The Regulators Strike Back: New Apps, Web Models Bump Against 20th Century Regulatory Restraints

badge-1In a battle of 21st Century business models and 20th Century regulatory regimes, the regulators may be winning round 1.  In Los Angeles, the city’s taxicab administrator sent letters to Uber, Lyft and Sidecar explaining that

[d]ue to the fact that your company has no permits or license to transport passengers for hire, in the interest of public safety, [Uber, Lyft or Sidecar] including all of its agents and contractors, is hereby directed to cease and desist from picking up passengers within the City of Los Angeles.

Each received a similar letter after launching in San Francisco earlier, which they resolved by signing an operating agreement with the California Public Utilities Commission.  The letters came at an awkward time, since tech-friendly mayor Eric Garcetti had just taken office.

In New York, a regulatory court fined a New York resident who sublet his place through Airbnb $2,400 for violating the city’s illegal hotel law.  In San Francisco regulators are concerned about property owners potentially using Airbnb service to get around local tenant protections and land use codes.  As NPR reports:

Questions over Airbnb’s legality have risen along with the web service’s impact on New York’s tourism industry. According to Crain’s, some 30,000 New York City residents are Airbnb hosts, accounting for hundreds of thousands of visits each year.  “That kind of demand is expected to generate around $1 billion in local economic activity in 2013,” Crain’s New York Business reports, “outstripping the impact of the city’s booming cruise-ship industry five times over, according to figures cited by tech-industry leaders with knowledge of the site.”

“It time to fix this law and protect hosts who occasionally rent out their own homes,” Airbnb said in a statementtells CNET. “Eighty-seven percent of Airbnb hosts in New York list just a home they live in — they are average New Yorkers trying to make ends meet”.

In the payment processing area, BitCoin and Square have also received notices from regulators in California and Illinois that they lacked proper licenses for their operations.

More Information:  Uber, Lyft, Sidecar get cease-and-desist letters frocm LA, CNET; LA sides with taxi companies, sends cease-and-desist letters to 3 ride-sharing startups, 89,3 KPCC; NY official: Airbnb stay illegal; host fined $2,400, CNET; Airbnb Stays Are Illegal In New York, Court Rules, NPR;  Bitcoin Foundation Receives Cease And Desist Order From California, Forbes