Sharing economy poster child Airbnb is under attack in New York and other cities for potentially breaking local laws related to the renting of properties.
Key quote from a Reuter's article on Airbnb's issues in New York:
... the company has run afoul of authorities in cities around the country for violating zoning laws that prohibit unlicensed rentals, as well as ducking taxes that hotels ordinarily have to pay. New York State senator Liz Krueger, the author of the 2010 law, has called Airbnb's business "unambiguously illegal."
And it's not just Airbnb. As the Chicago Tribune's When online upstarts rattle the playing field covers, many of the leading sharing economy companies are facing some sort of legal and/or regulatory challenges.
That sharing economy companies are facing increased regulatory and legal scrutiny is not a surprise. Industry incumbents and government agencies often respond to innovative newcomers by using regulatory processes to constrain the new entrants.
What I find surprising is how long it took for industry incumbents - and especially the hotel industry - to do this. In other industries incumbents have moved much more quickly.
A good example is what's going on with food trucks. Brick and mortar restaurants and their allies quickly responded to food trucks with a barrage of regulatory attacks.
As we've pointed out in the past, there are many examples of industry incumbents trying to deter innovative new competitors using political power. And almost none have succeeded.
The reality is when a new entrant offers a better customer solution it's likely they will eventually overcome political and regulatory roadblocks and win in the marketplace. We think this will be the case for most sharing economy firms.