Open Doors?

Entrepreneurs have pushed for deregulation as a way to get a foot in the door of old, entrenched industries. But is cutting through the red tape the solution you've been waiting for?

LaLa Wang has fought the law. So far, the law has won. A Harvard Business School graduate, Wang, 40, thought she had a potential breakthrough idea when, in the mid-1990s, she founded Mlx.com, a Web site dedicated to connecting landlords, property owners, real estate brokers and apartment hunters in New York City. With Mlx.com, Wang wanted to streamline the real estate market, making it easier for apartment hunters to view many different places, by putting photos online and allowing brokers, owners and landlords to better tailor offerings to potential clients. "I thought we had the model: an open system that would bring everyone together," Wang says.

Mlx.com has proved popular with consumers, but Wang's life has only gotten harder. According to Wang, larger, established real estate brokerages in New York City have pushed state regulators to use a 1975 licensing law against her company. The law says all companies that provide real estate listings must first obtain a welter of paperwork about each property--hard copies of contracts, escrow agreements and other papers that would be impossible for an e-commerce firm to obtain about the hundreds or thousands of online listings. (Older listings sources, such as The Village Voice, do not have to obtain this paperwork before posting real estate ads.) State regulators chose to enforce the 1975 law, and when Wang tried to continue operating, the state suspended her real estate license. Fighting to keep her business and overturn the 1975 law, Wang says, "has already cost over $300,000 in legal bills and an enormous amount of stress."

Deregulation of New York's real estate industry, Wang believes, could help solve her problems, allowing her to compete with larger brokers. Many other entrepreneurs share Wang's belief. They are convinced that deregulation of industries ultimately benefits entrepreneurs. Yet despite several examples of deregulation boosting the fortune of entrepreneurs, in some cases deregulation backfires, primarily helping larger companies.

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This article was originally published in the September 2003 print edition of Entrepreneur with the headline: Open Doors?.

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