Why regulating the 'sharing economy' should matter to you

You may not have heard the term “sharing economy” but there’s a very good chance you’ve been part of it.

Maybe you’ve grabbed a ride through Uber, booked a place to stay using Airbnb while traveling, bought or sold something on eBay or Craigslist or maybe invested in someone’s project via Kickstarter. Perhaps you’re actually the one behind the wheel of an Uber car or renting out the spare room in your home to visitors.

Sharing-economy business platforms are cutting a swath through the traditional way of buying and selling goods and services, yet a new report says governments seem to have no idea how to regulate them in a way that protects the public and workers while not hobbling innovative — and clearly popular — new business models.

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The Mowat Centre, an Ontario-based public policy think tank, says bureaucracies that set rules, regulations and tax policies have changed little in almost a century. They’re not agile enough to respond to the lightning-quick changes brought on by digital-based businesses.

Its report, Policymaking for the Sharing Economy: Beyond Whack-A-Mole, says regulators have reacted to the challenge in two ways; either by ignoring it and conducting business as usual or by lashing back when an emerging business threatens the established order. The latter strategy has been most visible in Uber’s ongoing battles with taxi companies.

“It can feel like governments are choosing between either letting these platforms operate without applying particular rules or regulations to them, or trying to knock them out of existence altogether,” report co-author Noah Zon told Yahoo Canada News.

“With the rapid emergence of sharing-economy platforms, governments need to rethink how they can provide a fair and safe playing field, because the current situation is untenable.”

Sharing economy poised for fast growth

Research cited in the Mowat report by the U.K. arm of international consulting firm PwC predicted revenues from five sharing-economy sectors (peer-to-peer finance, online staffing, peer-to-peer accommodation, car-sharing and media streaming) would climb from US$15 billion globally last year to US$335 billion by 2025.

The 26-page report proposes a roadmap for reforming regulatory bureaucracies and explains how the sharing economy is eroding normal regulatory structures while competing with traditional businesses.

“We hope to provide an intro to this issue for policymakers in government, recognizing these models are new,” Zon, Mowat’s lead researcher for intergovernmental economic and social policy, said in an interview. “They can seem a little bit scary, but [regulators should] not have knee-jerk reactions, which is where that whack-a-mole title comes into play.”

It’s not an issue the rest of us should ignore, either, he said.

“We all have an interest in the way the rules for the sharing economy operate, whether we’re using it or not,” said Zon.

We take for granted much of the regulatory underpinnings of the economy, including laws that protect us against consumer and investor fraud, establish worker safety rules, minimum wages, even taxation guidelines.

The sharing economy, with its emphasis on one-to-one transactions through digital platforms such as Uber, undermines that framework. You shouldn’t have to worry whether the vehicle you’re getting into and its driver are safe, or if the New York room you just booked is legit.

“We need to make sure we have a new set of rules that allows for this kind of innovation, that we get better services, better goods and more choice, that establishes once again a playing field that’s fair and safe and that we can go back to the average person not having to think about these things on a day-to-day basis,” said Zon.

Bureaucrats operate in isolation, often with obsolete rules

There are plenty of obstacles to achieving that. Bureaucrats tend to operate in silos, not talking with colleagues in other departments or jurisdictions even though they’re regulating the same sectors.

“To come up with a coherent response that really represents and balances all those interests, governments need to find a better way to work together within government,” said Zon.

There’s also a lot of overlap. The report notes Ontario’s hotel and motel sector is governed by 29 different pieces of legislation, some of it absurdly outdated. Ontario’s Innkeepers Act, for instance, lays out the rules for how a hotel operator can place a lien on a guest’s horse for non-payment.

Regulatory agencies also can become captive to the industries they monitor, the report points out. It leaves them defending the status quo instead of finding new approaches, which is what we’ve seen in Uber’s squabbles with local taxi commissions.

The solution may not be the same for every business sector, or even within a sector, the report suggests.

Maybe someone who rents out their apartment once or twice a year on Airbnb should not be subject to the same rules as a person who’s made it a major money-making enterprise. Perhaps the Uber driver who does 10 trips a week shouldn’t be treated the same as one who makes it a full-time job.

Regulators also may want to take a hands-off approach initially to see if a sector develops its own reliable safeguards, such as in areas of liability insurance or minimum wages for handymen.

One area of the sharing economy governments can exploitis the ocean of data it produces as it operates, the report says. Uber’s trip information, for example, could help cities determine which areas need more public transit. Customer reviews might help streamline safety checks.

“Governments can draw on that data maybe to target inspections where there are low user ratings for an operator instead of needing to operate all inspections of taxis or hotel rooms, or whatever it might be, on the same schedule,” Zon explained.

Trust and transparency among the players are crucial, he said. They must be willing to share the information.

“Reputational information, building trust between service providers or goods providers and consumers, is at the heart of what makes it [the sharing economy] possible,” said Zon.

“Those platforms enable that trust and share that information and I think the same principle can apply to the relationship between the sharing economy and policymakers … and the public at large.”.