Robert Robb

The Republic | azcentral.com

The Legislature is being importuned with tales of disruptive commercial innovations being thwarted by regulations that protect hidebound incumbents.

For the most part, the tales are true.

UberX and Lyft have provided a way for those who need a ride to digitally connect with people willing to provide it but who don't want to be in that business full-time. This, of course, displeases the taxi cab companies.

In this case, however, the incumbents don't have much of a regulatory shield to hide behind. In 1980, Arizona voters radically deregulated the taxi cab business. There is free entry, exit and pricing. There's not much in the way of other regulation, just requirements for commercial licenses, insurance and vehicle maintenance records. Moreover, state law preempts counties and cities from imposing their own regulations, except for transport from airports.

As strongly as Arizona policy tilts toward deregulation, regulators are nevertheless casting a suspicious eye at UberX and Lyft. So, they are asking for legislation setting up their own category with a regulatory structure tailored for their business model.

This isn't an ideal solution. This could become a regulatory barrier to the next disruptive innovation. And taxi cab companies have a point: for-hire transport is for-hire transport. Ideally, all competitors would fall within the same regulatory ambit.

Still, regulation shouldn't stifle consumer preference. Thus far, no one has come up with an alternative to what UberX and Lyft have proposed that expands, rather than constricts, consumer choice.

Tesla would like to sell its electric cars directly to retail buyers. In this case, the auto dealers have not only a regulatory shield but an impenetrable barrier. State law actual forbids car manufacturers from selling to retail buyers except through dealers.

This is egregiously anti-consumer. In today's world, there's no reason a customer shouldn't be able to custom order a car directly from a manufacturer. Let dealers earn their keep through adding value, rather than rent-seeking from a state-enforced oligopoly.

The auto dealers, however, are a powerful lobby, and there is no appetite for taking on their protected position entirely. But there is an interest in carving out an exemption for Tesla. Coming up with a public policy rationale for such an exemption is tricky, however.

The real reason is that Tesla is looking at Arizona to build a battery manufacturing plant that would employ an estimated 6,500 people. Admitting that's the reason for an exemption, however, is a bit crass.

Tesla claims it can't get a fair shake from dealers because the pitch for its electric cars undermines the pitch for the gas-guzzling alternatives the dealers primarily sell. This, however, is an insult to the, shall we say, versatility of car salesmen. They would have no problem making different pitches to Customers A and B.

And then there is beer. Arizona has a post-prohibition regulatory structure for liquor that requires strict separation between production, wholesale distribution and retail sales. This structure, however, doesn't fit craft breweries, who get lost in the regulatory maze.

So, exemptions have been made to allow them to sell limited quantities directly to consumers. Craft beers, however, are increasingly popular, so the limits keep getting bumped up against. The craft brewers don't have the political clout of the liquor wholesalers or retailers. So, they pretty much have to beg and accept what they can get.

In all of these cases, laws purporting to protect consumers are actually limiting and thwarting their preferences. And with no real justification.

Do we really need the Nanny State to keep us from paying for a ride from someone doing it part-time from their own car? Or to keep us from ordering a car, electric or otherwise, directly from a manufacturer? Or from purchasing liquor, craft or otherwise, directly from producers?

Arizona law is a thicket of protections for suppliers at the expense of consumers. Carving out exemptions for ridesharing, Tesla and craft beer is worthwhile. More worthwhile would be clearing out the thicket.

Reach Robb at robert.robb@arizonarepublic.com.

(column for 4.9.14)