Eric Tanenblatt: The Reason Why the ‘Next Uber’ Might Never Exist

Eric Tanenblatt

Wednesday, June 8th, 2016

The disruption economy is a uniquely perilous landscape, a theater of war littered with the corpses of those upstarts whose technology failed or, worse yet, those whose industry-rattling innovation was sabotaged by inadequate responses to regulatory hazards.

Onerous regulations on ridesharershotel taxes on homesharers—these are the measure of an upstart’s disruptive impact. If regulators are seeking to ban you, you’re doing something right: a hit dog will holler, after all.

But hit dogs often bite back.

Across the full spectrum of the economy, entrenched industries have mobilized at all levels of government to arrest the disruptive economy. And they’re doing a fine job of it.

From federal red tape to tedious municipal licensure requirements, incumbents are waging a full court public policy press to stifle innovation. In most cases, the offending disruptors never anticipated the regulatory tempest that would soon buffet them.

When on-demand platforms were first leveraged to hail a ride years ago, the blossoming ridesharing industry underappreciated the influence and regulatory ferocity of taxi cab commissions, whose blistering regulatory campaigns have chased the popular services from entire markets.

That was the case just last month in Austin, Texas, where ridesharers Uber and Lyft failed to sway voters to invalidate a city ordinance requiring fingerprint-based background checks for rideshare drivers. The measure amounted to a regulatory subsidy of sorts for cabbies.

When those same sharing platforms were first leveraged to offer short-term leases, Airbnb never anticipated the polished resistance of hoteliers, whose aggressive lobbying of municipal policy makers have forced the homesharer to begin collecting hotel taxes. 

And when automaker Tesla Motors conceived of its completely self-contained distribution model, in which the manufacturer owns its dealerships, it never anticipated that auto dealer associations would successfully advance model franchise legislation in some two dozen states that effectively banned Tesla.

It’s not that these companies were mismanaged—indeed, it was their profound success that left them vulnerable—and yet were still unprepared for regulatory growing pains. But there’s no beta testing when it comes to public policy: you get it right or you get regulated out of business.

Innovation is a dicey proposition.  It’s a gamble that consumers are weary of the status quo, but it’s increasingly a gamble that policy makers will actually allow the status quo to crumble.

The next Uber won’t have the luxury of lucking through red tape.  They won’t have any luxuries—they’ll have a fight. Indeed, if the next Uber is to be the next Uber, they must assume a regulation-first orientation, an eagerness to fight in and among governments.

The next Uber will only become the next Uber if it proactively surveys any possible federal, state, and local policy or regulation that might impede growth. Specifically, disruptors (and the venture capitalists who fund them) must audit for the possible impact of statutory limitations, licensure requirements, funding streams, and industry-specific taxes and fees.

Those few remaining industries that have so far survived without serious disruptive threats are acutely aware of the consequences: whole supply lines and markets can be obliterated almost overnight. They watched as cabbies lost their market share to ridesharers, as GPS device makers lost out to phone-based applications. They’re primed for a fight.

Certainly, it’s a difficult enough challenge—prohibitively so, sometimes—to topple the status quo. But it’s a great deal easier if you recognize from the outset those regulatory hurdles to which you’re sprinting. Just ask Uber.

Eric Tanenblatt is a leader of the Public Policy and Regulation practice at the global law firm Dentons.  He previously served in the Administrations of President George H. W. Bush and President George W. Bush, acted as a senior advisor to the late U.S. Senator Paul Coverdell, and served as chief of staff to Governor Sonny Perdue.