Platform businesses such as Airbnb and Uber have risen to success partly
by sidestepping laws and regulations that encumber their traditional
competitors. Such rule flouting is what the authors call “spontaneous
private deregulation,” and it’s happening in a growing number of
industries. The authors explain that businesses are most vulnerable to
spontaneous deregulation when certain conditions hold. One, for example,
is when regulations are excessive or outdated, protecting consumers
against unlikely risks—and when platform providers offer other means of
shielding consumers from harm. Incumbents facing threats from private
deregulation can respond by taking legal action to press for enforcement
of existing laws. Alternatively, they can embrace aspects of a new
entrant’s approach—taxi operators, for example, have developed
Uber-style apps for ordering rides. Incumbents can also leverage their
own strengths to set themselves apart from upstart competitors—that’s
the tactic that CitizenM, the Pod Hotel, and Yotel are using to woo
guests who might otherwise book with Airbnb. If all else fails,
incumbents may have to cease operation. But they stand a good chance of
avoiding that fate if they address their vulnerabilities early.
[ABSTRACT FROM AUTHOR]