This article first appeared in Westlaw’s Secondary Source Analytical Content, Emerging Areas of Practice Series in June 2017. Reprinted with permission.
INTRODUCTION
Before discussing how and whether the shared economy should be regulated and litigation involving the shared economy, it is important to first define what we mean by the “shared economy”. Shared economy is an economic model in which consumers grant each other access to their underutilized assets. When people are asked to name a shared economy or peer-to-peer company the most popular responses are Uber and Airbnb and, in the insurance industry, the new company Lemonade. However, are these really shared economy entities? Could it be that they actually are just the result of the advances in information technology? Without the advances in computer technology the shared economy would not exist. In fact, Uber defines itself not as a peer-to-peer or shared economy but as a “... technology company that has developed an app that connects users (riders) with third party transportation providers.” See About Uber, Uber (last visited April 25, 2017). Basically, these business are optimizing the resources which the consumer can use for services that are already available. Another term that is becoming popular to define these types of services is collaborative consumption, that is the sharing of goods and services through the use of the increases in computer technology via the use of apps and the internet. Juho Hamari et al., The Sharing Economy: Why people Participate in Collaborative Consumption, 67 J. Assoc. Inf. Sci. Technol. 2047-2059 (2016). In this article, we will use the term collaborative consumption (“CC”) since we believe it to be not only more appropriate, but also because it encompasses peer-to-peer and shared economy.
REGULATION
Since we are talking about innovative methods of providing services, the question becomes, how and whether these methodologies should be regulated. For instance, the traditional methods of regulation can be divided into at least two (2) major segments, commercial and individual consumers. However, CC blurs the lines between these two (2) segments. Is the Uber driver the same as a commercial taxi driver and therefore must comply with the same regulations as a commercial taxi driver? Is the passenger a “commercial passenger” as the individual would be in a taxi and protected by the same existing laws that protects a “commercial passenger” in a taxi? Should the individual who rents a room or their whole house through Airbnb be regulated and pay the same taxes as those imposed upon a hotel and conform to the rules regulating the traditional hospitality industry? And is the individual who stays at the Airbnb rental protected by the same regulations and laws as someone staying at a hotel? The answers to these questions are still not clear and vary by jurisdiction. What is clear is that CC is raising issues of what rules apply to these transactions and how existing rules should or could be applied.
SELF-REGULATION
An increasingly popular notion is that the most effective form of regulation of CC is self-regulation. Urs Gasser, The Sharing Economy: Disruptive Effects on Regulation and Paths Forward, Swiss Re Institute (June 6, 2016). The rationale behind self-regulation is based upon the same theories used for the regulation of professions, such as the legal profession. Ray Brescia, How to Regulate the Sharing Economy? Look to the Law Governing Lawyers, The Huffington Post (Feb. 10, 2016, updated Feb. 10, 2017). The basic theories for self-regulation fall into the following:
- The CC entities have the real incentives to self-regulate, since their success is based upon consumer trust, and consumers will not use their services if they are not satisfied. In fact, 64% of consumers surveyed by PWC for its April 2015 Consumer Intelligence Series, pwc.com/CISsharing, stated self-regulation is more important than government regulation. In addition, 69% stated they would not “trust sharing economy companies” unless the company was recommended by someone they actually trusted. Bottom line is that CC entities essentially profit by aiding in the transaction between the seller and buyer, and thus have the motivation to self-regulate. A lack of consumer trust can obstruct transactions, directly reducing the success of the platform or app.”
- In order to continually improve the technology necessary to provide their products or services, enormous amounts of data must be readily available. This data is more easily accessible by the CC entities than by the regulators;
- Because the CC entities are driven by technology they are in the position to be able to quickly remove individuals that are not conforming to the requirements of the CC entity. Additionally, they can better regulate tax payments and monitor compliance with laws and regulations.
Urs Gasser, The Sharing Economy: Disruptive Effects on Regulation and Paths Forward, Swiss Re Institute (June 6, 2016).
APPLYING EXISTING REGULATIONS
However, the regulatory authorities must continue to protect their constituents with the existing laws and regulations. Therefore, it is important that CC entities ensure they are not only engaging in self-regulation but also are working closely with the existing regulators to warrant they are in compliance with existing rules. This means it is also incumbent upon the regulators to think out of the box when necessary and not be viewed as hostile to technology and innovation. We are living in a quickly changing world and regulators must be willing to innovate and adapt.
It has been observed by legal scholar Orly Lobel that those regulators and CC entities willing to work closely together and offer more flexible regulatory approaches will be most likely to address problems created by the CC economy and simultaneously encourage the growth of the CC economy.
LITIGATION
As is often the case in emerging industries, the litigation involving CC preceded changes in regulations, some of which were modified after the fact in response to litigation outcomes. The types of cases and issues raised in such litigation is far too broad to be fully addressed or covered here. Instead, an overview of personal injury claims...
