Saturday, June 03, 2006

How Businesses Fend Off Regulators

Today's edition of NYT has a fascinating story about how eBay helps curb government regulations, read the story here.

Two points are noteworthy about the story...

1) How Government Regulations are Out-of-tuned with Rapid Pace of Technological Change

In Lousiana, which is the focus of the story, those affiliated with eBay who had got their licenses had to go through a course which supposedly would inform them about their trade. What did they got instead?

"Ninety-nine percent of the course had nothing to do with our business...It was about traditional auctioneering, cattle and land and firearms."

2) How Good Intentions May Backfire

Louisiana Auctioneers Licensing Board, the agency which attempted to get eBay affiliates to be licensed, says its mission is to protect the public from "unqualified, irresponsible or unscrupulous individuals."

While the effectiveness of such license is questionable, given eBay's interests to protect its brandname and thus renders the on-line market a self-regulating one, the regulation does have an undesirable unintended consequence: job losses for those affiliated with eBay.

As the story has it: "[M]any eBay sellers do their trading part time or in addition to another job. "If they are overregulated by licensing fees...they will abandon their eBay business."

Hence the irony is this: the regulators kill the very market that it attempts to regulate.

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