Tue, 06/01/2021
This post is a summary of Episode 21 of The Nebraska Governance & Technology Center’s (NGTC) Podcast Series, Tech Refactored. Host Gus Hurwitz, Director of the NGTC was joined by Eric Goldman, Professor at Santa Clara University School of Law, Sajeesh Sajeesh, Assistant Professor of Marketing at the University of Nebraska-Lincoln College of Business,and Kellen Zale, Associate Professor at The University of Houston Law Center.
Episode 21 of Tech Refactored, “How Should We Regulate Airbnb, Ride Shares, and Web Content” is part of our Regulation at Scale series of podcasts, where we examine the challenges that arise when new rules or technologies affect broad swaths of society all at once.
Since the internet emerged from its infancy, governments, and later, social media platforms, have had to struggle with the question of how to handle online content that is in some way harmful or offensive. Often, that discussion has centered around removal; whether the degree of harm or odiousness rises to a level that it justifies the government or another entity stepping in and mandating its removal. In reality, removal is just one potential remedy for addressing harmful content on the internet, and Eric Goldman has focused a portion of his research on building “a taxonomy of several dozen different remedies that are available for remediating problematic content online.”
One important implication of this artificial binary in terms of the potential responses to harmful content (to remove, or not to remove) is that we are presently at the cusp of having that limited approach encoded into law, by having legislatures or regulatory bodies step in and say that a certain type of content must be removed. Importantly, once that “removal” approach is encoded into law, all the other, less absolute potential remedies are effectively foreclosed, with important implications for the scope of free speech on the internet. Goldman notes that in doing so we would create a system that would prevent platforms from tailoring their responses to the content at issue- and instead narrow the scope of speech on the internet considerably.
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Kellen Zale has focused a portion of her research on municipal regulations of short-term rentals that have emerged as a result of a surge in demand, particularly in cities, and even certain neighborhoods within cities that are popular with visitors. For many cities, like Austin or Portland, the recent surge in demand for short-term rentals wasn’t something they had to address just a few years ago. But as demand has risen, and transaction costs have come down in part because of the advent of platforms like Airbnb, some cities have found that certain neighborhoods have become highly populated with short-term rentals, often in cities that didn’t even have “short-term rental” as a municipal property designation just a few years ago
Cities are often in a bind, in that they want to support the increased economic activity that short-term rentals bring to a city, while being concerned that such rentals risk removing a substantial amount of existing long-term rental housing from the local market, and thereby causing the rents to rise on full-time residents..
In conducting her research, Zale found that cities have taken a number of different regulatory approaches to addressing short-term rentals. First, some have expanded existing legislation that address bed and breakfasts and other small-scale short-term rentals to accommodate the rise of short-term rentals that are facilitated by internet platforms like Airbnb. A second category of municipalities entered the era of short-term rentals without having any statutes on the books addressing short-term rentals, so they had to quickly start from scratch in developing a licensing system and a system to implement it. Lastly, there is a class of municipalities that have never had any regulations regarding short-term rentals and don’t want any, because they have ample housing stock or they prioritize the increased economic activity over the pressures short-term rentals place on the long-term rental market.
Zale also notes that a second major element of understanding city regulatory responses is assessing enforcement - that is, are the regulations on the books actually being enforced? That information, in terms of where short-term rental properties are operating, is held by internet platforms, and up until recently they were reluctant to share that information with anyone, including cities. Zale notes that the platforms “may be starting to be more cooperative in terms of co-regulation, or using third party tools to get the technological data that (a city) needs to enforce its regulations. But, as Zale notes, that model has practical downsides, in that platforms like Airbnb and VRBO operate in thousands of cities and towns all over the world, and it is not easily feasible for them to adopt a co-regulatory model in all those places.
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The podcast’s last guest was Sajeesh Sajeesh, a marketing professor at the University of Nebraska-Lincoln College of Business who is studying “the extent of lobbying contributions that need to be made by incumbents (companies already operating within a market), as well as entrants (new companies to a market), in order to obtain favorable policies.”
In assessing the role of lobbying in market success, Sajeesh’s research considers a number of variables, including “the heterogeneity (non-uniformity) in legislator preferences, the strength of such preferences as well as the number of legislators, the extent of consumer welfare, the transparency of lobbying contributions- since it influences the extent of backlash from consumers,” and whether lobbying is permitted or operates in the shadows. “We also account for the liability associated with foreign lobbying. These are the important elements that we capture in our model, and based on these, we come up with an idea or a new framework called the ‘profit transfer ratio’ which helps to determine the outcome.” Sajeesh explains that the “profit transfer ratio” represents “the amount of profit transferred from the incumbent to the new business model, based on the efficacy of the new business model and the lobbying efficacy of the new business model.” In essence, the profit transfer ratio quantifies the drop in profits of the market incumbent as a result of the entry of the new business model.
In terms of methodology, Sajeesh works “at the interface of economics, math, and marketing; incorporating that in a context which has some legal implications.” Sajeesh aims to “build() an analytical model, which combines economic principles with ideas from game theory in order to come up with some sort of marketing implications.” It’s primarily an analytical modeling approach, which Sajeesh explains is fairly new to the legal literature.
Sajeesh is also exploring how to identify the ideal allocation, from a business standpoint, of money on lobbying, in order to ensure the company can enter the market, as compared to money spent on market development; that is, laying the groundwork through marketing in order to succeed in the market.
Sajeesh’s final thought was a compelling one:
There is a lot of potential to work at the interface of marketing and the law. What we are trying to do is to recognize that laws many times cannot keep pace with technology. Companies are trying to exploit the legal loopholes in order to expand rapidly. And what we are trying to highlight is, when companies try to do that, how do they obtain favorable policies, and how can other firms compete with firms which are also trying to compete to get favorable outcomes?
