MORE LICENSING HARASSMENT
Skip Oliva blogs about a classic case of using licensing law to block entrepreneurial innovation:
In New York State, it is against the law for individuals to sell apartment rental listings without a special "apartment information vendor" (AIV) license, which is separate from a general real estate broker's license. The AIV law was passed in the late 1970s to combat potential fraud in the rental market; for example, individuals might sell repackaged newspaper rental listings as original compilations. The AIV law places substantial burdens on legitimate businesses, however, such as mandatory refunds on request and a ban on advertising specific properties.
In 1992, LaLa Wang started MLX.com, an online multiple listing service (or MLS) for customers looking to rent apartments. In most markets, real estate brokers form an MLS to combine their individual listings into a single, shared database. The traditional MLS concentrates resources in the hands of the brokers. New York City, however, is one of the few major markets to lack an MLS (in part because New York's notorious rent control laws create an artificial supply shortage that make high-commission rentals too valuable a commodity for brokers to share with one another). Wang's service changed all that. Not only did MLX create a de facto MLS, it did so in a more open platform than a traditional service: Customers could directly access the MLX database via a password protected account.
New York officials, and their political allies in the traditional real estate industry, used the AIV law to try and shut Wang down. They claimed that Wang needs an AIV to operate her service. But the Internet-based MLX service is merely a forum to exchange rental listings, not the type of self-contained lists that were the intended target of the AIV law. Wang's service is no different than a newspaper that runs apartment listings, yet New York officials acknowledge newspapers do not need an AIV license to operate.
Read the whole thing.