The Tech Industry Poised To Reinvent Regulation


A few weeks ago, I wrote about how Uber was upsetting government regulators. The ride-sharing company is providing such great service to consumers that existing taxi companies called upon the government to help. Shortly after I wrote that column, the attorney general of Virginia issued a cease-and-desist order to the company.

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There was no allegation of misbehavior or dangerous practices. The bureaucratic order simply said the rules don’t allow Uber to operate.

This sort of cultural clash between technology companies committed to serving consumers and regulators committed to protecting the status quo will become increasingly common in the coming years. Just as technology is reinventing everything from journalism to cars, the industry will also reinvent regulation.

What’s especially challenging for government regulators in this transition is that they can’t hide behind a claim that their rules benefit consumers. After Virginia tried to shut Uber down, the company sent a message to its customers highlighting its commitment to stricter standards than the government requires.

(SET ITAL) “All uberX rides in Virginia are insured up to $1,000,000, nearly 300% more than the $350,000 required of for-hire drivers by the Virginia DMV. While the Virginia DMV does not require that all for-hire drivers pass background checks, all drivers on the Uber platform pass rigorous background checks at the county, state and federal level before they are ever allowed access to the technology. Our commitment to safety far exceeds the requirements set by the Virginia DMV — making their actions puzzling.” (END ITAL)

So, Uber provides a better service that is more convenient for its customers and maintains higher safety standards. What’s not to like? Other than competing taxi companies and drivers who may not pass the company’s background check, everyone comes out ahead.

What’s especially interesting is Uber’s commitment to dramatically exceed the safety requirements imposed by the state of Virginia. This challenges the core worldview of those who believe that only government regulation can force companies to behave.

People who hold this view, including many regulators, believe companies like Uber are unregulated and potentially dangerous.

The reality is that Uber is being held to a higher standard of regulation. The company must continually work to serve and maintain the confidence of its customers. Sure, it’s easy to download an Uber app and order a car. It’s just as easy to delete the app from your phone. That’s why Uber operates with far higher safety requirements than the state of Virginia requires.

It’s also the key to reinventing regulation. Politicians often talk of a choice between regulation and deregulation. That doesn’t make sense in today’s world. Every company needs to be held accountable, so the only question is who should do the regulating. Uber is regulated and held to a higher standard by its customers.

There’s a huge difference between companies regulated by bureaucrats and those regulated by consumers. Bureaucrats can be lobbied; backroom deals can be made; big companies can gain an advantage over smaller challengers.

But when consumers are in charge, there’s no one to lobby. Companies have to perform or go out of business.

The tech industry has given consumers more power than ever before. Consumers are using that power to hold companies (and our government) to an ever-higher standard of regulation.

Also See,

Tech Industry Looks Forward, Politicians Look Back

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