MonkeyParking: Parking apps under fire in San Francisco

Finding a good parking spot is a problem in any big city. But now one start-up is offering a novel solution.

MonkeyParking is an app that allows users to auction off public parking spots in San Francisco. Users download the app and set the parking spot they're using. When they're ready to drive away from their spots, they receive bids from nearby motorists scouting for a space.

The app sounds convenient. But the city of San Francisco says it's illegal and is demanding that the company stop providing its service by Friday.

"You are talking about a company that is taking a public asset and trying to make nothing more than a private profit," said City Attorney Dennis Herrera. "Why are we getting involved? Because public transit, and the public right of way, is exactly what governments are supposed to be focused on."

Monkey Parking app.
Source: MonkeyParking
Monkey Parking app.

The city is also asking Apple to remove MonkeyParking from its App Store. Apple declined to comment. But typically, when Apple has received such letters from local governments, it has instructed developers to get in line with regional laws, or the apps would be removed.

MonkeyParking insists it's a legal service because it is not auctioning off public property, but simply sharing information about that property. MonkeyParking CEO Paolo Dobrowolny told CNBC the company is reviewing its options.

Two other parking apps, called Sweetch and ParkModo, also are working with the city.

A row of parking meters line O'Farrell Street on July 3, 2013 in San Francisco.
Getty Images
A row of parking meters line O'Farrell Street on July 3, 2013 in San Francisco.

Across the country, there has been similar tension among start-ups, politicians and regulators navigating through the so-called sharing economy, which lets individual consumers participate in entrepreneurial activities such as driving passengers and renting rooms.

But venture capitalists say there's a significant difference between start-ups such as Uber and Airbnb and emerging parking apps.

"We believe that things that promote an open and transparent world will win out. even if regulations take awhile to catch up," said Ethan Kurzweil of Bessemer Venture Partners. "Now there is distinction between that, and apps that sell public goods like selling parking spots in the street that aren't the person's to sell. In those cases, regulators will step in, and that stuff will go away."

The city of San Francisco says MonkeyParking could face civil penalties of $2,500 per transaction if the start-up continues offering its services.

So, by next week, motorists in the City by the Bay might have to find parking the old fashioned way: Circling the block until a space opens up.

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By CNBC's Josh Lipton