Regulation and the "sharing
economy" was the topic of a recent panel discussion in the U.S. House of
Representatives. Alex Howard summarizes the highlights.
(L
to R) David Hantman, John Breyault, Alex Howard, Adam Thierer, Arun
Sundararajan at the regulation and sharing economy panel convened by the
Internet Caucus.
"Congress should
care, but forbear." That was the conclusion of a panel of an academic, a
researcher, a consumer advocate, and a tech executive convened by the Internet
Caucus in the U.S. House of Representatives in DC last week to consider regulation and the "sharing
economy." I was proud to
moderate the discussion. It's a timely topic: startups that develop platforms
that match the supply of goods and services with demand from mobile consumers
are attaining multi-billion dollar valuations and shaking up markets for
lodging, transportation, and more.
Three of the
participants, Arun Sundararajan, a professor at the NYU Stern School of
Business, Adam Thierer, a senior research fellow at the Mercatus Center at
George Mason University, and David Hantman, the head of global public policy
for Airbnb, all made a case for why legislators and regulators need to take
great care in enacting laws and policies that govern companies and startups,
lest entrepreneurs be stifled and genuine benefits to consumers be snuffed.
That came as no great
surprise: Sundararajan has previously written that government shouldn't regulate the
sharing economy, in 2012, and, more recently, about trusting the sharing economy to
regulate itself. Thierer just co-authored a paper on the sharing economy and
consumer protection regulation (PDF) in which he and his
co-authors argue that, "coupled with the Internet and various new
informational resources, the rapid growth of the sharing economy alleviates the
need for much traditional top-down regulation."
These recent innovations are likely doing a
much better job of serving consumer needs by offering new innovations, more
choices, more service differentiation, better prices, and higher-quality
services. In particular, the sharing economy and the various feedback mechanism
it relies upon helps solve the tradition economic problem of "asymmetrical
information," which is often cited as a rationale for regulation. We
conclude, therefore, that "the key contribution of the sharing economy is
that it has overcome market imperfections without recourse to traditional forms
of regulation. Continued application of these outmoded regulatory regimes is
likely to harm consumers."
John Breyault, vice
president of Public Policy, Telecommunications and Fraud at the National
Consumers League, made arguments for consumer protection within the services
using existing statutes and posited that thetechnological innovation that various startups are deploying benefit
consumers. Hantman, for his part, recounted the steps that Airbnb now takes to
protect both hosts and users of its services in the event of disputes and
issues.
One narrative of the
sharing economy has often been that these platforms enable ordinary people to
earn income renting a room or driving for a car service in their spare time,
and others to rent part of a good or service, as opposed to having to own it. A
countervailing narrative is that the business tycoons of Airbnb,
one of the most well-known examples of the sharing economy, are professional
operators, not amateurs, and that other markets for goods and services will
have similar dynamics. Hantman argued that their data shows the majority of the
700,000 or so Airbnb listings in New York City alone are offered by
individuals, not businesses.
As anyone who has used
a mobile device to request on-demand transportation to those who have found
flexible accommodation knows, these kinds of services can offer improved
services at lower prices. (I've used Uber around the US, and we were Airbnb
hosts for a few months.) The question of where liability rests, however, is an
important legal matter that came up during the discussion. The consensus answer
was that "it depends," but one emerging approach is to make sure
operators of vehicles and hosts carry sufficient insurance.
Given that the forum
was held in Washington, DC, it was no surprise to hear the question of taxes and the sharing economy also
came up. (Once something exists, it seems people in DC will
inevitably wonder if it's taxable.)
In this land of
lawyers and lobbyists, the issue of legal liability is never far away. In the sharing
economy, the question is often unresolved. For instance, if the operator of a vehicle used in a
sharing economy startup kills someone while driving, who is liable?
I asked the panel this question, along with the related issue of whether the
people on these platforms provide means of "public accommodation,"
which in turn would mean that some vehicles or residences would need to be
accessible. No clear answers there, either, but again, there are existing
statutes, like the Americans with Disabilities Act, on the books to apply if
violations are found.
A clear tension point
is how and where data showing compliance with existing laws and regulations can
and should be disclosed. The companies involved aren't sitting idly by on the
sidelines, either: as WAMU reported in November 2014, Uber is actively lobbying
the municipal government of the District of Columbia toseek changes to a
wheelchair-accessible taxi bill, the For-Hire Vehicle Accessibility
Amendment Act (PDF). Uber holds that
disclosing the data about the numbers of wheelchair-accessible trips that are
requested and provided to passengers would pose an "undue regulatory
burden" upon the startup.
There's also the issue
of discrimination in the sharing economy. On the one hand, "Ubering while black,"
as Jenna Wortham wrote in Medium and Latoya Peterson described at Racalicious, canenable people of color to order
transport when cabs do not stop. While it may cost more to use the
premium towncars, an UberX is currently cheaper than a taxi and does not carry
any emotional overhead.
On the other hand, as
Wortham noted, creating platforms and leaving people using them to
self-regulate commercial activity there without oversight could be problematic
in the long term.
Michael Luca, an
assistant professor of business administration at Harvard Business School, told
me that the one clear downside to marketplaces that rely on reputation and
build social features like personal information into business transactions is
that they can have unintended side effects. "The social nature of the
sharing economy is more vulnerable than a traditional economy," he said.
In January, Luca co-published a paper on digital discrimination that surveyed thousands of listings on Airbnb.
The study compared black and non-black hosts who had similar apartments,
photos, and ratings, and found that the non-black hosts tended to earn 12
percent more than their black peers, suggesting that those black Airbnb hosts
were susceptible to some form of social selection and internal biases.
One of the final
questions that I brought up regards privacy and trust in the sharing economy,
a matter I explored at Wired in November 2014. Information transactions around services,
objects, and resources have existed in humanity for thousands of years, from
people sharing shelter and food to neighbors borrowing tools to housemates
borrowing cars to colleagues and classmates sharing networks, servers, and
printers.
Today, these
interactions and transactions are rapidly becoming digitized: if an
entrepreneur can create a marketplace for a given commodity or service, someone
will try to do so. That means there's going to be data generated where there
was none before, which will give the owner of the platform strategic insight
and business intelligence about the dynamics of the market, and its users.
As sharing economy
startups become larger parts of local economies, embedded into how people work,
travel, recreate, and shop, the digital exhaust from those actions creates
associations and patterns that may be mined for insight, efficiencies, or more
nefarious purposes. Location data is powerful, in context. As The Washington Post reported,
when access to Uber's internal analytics was granted to a job applicant, he was
then able to use it to look up the relative of a politician in DC. Uber now says that it's monitoring and
auditing user data access much more robustly, as is Lyft, the ridesharing startup's chief competitor.
These kinds of issues
around user data privacy will lead more people to worry about whether they can trust companies like
Uberand other players in the sharing economy.
One approach to that
issue could be what Zeynep Tufekci, an assistant professor at the School of
Information at the University of North Carolina, and Brayden King, an associate
professor of management and organizations at the Kellogg School of Management
at Northwestern University, suggested in an editorial in The New York Times: information fiduciaries,
or "independent, external bodies that oversee how data is used, backed by
laws that ensure that individuals can see, correct and opt out of data
collection."
Given a 113th Congress
that did not pass surveillance reform, a national data breach law, digital due process, or Freedom of Information of Act reform,
it's unlikely that such a body will be created soon, but in the vacuum left
behind, the Federal Trade Commission has placed many tech companies under
privacy audits. If platform operators in the sharing economy aren't responsible
about designing their platforms and applications to deliver security and
"privacy by design," they may face the same attention.
Down the road, if
discrimination, disability, civil rights, and consumer protections aren't also
baked into these services from the start, more members of Congress and
parliaments around the world might also start to care about sharing -- and stop
forbearing from legislative action.
You can listen to the
archived audio of our robust discussion on the audio player at NetCaucus.org or download it directly as an MP3 to listen to at your leisure.
