NetChoice Testimony in Opposition to AK HB 90 – Discriminatory Treatment of Car Sharing

Carl Szabo, Vice President & General Counsel

1401 K St NW, Ste 502

Washington, DC 20005

netchoice.org

Alaska State Senate – Transportation Committee

Opposition to HB 90

April 7, 2022

Chair Robert Myers and members of the Transportation Committee,

We write to you to express our opposition to HB 90 because it:

• Shields Big Rental from competition;
• Punishes innovation;
• Discriminates against average citizens; and
• Is vulnerable to constitutional challenge.

No matter how well intentioned HB 90 may be, it is neither necessary nor fair. Indeed, the HB 90 picks winners (rental-car companies) and losers (residents who use peer-to-peer car sharing platforms).

HB 90’s harm extends to average residents looking to supplement their incomes and to consumers looking for affordable transportation options. In other words, it hurts the very people it allegedly seeks to protect. Even worse, HB 90 inflicts this harm during a time of economic uncertainty and suffering.

We respectfully ask that you not advance HB 90.

HB 90 protects incumbents by shielding them from competition

Rather than innovate, Big Rental is running the same playbook that has worked well in the past: get the locals to pass laws that benefit its bottom line at the expense of others. Digital newcomers threaten established firms that have spent decades—and untold money—forcing out competition and creating barriers to entry for newcomers. When it succeeds, this behavior results in higher prices for consumers and fewer jobs for Alaskans.

Big Rental’s fear of car-sharing platforms is not surprising. Indeed, a recent survey of rental-car operators revealed that “Competition from peer-to-peer networks (Turo, GetAround)” ranked as one of the top self-reported “threats” in 2020.^[1] It’s not hard to see why. Peer-to-peer car sharing offers better service and deals than Big Rental does. First, they give consumers better choices, including specialty and antique cars. Second, they offer 24/7 roadside assistance. And third, they are more affordable than Big Rental—and they don’t come with hidden fees.

To be sure, Big Rental’s rent-seeking efforts are not unique. The hotel industry, for example, has been pushing HB 90 to crush Airbnb’s growing popularity. Like Big Rental now, Big Hotels have pushed for unnecessary and harmful regulations under the guise of consumer protection. So, too, with taxi cabs toward ridesharing apps like Uber and Lyft. In all these cases, incumbents turned to the state for protection. And in all these cases, they used consumer protection to mask their true intent of stifling competition.

HB 90 is anti-innovation and therefore anti-consumer

The rise of digital platforms, especially peer-to-peer ones, has threatened incumbents in all industries. This disruptive technology has proven popular with consumers. So much so that incumbents have been caught so off guard that rather than invest in their own research and development, or rather than adapt to changing consumer preferences, they have instead sought to squash innovation and strangle competition.

HB 90 is no different. By forcing innovative platforms to assume liability for their drivers’ actions, HB 90 will drive many platforms from the market. And it sends a signal to other incumbents threatened by innovative peers: the way to succeed in Alaska is not by winning on the merits, but by legislating against competition.

These efforts should not succeed. The peer-to-peer economy helps average Americans supplement their incomes by letting them rent assets they already own. Here, for example, car-sharing platforms let Alaskans earn from their own cars, which they can then use to make car payments, pay insurance premiums, or cushion the financial blow from coronavirus.

HB 90 discriminates against average citizens hoping to stay afloat during coronavirus, while favoring Big Rental companies

Although HB 90 is ostensibly aimed at carsharing platforms, it really targets average citizens who seek to earn extra income. Because HB 90 would make it cost-prohibitive for these platforms to operate in the state, these car owners will be robbed of this opportunity. Indeed, Big Rental’s real competitors are not the platforms, but the car owners themselves. These are people who supply the cars for others to use; these are the people who give consumers a choice. The platforms merely coordinate the arrangement.

And even if HB 90 does not force the platforms from the market entirely, it will force them to revise their contracts with car owners to protect themselves from untold liability. Those revisions would likely require car owners to maintain insurance policies beyond what’s necessary, and therefore make it cost-prohibitive for the most financially strapped car owners to compete.

This is unacceptable. If HB 90 were truly necessary to protect car owners and consumers, then its theory of liability would apply equally to Big Rental and to carsharing platforms. Unlike Big Rental, carsharing platforms require car owners to maintain car insurance. Big Rental does not require renters to have car insurance. In fact, Big Rental specifically offers car insurance as an add-on that consumers can buy. If they don’t buy it, then those consumers must pay for accidents out of pocket. It’s hard to see why Big Rental’s consumers should be exempt from HB 90.

In fact, Big Rental has already proved that it is unnecessary for companies to assume liability for individuals. Rental-car companies have been in business for decades. And they continue to be one of the most popular forms of transportation. Yet, they’ve managed to go all this time without the type of liability regulations that HB 90 would force on carsharing platforms.

HB 90 invites litigation, uncertainty, and inefficiency

Although the U.S. Supreme Court eliminated the “physical presence rule” in Wayfair v. South Dakota, the Court suggested that a “substantial nexus” must exist between states and the businesses they require to collect and remit taxes from.^[2] However, the Wayfair decision was about sellers of record for physical product – not marketplaces who merely facilitate transactions. HB 90 ignores this key distinction and reads into the Wayfair decision factors that are clearly not there.

Thus, HB 90 will invite litigation and, as seen in the Wayfair case, that litigation can take years to sort out. In the meantime, businesses—of all sizes and of all revenues— will be left with uncertainty and unnecessary costs as they try to make sense of what’s required. That is an inefficient and wasteful use of capital.

Sincerely,

Carl Szabo

Vice President & General Counsel

NetChoice is a trade association that works to make the internet safe for free enterprise and free expression.

^[1] Auto Rental News, 2020 Fact Book 15 (2020), http://digital.autorentalnews.com/factbook2020#&pageSet=6.

^[2] 585 U.S. ___ at 22-23. (2018)