This post was written by John P. Feldman and Jonathan R. Davey.
As we, and countless others, have previously written, peer-to-peer sharing services are transforming the world economy. As Tom Goodwin at Havas Media pointed out in March, the world’s largest taxi company owns no vehicles, the world’s largest media company creates no content, the world’s most valuable retailer has no inventory, and the world’s largest accommodation provider owns no real estate. Readers, especially those in urban locations, have undoubtedly seen news reports of city and state regulators trying to find regulatory solutions to the challenges posed by new sharing economy companies, even as these companies have come to dominate their markets. As illustrated in Uber’s fight to pick up passengers at Chicago’s airports, zoning complaints against Airbnb in New York, or the recent creation of the Congressional Sharing Economy Caucus, it is clear that the sharing economy poses unique challenges to government regulators.
To address those challenges, the Federal Trade Commission (FTC) is hosting a conference today titled “The ‘Sharing’ Economy: Issues Facing Platforms, Participants, and Regulators.” In her introductory remarks, Commissioner Maureen Ohlhausen made it clear that the federal government lags significantly behind local government in understanding how the sharing economy has impacted consumer choice and competition at the ground level. While reminding her audience that the FTC has a broad mandate to protect consumers and competition that goes beyond enforcement, Commissioner Ohlhausen asked the audience, consumers and industry alike, to help educate the FTC about the sharing economy. After all, the FTC cannot fulfill its mandate unless the agency is able to understand the complex market dynamics ubiquitous in the sharing economy, possible consumer protection issues posed by the sharing economy, and what second- or third-order effects might arise from FTC involvement.
She posited that market evolution should be driven by consumer demand, not artificial regulatory preferences for one business model over another. When government picks market winners and losers, the public pays the cost – narrow special interests cannot be favored over the broader public good. To find a balance between consumer protection and industry competition in the context of the sharing economy, she asked regulators to be careful – especially when they discuss hypothetical rather than demonstrated consumer harm. She suggested regulators ask themselves the following series of questions:
- Do existing regulatory rubrics need to be reworked or abandoned to accommodate a flexible regulatory framework that allows new business models to realize their full potential?
- Can regulators ensure new business models do not destroy existing consumer protections in privacy, data security, health and safety?
- Can trust mechanisms built into some of these business models effectively, and appropriately, replace regulation?
- How should regulators avoid creating two distinct regulatory tracts, where traditional business models exist separately from newer models? After all, picking winners by regulating in favor of new entrants is no any better than retaining regulations that improperly deter new competitors.
- How should regulators respond to a dynamic market where business models of today might be transformed or destroyed tomorrow?
These questions will not be answered easily, but panelists at today’s conference will provide a meaningful background for industry and regulators to consider as they continue to shape our global economy.