Entrenched businesses do not like disruptive new competitors. Perhaps that’s a simplistic generalization, but it certainly seems to be the case in a fight between the rental car industry and car sharing platforms like Turo and Maven. On Tuesday afternoon, Illinois Governor Bruce Rauner vetoed a bill that would have crippled the operations of the peer-to-peer car sharing companies in the state by adding large taxes to those who rented or loaned their cars through such services.
The bill in question started life uncontroversially, changing some rules about damage waivers and rental cars. But late in the legislative session, amendments written by lobbyists for Enterprise Rent-A-Car radically altered its meaning.
Illinois currently applies a five-percent tax to car rentals, with extra local taxes of up to 20 percent in cities like Chicago to pay for local bond issues for things like the convention center. The amendments changed the bill such that all those taxes would now apply to peer-to-peer car sharing, as well as requiring companies like Turo, Maven, and GetAround to comply with regulations about font sizes, physical premises design, having humans to physically inspect driver's licenses, and other rules that make no sense given the distributed nature of Internet-enabled peer-to-peer car sharing.
Critics of the amended bill point out that this would, in effect, create a triple-tax situation for car sharing, since those vehicles were already subject to sales tax, something that rental car companies like Enterprise are exempt from.
Turo is the most established company in this space, having been launched and founded in 2010 in Massachusetts. GetAround launched its services the following year, and in 2016 General Motors entered the space with Maven. But predictably, the rental car companies have not been happy about it. One plan of attack has been fighting to prevent car sharing services from being able to operate at airports. And industry lobbyists have attempted to block car sharing companies from operating at the state level.
Anti-innovation
"It's a telling symbol of Illinois' unique reputation for politics that a one-sided and rushed effort to shut down new competition failed everywhere else but succeeded here," said Mischa Fisher, chief economist and advisor to Governor Rauner. In the statement released along with the veto, Governor Rauner returned the bill to the Illinois Senate with a list of changes that would protect the operations of the car-sharing companies.
"It’s easy for even an active follower of tech and startups to think that the constant marginal progress we see is automatic," Fisher told Ars. "But what nearly happened in Illinois is a reminder that the legal rules matter, and if we want to have competitive marketplaces that produce new goods and services in any state, we don’t want incumbent players authoring their competitors’ rules without any oversight or feedback."
As you might expect, the car sharing companies were pleased with the veto. "We support strong safety standards and regulations in every state where we operate," said Michelle Peacock, Turo VP of government relations. "Illinois was the only state where we were never given a chance to substantively discuss those regulations before they were rammed through to approval. We appreciate the opportunity to have a seat at [the table] just as we’ve had everywhere else."
A statement sent to Ars by General Motors said that the company "supports Governor Rauner’s decision to veto SB 2641 and seek a reasonable legislative compromise that protects consumers and allows innovative mobility platforms to operate in the State of Illinois. His actions today recognize that peer-to-peer car sharing can provide mobility solutions and economic opportunities for both vehicle owners and program users."
However, Enterprise Rent-A-Car was less enamored. "Why the Governor would veto bipartisan legislation that exempts peer-to-peer car rental providers from basic requirements is beyond comprehension," the company told Ars. "Ensuring vehicle safety, offering transparent pricing, and collecting essential state and municipal fees is just common sense. If peer-to-peer doesn't pay taxes or fees, cities/municipalities will have to find ways to make up for lost revenue. That will only hurt local businesses and citizens while peer-to-peer companies get a free pass. We are confident the Legislature will right this wrong."
From here, it's now up to the Illinois Legislature. The bill passed with a veto-proof majority in the House and with a nearly veto-proof majority in the Senate.
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