on the road toward sharing economy bliss, but the road’s still there.