Last month, the FTC released a staff report entitled “The ‘Sharing’ Economy: Issues Facing Platforms, Participants, and Regulators,” that assesses evolving business models relying on internet and app-based “sharing economy” platforms, such as peer-to-peer platforms (think, Airbnb), and their effects on more traditional industries. The 100-page report also discusses several “trust mechanisms,” such as reputation rating systems or money-back guarantees, which help develop a level of confidence between buyers and sellers.
The report summarizes an FTC public workshop held in June 2015 that highlighted a number of competitive benefits and potential consumer protection challenges posed by disruptive business models in markets such as for-hire-transportation and short-term lodging. In particular, the report discusses the economics underlying how these marketplaces operate and the platforms’ approaches to addressing consumer protection and other regulatory concerns through trust mechanisms. As the report explains, through sharing economy platforms, smaller sellers (e.g., individuals) can enter markets and access broad groups of potential buyers. These sellers are often able to use their own personal assets for service – such as a room in their house – which may make the cost of entry much lower than it has been for more traditional sellers.
The FTC also examines regulatory approaches to protect consumers and the public while still preserving the benefits of competition offered by these new and innovative sources of supply. The report states that, in the FTC’s view, any necessary regulations on these new platforms “should be flexible enough to allow new forms of competition” and “narrowly tailored to the specific public policy goals that have been identified” in order to avoid stifling competition.
Takeaway: While the FTC’s report does not propose specific solutions or next steps, it opens up a dialogue between regulators, economists, federal and state governments, industry participants and consumers about emerging platforms and the costs and benefits they carry for consumers and traditional industries.