When the Government Gets All Up in Your Business

by Christina Sandefur
September 28, 2018

Innovative technologies are changing the way we live, work, and travel by more effectively connecting providers of goods and services with consumers. Entrepreneurs are able to reach new markets and realize creative and flexible ways to earn a living, while consumers get greater access to products and services at lower costs. But too often, federal, state, and local governments are imposing antiquated and incongruent rules that shut down these innovative ways of communicating about and facilitating exchange.

This week, I spoke to the University of Michigan Federalist Society to discuss just this problem, a talk called “When the Government Gets All Up in Your Business: Regulation and the Sharing Economy.” I explained that while officials claim that new businesses require new regulations, many sharing economy businesses are in fact not really new at all. Often, what makes the sharing economy unique is not that it sells new things, but that it makes it easier to exchange goods and services that have been around a long time.

Take, for example, home-sharing, a new term for the long-established practice of homeowners renting rooms or entire homes to overnight guests. Rather than celebrating companies like HomeAway and Airbnb—internet-based platforms that connect homeowners and guests better than ever before—many cities have responded by imposing draconian new rules that deprive Americans of some of their most basic constitutional rights, including the right to share information. For example, Chicago homeowners who offer their homes for rent through a platform like Airbnb must open their homes to government searches “at any time and in any manner.” In Miami Beach, a city built as a vacation destination that has always relied on tourism, the advent of online platforms to facilitate these exchanges prompted officials to outlaw the practice in much of the city, fining home-sharers up to $100,000 per night. Former Mayor Philip Levine, who signed the penalties into law, said, “Airbnb is an extraordinary company—I think it’s fantastic, but I just don’t love Airbnb on Miami Beach.” Some California cities have actually coopted platforms into doing their dirty work, forcing the companies to turn homeowners over to the cops if they list their homes for rent on their websites. These regulations don’t keep communities quiet, clean, and safe—indeed; they don’t even target bad actors. Instead, they punish responsible homeowners for using their property in ways Americans have been doing for centuries.

Local governments aren’t the only ones targeting the sharing economy—the federal government is also imposing new regulations on established practices. For decades (and with the Federal Aviation Administration’s blessing), private pilots have cut down on travel costs by sharing fuel costs and other expenses with passengers wishing to tag along for the ride, often advertising this opportunity by pinning flight plans on local airport bulletin boards or at community centers. Yet when Northeastern students and private pilots Alan Guichard and Matt Voska established Flytenow—a company that connects private pilots and passengers through an online bulletin board—the FAA shut them down, simply because they used the internet to facilitate flight-sharing.

Why should government subject decades-old, lawful practices like home-sharing and flight-sharing to new regulations simply because people use the internet to rent a home or share a flight?

When challenged in court, regulations that hinder economic liberty or private property rights are subject to the “rational basis” test, which is exceedingly deferential to government and requires the person being regulated to prove he should be free. But courts are generally more protective of free speech and other rights they consider “fundamental,” requiring the government to prove that the regulation protects public health, safety, or welfare. Yet bureaucrats continue to impose unnecessary and burdensome regulations on longstanding practices that are newly associated with the sharing economy. Why should a person’s right to share information—a fundamental right protected by the First Amendment—get less protection just because that person is sharing economic opportunities, rather than, say, political messages?

At the Goldwater Institute, we believe that regulations should target actual harms, without undermining rights. That’s why we’re promoting state legislation that requires cities to stop targeting home-sharing and instead focus on enforcing the anti-nuisance rules they already have on the books. It’s also why we support federal reforms that would safeguard flight-sharing, making it clear that pilots can use whatever means of communication they feel is appropriate, including the internet, to communicate their flight plans. And it’s why we created the Right to Earn a Living Act, which requires government to prove some real risk to the public before it can restrict the freedom of entrepreneurs.

When it comes to the sharing economy, government should not regulate purely communicative activities as if they were the same as the underlying practice being advertised. After all, advertising a car ride is not the same thing as selling a car ride. New economic innovations do not always require new regulations.

Christina Sandefur is the Executive Vice President of the Goldwater Institute.