Virginia's War on Uber and Lyft
The hidebound arm of an administrative state once again has descended upon one of the nation's most visible, exciting, and novel industries. The Virginia Department of Motor Vehicles on Thursday furnished both Uber and Lyft -- businesses that match people willing to pay for rides with people willing to provide them -- with letters demanding they cease and desist operations within the commonwealth.
The DMV alleges these companies are operating in violation of Virginia law. While that may be true, attempting to kill a disruptive technology is a regrettable way to handle the problem.
The regulatory framework in Virginia was crafted to accommodate existing industries, and it doesn't have a category that's appropriate for a business like Uber or Lyft. The state doesn't interfere with "ride-sharing arrangements" in which no money changes hands, but all "for-profit passenger carriers" must obtain operating authority from the state. To provide rides for pay, the commonwealth has determined, Uber's and Lyft's drivers must be licensed as taxicab operators, and the services must register either as common carriers or as contract carriers.
Virginia's DMV is still studying the law, and the legislature may well change it in the next session, but the state has asked Uber and Lyft to stop their "illegal operations" in the meantime.
By its very nature, innovation will force regulators to play catch-up. But why must innovation languish in the face of regulatory torpor? If instead we wanted to facilitate novel industries, what would our approach to regulation look like?
It certainly would not ask an administrative body to abdicate its duties. If anything, it would require full and robust communication between the novel industry and its potential regulator. Frank, timely, and clear conversation about new practices, organizational principles, and early experiences can help regulators and policymakers alike assess how best to accommodate the new industry.
With less aggressive regulation, the civil-liability system, though fraught with excess and absurdity, could handle cases in which novel industries harm customers or others. And should a novel industry prove too disruptive, legislators, not regulators, could act. Regulators are bound by the scope of their devolved authority, while lawmakers are better equipped institutionally to address whatever fresh policy questions such industries pose.
The ongoing struggle of the transportation network companies (TNCs) -- lodestars of the innovator-vs.-regulator conflict -- has painted in stark terms the downsides of regulatory security blankets. Virginia's present approach, one akin to forcing square pegs into round holes, is frustrating for both regulators and regulated firms.
When the administrative state lacks the ability to regulate a new business efficiently, it should grant the business some space rather than trying to force it into existing regulatory categories. In exchange for granting innovators this space, society will more quickly experience the benefits of novel businesses and learn to avoid the shortcomings of innovation. Most importantly, society will again experience the transformative power of creative liberty.
The negativity of the Virginia DMV was predictable, but is not necessarily the Homeric victory of the TNCs. As evidenced by their inevitable difficulties in California, they too may not be playing their role in the "facilitative approach." But at the end of the day, administrative institutions must adapt to disruptive technology. Until they do, we all lose.
Ian Adams is an associate policy analyst with the R Street Institute.