The Regulatory Name Game

Anyone who has been to a coffee shop recently knows that when asked what kind of milk you want, you are now faced with a plethora of choices from whole to skim to coconut to almond to soy. Recently, however, the FDA (and dairy producers) have grown concerned over the “misuse” of the term “milk” to describe products that come from plants rather than animals. In fact, the Senate has even considered legislation on the issue. This may seem like a silly debate, but how strictly administrative agencies define certain terms can impact the ability of entrepreneurs to innovate and the access that consumers have to new options and technologies.

Terms and meanings evolve in cultural and societal contexts, and innovators often find it easiest to use existing terminology to explain their disruptive product. However, these definitions can also be weaponized to regulate a new technology without addressing the underlying issues. For example, when FlyteNow tried to launch “Uber for planes,” the FAA reinterpreted its existing common carrier definition to prohibit a longstanding industry practice of offering rides as part of flight certification or cost sharing through bulletin boards at airports. Perhaps if FlyteNow, or the media, had described it as a 21^st century bulletin board, it would have been more difficult for the FAA to reinterpret its definition.

Another example of regulators redefining terms to impose soft law regulation on a disruptor is the approach many cities have taken to electric scooters. Few, if any, cities had laws on the books directly addressing scooters or scooter sharing; however, when innovators began offering them on a large scale, some cities used broad definitions in bike rental or street vending regulations to find them in violation.

There are many other situations in which regulators will expand or even narrow their definitions to cover activities that don’t really fit the original meaning of the regulation. Several cities have taken this approach to limit the growth of the sharing economy, particularly home and car sharing operations like AirBnB and Turo. With the growing popularity of Airbnb, many cities have started enforcing zoning laws against hosts that may not have been used for decades or requiring compliance with taxes and regulations that were designed for hotels. Often, with cries for “fairness,” existing industry players change definitions to either regulate or prohibit disruption.

Just last month, Missouri passed a law stating that lab-grown or plant-based products could not be called meat. Cattlemen and other advocates for the law argued that it was in the best interest of consumers; however, there is no evidence that consumers have been confused about what is in these alternatives. Instead, as with other industries being disrupted, the meat industry is turning to regulatory terminology in hopes of preventing competition.

A related problem arises when agencies define terms for which a uniform definition has not yet been reached. This is particularly relevant to quickly evolving fields like Artificial Intelligence (AI) and robotics as well as online platforms.  While there may be generally accepted academic definitions, technology evolves so rapidly that it quickly outpaces them. It is hard to define what exactly a federal robotics commission or an AI regulatory board would regulate. Slippery slopes can even lead to a point where we begin regulating math. If regulation is necessary in these rapidly evolving contexts, it should be narrowly tailored to remedy or prevent specific harms rather than so broad as to risk unintended, innovation ending consequences.

Language evolves over time and regulatory definitions should as well. Unfortunately, when faced with the pacing problem, some regulators and entrenched interests use this language as a form of “soft law” regulation. But there are better ways forward. As my colleague Adam Theirer has argued, older industries should seek a parity provision that would free them from burdensome regulatory constraints, rather than imposing them on new entrepreneurs.

Otherwise, innovators and regulators may be grappling with the question of whether a rose by any other name is still a rose.

Photo credit: Michael Reynolds / Epa/Shutterstock