Rauner rejects bill aiming to squeeze out rental car competition

Rauner rejects bill aiming to squeeze out rental car competition

Using his amendatory veto authority, the governor blocked a proposal by the General Assembly that would have protected traditional rental car companies by stifling car-sharing startups.

On Aug. 28, Gov. Bruce Rauner issued an amendatory veto on a bill that would have squeezed out competition in the car rental industry.

Senate Bill 2641, as it was originally introduced, would have made changes to liability laws as they pertain to car rental companies. But toward the end of spring legislative session, lawmakers transformed the bill into a vehicle for stifling some of those companies’ competitors. SB 2641 would have targeted startups such as Turo, Maven and Getaround, which facilitate the rental of personal vehicles between individuals, a service known as car sharing.

Traditional car rental companies such as Enterprise Holdings and Hertz lobbied for the measure, in a clear attempt to insulate themselves from competition. SB 2641 in its new form passed both the House and Senate, though the bill faced bipartisan opposition.

Under SB 2641, startup companies that facilitate peer-to-peer car-sharing services would be classified the same as established traditional car rental companies, thus subjecting them to similar regulations and taxes. That would mean imposing a state tax as well as taxes at the local level.

While many lauded the bill as holding car-sharing services and traditional car rental companies to the same regulatory standard, there was one major difference. Traditional rental car companies are exempt from paying taxes on the vehicles they purchase for their business. However, the bill did not include any exemption for Illinoisans who rent out their personal cars, thus giving traditional car rental companies an advantage on the car-sharing market.

An amendatory veto blocks a bill by returning it to the General Assembly with a “veto message” that includes recommended changes. With a simple majority vote in both chambers, lawmakers may adopt such changes, sending the amended bill back to the governor’s desk. Lawmakers may also opt to reject the amendatory veto and vote to override, which requires a three-fifths majority in both chambers.

In his veto message, Rauner criticized the process by which lawmakers passed the bill. “Senate Bill 2641 was passed rapidly by the General Assembly in the final hours of the legislative session,” the governor said, “without any meaningful time for public input or debate.”

Rauner’s amendatory veto eliminates a substantial portion of the bill and recommends a new provision, titled the Illinois Peer-to-Peer Car Sharing Act. Rauner’s recommended changes include regulations specific to carsharing services, covering details such as licensure, insurance, disclosures and liabilities.

More importantly, the amendatory veto protects companies against excessive taxation and burdensome regulation that provides no value to the public. For example, Rauner’s recommendation explicitly forbids home rule municipalities from imposing a tax on car-sharing services, unless the owner has rented out their personal car for more than five years.

Rauner’s rejection of the proposal received praise from Allstate Chairman, President and CEO Tom Wilson. “Gov. Rauner’s amendatory veto will enable car sharing to significantly lower the cost of personal transportation in Illinois,” Wilson said.

It remains to be seen whether the General Assembly will attempt to override Rauner’s amendatory veto or consider his recommended changes. Lawmakers may also refrain from taking any action, in which case the bill dies.

Illinois has a discouraging history of responding to innovative companies – including Uber, Lyft and Airbnb – with high taxes and overregulation. Lawmakers would be wise to welcome car-sharing innovations that create opportunity while providing residents accessible and affordable services.

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