Silicon Valley-based startups with business models that circumvent local regulatory boards are getting major pushback lately.
Virginia issued a cease and desist order against car ride companies Uber and Lyft which get around ride-share and taxi regulations by having customers register and pay for rides in advance only by credit card or paypal.
Meanwhile, the DC government has gone after Ultra online liquor delivery company saying the company doesn’t prove that purchasers are over 21, and issued a cease and desist order on it.
Uber and Lyft tried a strategy of ignoring the ban arguing that they are not covered under the regulations which were written before they came into existence and that their peer-to-peer model wasn’t even imagined by the regulations when written.
However, Virginia police officers have started to interrupt riders.
Ultra’s CEO said the Alcohol Beverage Control board’s attack is unfair as it doesn’t apply evenly to companies like Groupon that sells restaurant deals online, including to dining establishments that sell liquor.
The challenges are ongoing.
Start ups with similar models that attempt to offer online payment services and go-around local regulatory laws that apply to brick & mortar businesses should be watching these cases carefully as they progress, as should investor communities.
They could detrimentally impact future ventures and may deter investors.
