Is Law Killing the Development of New Technologies?: Uber and Airbnb in Japan

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Is Law Killing the Development of New Technologies?: Uber and Airbnb in Japan THIS VERSION MAY CONTAIN INACCURATE OR INCOMPLETE PAGE NUMBERS. PLEASE CONSULT THE PRINT OR ONLINE DATABASE VERSIONS FOR THE PROPER CITATION INFORMATION. ARTICLE IS LAW KILLING THE DEVELOPMENT OF NEW TECHNOLOGIES?: UBER AND AIRBNB IN JAPAN SHIGENORI MATSUI* * Professor of Law, University of British Columbia, Peter A. Allard School of Law. 100 3. MATSUI.DOCX (DO NOT DELETE) 4/1/19 10:38 AM 2019] UBER AND AIRBNB IN JAPAN 101 CONTENTS INTRODUCTION .......................................................................................... 102 I. UBER IN JAPAN ........................................................................................ 103 A. Taxi Regulation ............................................................................... 103 B. Specified Areas and the Reintroduction of Much Tighter Regulation ..................................................................................................... 107 C. Uber and Strong Opposition from Taxi Industry ............................ 112 D. The Japanese Government Response ............................................. 117 E. The Future of Uber in Japan .......................................................... 119 II. AIRBNB IN JAPAN .................................................................................. 121 A. Hotels and Rental Houses ............................................................... 121 B. Airbnb and Japan ........................................................................... 124 C. The Road to the Enactment of New Regulation .............................. 128 D. Private House Lodging Business Act ............................................. 130 E. National Strategic Special District ................................................. 132 F. Future of Airbnb in Japan .............................................................. 133 III. LESSONS FROM UBER AND AIRBNB’S EXPERIENCES IN JAPAN ............................................................................................................. 138 A. Why Airbnb but not Uber? .............................................................. 138 B. Development of New Technologies and the Law ............................ 140 C. Changes Introduced by New Technologies, even when Shut Down ..................................................................................................... 141 D. Alternatives to Trying to Shut Down New Businesses .................... 142 CONCLUSION .............................................................................................. 143 3. MATSUI.DOCX (DO NOT DELETE) 4/1/19 10:38 AM 102 B.U. J. SCI. & TECH. L. [Vol. 25:100 INTRODUCTION The development of the Internet has brought about a revolution in both tech- nology and modern business practice. Much of the public welcomes these changes, but they often face resistance in the form of outdated government reg- ulation and old, but normative, business practice. As a result, at times these dis- ruptive technologies face either forced termination or the false promise of ac- ceptance, but acceptance subject to government regulation so stringent as to rob the technologies of their revolutionary character. What role should the law play in this battle between old business practices and disruptive technologies? This article will examine the Japanese legal response to two such disruptive technologies: Uber and Airbnb. The development of both the Internet and the “sharing economy”1 has made these new businesses possible. In allowing cus- tomers share their resources, new technologies like Uber and Airbnb represent tremendous potential for economic development, but they also represent tremen- dous potential for radical change in normative business practice. As a result, both have faced tremendous resistance upon introduction.2 This article examines 1 “Sharing economy” is defined as “an economic system that is based on people sharing pos- sessions and services, either for free or for payment, usually using the internet to organize this.” Sharing Economy, CAMBRIDGE DICTIONARY, https://dictionary.cambridge.org/diction- ary/english/sharing-economy [https://perma.cc/W6AR-CES8] (explaining the term via an ex- planation which states “[t]he article discussed Uber, Airbnb, and the consequences of the sharing economy.”). See also First International Workshop on the Sharing Economy, UTRECHT U., https://www.uu.nl/en/IWSE2015 [https://perma.cc/Q9UH-JVZN] (last visited Jan. 21, 2019) (advertising for a conference held in June 2015 and defining “sharing econ- omy” as “consumers granting each other (‘peer-to-peer’) temporary access to their under- utilized physical assets, possibly for money.”). Although some dispute discrete definitions of the term, many believe that Uber and Airbnb are typical examples of the sharing economy. See, e.g., Koen Frenken, Toon Meelen, Martijn Arets & Pieter van de Glind, Smarter Regu- lation for the Sharing Economy, GUARDIAN (May 20, 2015, 2:00 EDT), https://www.theguardian.com/science/political-science/2015/may/20/smarter-regulation-for- the-sharing-economy [https://perma.cc/C5NN-NNT6]. 2 Some countries banned Uber, while some permit its operation under strict conditions. Anna Rhodes, Uber: Which Countries Have Banned Controversial Taxi App, THE INDEPENDENT (Sept. 22, 2017), http://www.independent.co.uk/travel/news-and-advice/uber- ban-countries-where-world-taxi-app-europe-taxi-us-states-china-asia-legal-a7707436.html [https://perma.cc/WXB7-SUYA]. Likewise, some countries take issue with Airbnb, with Am- sterdam, Barcelona and Spain deciding to penalize hosts who list illegal rentals and Berlin banning most short-term rentals. Katie Benner, Airbnb Sues Over New Law Regulating New York Rentals, N.Y. TIMES (Oct. 21, 2016), https://www.nytimes.com/2016/10/22/technol- ogy/new-york-passes-law-airbnb.html. The City of Vancouver had banned both short-term rental and ride-sharing, but as of April 19, 2018 has legalized short-term rentals under strict conditions. See Ian Austen, Vancouver Limits Airbnb, Effort to Combat Its Housing Crisis, N.Y. TIMES (Nov. 15, 2017), https://www.nytimes.com/2017/11/15/world/canada/vancouver- housing-airbnb.html; City Legalizes Short-term Rentals in Vancouver, CITY OF VANCOUVER 3. MATSUI.DOCX (DO NOT DELETE) 4/1/19 10:38 AM 2019] UBER AND AIRBNB IN JAPAN 103 the Japanese experience in order to explore whether the law is and should be killing these new technologies. It will show that the Japanese reaction is mixed: although the government shut down Uber, it accepted Airbnb, albeit under very strict new regulations which cast doubt on its sustainability. It will conclude that while the overwhelming demand for new and technologically innovative busi- ness models will force the government to face further challenges in the future, it may be wiser to simply acquiesce to this new reality so as to stimulate innova- tion, which is essential to thrive in the new millennium. I. UBER IN JAPAN A. Taxi Regulation Japan’s Ministry of Land, Infrastructure, Transport and Tourism (MLIT) has a long history of strictly regulating the Japanese taxi industry.3 Legally speaking, per the Road Transportation Act, a taxi is a “general passenger auto transporta- tion business,”4 for which an operator must secure a permit from the Minister of Land, Infrastructure, Transport and Tourism.5 In order to receive such a permit, (Oct. 5, 2018, 1:00 PM), https://vancouver.ca/news-calendar/city-legalizes-short-term-rent- als-in-vancouver.aspx [https://perma.cc/6DQA-SMJM]; Short-term Rental Business License, CITY OF VANCOUVER (Oct. 5, 2018, 1:00 PM), http://vancouver.ca/doing-business/short-term- rentals.aspx [https://perma.cc/V7FQ-4X2A]. The government of British Columbia has just started to examine the possibility of introducing ride-sharing. SELECT STANDING COMM. ON CROWN CORP.: TRANSP. NETWORK COMPANIES IN B.C. (2018), https://www.leg.bc.ca/con- tent/CommitteeDocuments/41st-parliament/2nd-session/CrownCorporations/Report/SSC- CC_41-2_Report-2018-02-15_Web.pdf [https://perma.cc/6496-FZQR]; Kendra Manglone, 32 Recommendations Released for Ride-hailing in B.C., CTV NEWS VANCOUVER (Feb. 15, 2018), https://bc.ctvnews.ca/32-recommendations-released-for-ride-hailing-in-b-c- 1.3804971 [https://perma.cc/MU3R-KFNX]. 3 See infra notes 26-27. 4 Douro unsōhō [Road Transportation Act], Act No. 183 of 1951 art. 3, item 1. The gen- eral passenger auto transportation business is divided into three categories: (1) the general ride-share passenger auto transportation business, e.g., regular bus service running on estab- lished bus routes; (2) the general rental passenger auto transportation business, e.g., sightsee- ing busses; and (3) the general ride passenger auto transportation business, e.g., a “taxi” (pas- senger transportation service available to customers upon call or appointment, with fees based on factors such as distance and time) and/or a “hire” (passenger transportation service for primarily corporate customers, with hourly fees as set out in a prior contract). Id.; see also NIPPON KOTSU KABUSHIKIGAISHA, HIRE TOWA [WHAT IS HIRE?], http://www.nihon-ko- tsu.co.jp/hire/about/ [https://perma.cc/HM7K-ALHB] (last visited Jan. 21, 2019) (explaining the difference between taxi and hire service). 5 Road Transportation Act, art. 4, para. 1. An operator used to need a license, but the licensure requirement was abolished in 2000. See infra notes 29-30 and accompanying text. A number of individuals are ineligible for such a permit. Road Transportation Act, art. 7 (ex- cluding, inter alia, applicants who, within the
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