Peer-to-peer firms face legal fight as they try to disrupt car rental business

Having watched Uber disrupt the taxi business and Airbnb cut into hotels’ revenue, the car rental industry is keeping a close eye on the so-called sharing economy.

Two San Francisco companies, Turo and Getaround, are well-funded leaders in what’s known as peer-to-peer car sharing. They list cars whose owners are willing to rent them for a few hours or a few days.

Just as Uber insisted that it shouldn’t be subject to taxi rules, the car-sharing companies proclaim that they are technology platforms, not rental agencies. They’re fighting a series of battles as state and local governments try to apply old rules to a new business model.

Turo pulled out of New York in 2013 after the state said it didn’t comply with insurance laws. It was sued by San Francisco in January over not paying fees for airport pickups. Turo also has received a cease-and-desist letter from the agency that runs Baltimore-Washington International Airport, and a bill in the Maryland Legislature would force car-sharing companies to collect sales tax and conduct safety inspections.

The American Car Rental Association says the upstarts also should have to comply with a federal law that makes it illegal to rent cars subject to recall notices. Turo responds that compliance is up to car owners, and it doesn’t own any cars.

Brad Greenwood, an associate professor of information science at the University of Minnesota who studies the sharing economy, notes that Uber eventually agreed to regulations in most places, and Airbnb agreed to collect sales and lodging taxes on behalf of its landlords.

The “we’re just a technology company” line “is an argument that a lot of these platforms are using,” Greenwood said. “It doesn’t really hold up.”

The upstarts, he explains, usually have an innovative answer to a real business problem, like the fact that owning a large inventory of rental cars is expensive. In their early years, they’re also adept at flying under regulators’ radar.

“When the platform engages in this kind of regulatory arbitrage, the incumbents have the right to complain,” Greenwood said.

And they do. “If it walks like a duck and quacks like a duck, chances are it is a duck,” says Gregory Scott, a lobbyist for the American Car Rental Association. “If they are a car rental company, they should abide by all the laws and regulations.”

That includes insurance and safety laws as well as taxes and fees, Scott explained.

Most airports collect about 10 percent of revenue from car rental companies that operate there. At St. Louis Lambert International Airport, those fees totaled $11.9 million last year.

Turo doesn’t pay those fees, but it advertises that cars can be delivered to the airport. On Friday, its site showed nine cars available for weekend rental at Lambert, ranging from a $44-a-day Honda Fit to a $399-a-day Tesla Model 3.

“We’re aware of them, and we’ve had discussions with the company,” Lambert spokesman Jeff Lea said.

Michelle Peacock, Turo’s head of government relations, characterized the conversations as positive. “I would love to work this through and get a permit for the St. Louis airport,” she said.

She said, though, that Turo shouldn’t be treated like other car rental companies. The big companies benefit from tax breaks of their own, she argues, and use infrastructure such as parking lots that Turo doesn’t need.

Peacock accuses the industry giants, especially Enterprise Rent-A-Car, of lobbying to kill the car-sharing model. “Their goal is to basically smother our business completely,” she said. “They don’t want Turo to exist.”

Enterprise says that isn’t true. “We have always been open to new ideas and innovation,” spokeswoman Laura Bryant said in a statement. “However, we believe the playing field should be level and fair for everyone involved in ground transportation.”

Greenwood predicts that, like Uber and Airbnb, the car-sharing companies eventually will have to comply with some regulations. Whether Turo will be as disruptive as Uber is an open question, he adds, but it obviously is already pesky enough to bother the big companies.

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