Ducey takes preemptive strike on ‘sharing economy’ regulation

Rather than wait for the next regulatory fight over a “sharing economy” business to erupt somewhere in Arizona, Gov. Doug Ducey wants to make sure cities, counties and the state can’t regulate them at all – at least not without the Legislature’s permission.

Ducey is launching a preemptive strike at prospective future regulations on sharing economy businesses, such as Uber and Airbnb, with SB1524. The bill has two core provisions.

The first states that government entities and subdivisions can’t impose regulations on businesses that provide a “digital platform” for individuals to offer goods or services to each other in the same way they would regulate businesses that provide goods and services directly to customers. The legislation would prohibit the state or its political subdivisions from regulating, for example, Airbnb, an online service in which people rent out rooms in their homes, as if it were a hotel service, or from regulating Uber as if it were a taxi company.

“We live in a free country and we have a free-market economy. So why are we putting laws out there to stop businesses before they even start?” Ducey said. “Why are we taking regulations that were written decades ago for another industry and applying them to businesses like this?”

The second part of the bill curtails government’s ability to “increase regulatory burdens on a person” without express legal authority. The only exception it leaves is situations where there is a “critical or urgent need” that hasn’t otherwise been addressed by legislation or “self-regulation” by the industry in question.

Sen. Steve Smith, the bill’s sponsor, used the recent battle over ride-sharing services like Uber and Lyft as an example of why SB1524 is needed. After legislation failed that would have exempted the companies from following the same regulations as taxis, the Department of Weights and Measures under then-Gov. Jan Brewer cracked down on them. Ducey subsequently loosened the reins after taking office in January 2015, and claimed he fired the weights and measures director due to overzealous regulation of the ride-sharing industry.

“Look what happened with Uber last year,” said Smith, R-Maricopa. “The fight lasted a year and a half, almost two years.”

Smith emphasized that the bill does not prohibit all regulations on sharing economy businesses. But it only leaves the door open for new regulations, not approved by the Legislature, in critical situations.

“Unless it’s of some urgent nature that the Legislature didn’t already touch on … let’s leave sleeping dogs lay, so to speak,” Smith said. “If there is something that comes up, a critical need or urgent need that hasn’t been addressed, then there’s room in the bill to allow it.”

The Uber fight is long over, and separate legislation is working its way through the Legislature that would address online lodging services like Airbnb. But Rene Guillen, a policy adviser to Ducey, said SB1524 will help smaller businesses that haven’t yet become a household name, such as the services company Thumbtack, the delivery service Postmates, and sales company letgo, along with businesses that have not yet been created.

The bill is an outgrowth of Ducey’s well-documented enthusiasm for the sharing economy and his State of the State pledge in January to “stop shackling innovation and instead put the cuffs on out-of-touch regulators.”

“Arizona should be to the sharing economy what Texas is to oil and Silicon Valley used to be to the tech industry,” Ducey said in his State of the State address.

Some, such as the League of Arizona Cities and Towns and the city of Prescott, raised early concerns about the bill’s vagueness. The original version restricted the use of regulations intended for business-to-customer transactions to govern “a business that provides a mechanism for individuals to offer goods or services to each other or procure goods or services from each other.”

The Governor’s Office has ironed out some of the bill’s kinks in an attempt to make it a bit less vague, pushing an amendment specifying that the legislation applies to companies that provide digital platforms for person-to-person transactions.

Despite the change, some concerns remain. Ken Strobeck, the league’s executive director, questioned how the state would define “a business that provides goods or services directly to the customer,” while Alison Zelms, Prescott’s deputy city manager, said the bill is still too vague and expressed concerns that it could inadvertently affect city policies and activities.

The league is working with the Governor’s Office, which Guillen said is open to additional technical changes if more clarification is needed.

“We’re open to looking at that, as long as it preserves the intent of the original introduced legislation,” he said.

Aside from the league’s concerns, which it is discussing with the Governor’s Office, the bill has aroused little opposition. Even a handful of Democrats backed the bill in the Senate, giving it some bipartisan support.