Law and the "Sharing Economy"

Regulating Online Market Platforms

Derek McKee, Finn Makela, Teresa Scassa

• Publisher: University of Ottawa Press
• Year: 2018
• eBook ISBN: 9780776627533
• Topic: Business
• Subtopic: Business Law
• Index: Business

Controversy shrouds sharing economy platforms. It stems partially from the platforms' economic impact, which is felt most acutely in certain sectors: Uber drivers compete with taxi drivers; Airbnb hosts compete with hotels. Other consequences lie elsewhere: Uber is associated with a trend toward low-paying, precarious work, whereas Airbnb is accused of exacerbating real estate speculation and raising the cost of long-term rental housing.
While governments in some jurisdictions have attempted to rein in the platforms, technology has enabled such companies to bypass conventional regulatory categories, generating accusations of "unfair competition" as well as debates about the merits of existing regulatory regimes. Indeed, the platforms blur a number of familiar distinctions, including personal versus commercial activity; infrastructure versus content; contractual autonomy versus hierarchical control. These ambiguities can stymie legal regimes that rely on these distinctions as organizing principles, including those relating to labour, competition, tax, insurance, information, the prohibition of discrimination, as well as specialized sectoral regulation.
This book is organized around five themes: technologies of regulation; regulating technology; the sites of regulation (local to global); regulating markets; and regulating labour. Together, the chapters offer a rich variety of insights on the regulation of the sharing economy, both in terms of the traditional areas of law they bring to bear, and the theoretical perspectives that inform their analysis.
Published in English.

PART I

TECHNOLOGIES OF REGULATION

CHAPTER I


Peer Platform Markets and Licensing Regimes

Derek McKee¹

I. Introduction

Recent debates about Airbnb, Uber, and similar “sharing”² platforms have generated an apparent consensus. According to policy reports published by governmental and intergovernmental organizations, the platforms have benefits, but they also pose risks. The platforms give consumers access to a wider variety of services at lower costs; they also provide a flexible source of income for providers. However, peer-to-peer rentals and services threaten consumers’ safety and privacy; they may also give rise to contractual unfairness. Most commentators agree that these problems would be appropriately addressed through some form of regulation.

What form of regulation? This is where the consensus breaks down. Some government authorities have tried to subject platform-mediated services to rules designed for their analog counterparts, such as hotels and taxis. However, proponents of the platforms are generally critical of these rules. They claim that “self-regulation” by the platforms would be more appropriate.

This debate over the appropriate form of regulation is complicated by the presence of public licensing regimes. In many places around the world, it is illegal to drive a taxi without some form of prior authorization. Some jurisdictions also require licences for operators of hotels. The platforms achieved their initial success by ignoring such licensing regimes, claiming (more or less plausibly) to be exempt from them.

Debates over the “sharing economy” have therefore brought to the fore a set of debates about the merits and demerits of licensing as a form of governance. While licensing provides regulators with a powerful instrument, licences have also been seen as an overly blunt tool—and one that can fall into the wrong hands. Many scholars have argued that licensing regimes are likely to generate economic inefficiencies, political conflicts of interest, and arbitrary exercises of power. In view of these pathologies, some scholars have argued that licences would be better replaced with other policy instruments.

While acknowledging these critiques, this chapter emphasizes that much depends on the details of licensing regimes. Such regimes are highly variable. They can concentrate control in government hands, or delegate it to private actors. They can impose major or only minor barriers to entry, and they can do so formally or informally. In short, the presence or absence of licensing is never an all-or-nothing question.

The recent experience of regulatory responses to sharing econom” platforms bears witness to this need for nuance. In response to the market disruptions generated by “sharing economy” platforms, few governments have dispensed with licensing entirely. Instead, they have made adjustments to existing licensing regimes; they have also created new licences for platforms and providers. Moreover, even if governments eliminate public licensing regimes, the platforms’ regulation of service providers who operate through their platforms is akin to privately managed licensing. There is no guarantee that such a regime will operate in the public interest; indeed, there are reasons to suspect it will mainly serve the platforms’ private interests. The alternative of platform “self-regulation” therefore provides no escape from the dilemmas associated with licensing.

The argument proceeds as follows. In section II of the chapter, I summarize recent policy discussions undertaken by governments and international organizations. These discussions have produced an apparent consensus around certain issues, especially the need to protect consumers from possible harms. However, they have also revealed disagreement around other issues, including the application of labour or employment law as well as the potential application of competition law. Moreover, policy makers disagree over the proper mechanisms for implementing consumer protection goals, especially where licensing regimes are present.

In section III of the chapter, I take a closer look at licences as a legal technology. Licences have a long history; they are also a ubiquitous feature of contemporary legal systems. Governments use licences to pursue various forms of social and economic regulation. Licences are useful to regulators because they provide an effective means of enforcing standards. Nevertheless, licensing regimes have often been the object of critiques, stemming from economic concerns, political concerns, or various combinations of the two.

In section IV, I examine how these issues have been manifested in the context of debates over “sharing economy” platforms, using the licensing of hotels and taxis in Quebec as a case study. These platforms have encroached on economic sectors historically subject to licensing. In response, many jurisdictions have undertaken legislative reforms; to clarify the applicability of the older licensing regimes, to adapt them to the realities of new, digitally mediated services; or to create new, bespoke licensing regimes for the platforms and their users. Many governments have effectively implemented some kind of compromise, treating incumbents and newcomers differently, recognizing each as occupying a certain niche in the market. In doing so, not only have governments not abolished older licensing regimes, they have often created new, separate licensing regimes for the platforms or for providers. These regimes impose barriers to entry and they often contain some form of supply management.

In section V, I consider the fact that, in functional terms, the platforms operate more or less like private licensing regimes. Even without state-imposed licensing, then, the platforms may be perfectly capable of replicating the pathologies historically associated with licensing regimes: there are tensions between the public interest goals that platforms are expected to fulfill and the platforms’ private interests; platforms are likely to engage in rent-seeking behaviour, and they often behave arbitrarily. The superimposition of a public licensing regime for platforms or providers may counter some of these tendencies, but it may also reinforce them.

II. Policy Consensus and Conflict

In the last few years, national and local governments around the world have tried to respond to the policy challenges posed by peer platform markets, such as Airbnb and Uber. Although responses vary from one jurisdiction to another, it is also possible to identify an emerging consensus. This consensus focuses on consumer protection, understood to include issues of safety, privacy, and contractual fairness. It also includes taxation. However, the consensus does not extend to the labour issues arising from platform-mediated services, nor does it extend to the application of competition law. Finally, despite agreement on consumer protection objectives, there is no consensus as to how these goals should be achieved. This last disagreement is partly due to the presence of licensing regimes.

This consensus is on display in a number of policy documents published by national governments and international organizations in 2016. I will review three of these documents in particular: a report published by the Organisation for Economic Co-operation and Development (OECD) in June 2016;³ a communication by the European Commission (EC), also published in June 2016;⁴ and finally a report by the staff of the United States Federal Trade Commission (FTC), published in November 2016.⁵ Of these three reports, the EC’s is the only one that purports to represent the official views of the organization that published it. Nevertheless, all three reports attempt to stake out common ground among a diverse range of participants, and all have received some kind of official endorsement.

The OECD report in question was prepared by a consultant, Professor Natali Helberger of the University of Amsterdam, and provided as a “background report” for the OECD’s “Ministerial Meeting on the Digital Economy: Innovation, Growth and Social Prosperity” in Cancun in June 2016. The declassified document is entitled “Protecting Consumers in Peer Platform Markets: Exploring the Issues.” As the title suggests, the report deals exclusively with consumer protection issues; it excludes issues of taxation, labour, sectoral regulation, and competition. The report proposes that, in general, consumer protection laws (such as prohibitions on fraud and other deceptive practices) should apply to peer platform markets. It identifies a number of issues for discussion, including the reliability of the platforms’ own trust mechanisms (such as pre-screening and user ratings) and how these interact with more formal kinds of regulation and self-regulation, as well as to what extent platforms should be responsible (and legally liable) for the behaviour of their users.

In June 2016, the EC issued a communication entitled “A European Agenda for the Collaborative Economy,” outlining its views on the issues.⁶ In this document, the Commission highlights the economic opportunities associated with the new platforms and argues that Europe should not miss out. It also acknowledges a number of problems with the platform model, however, including uncertainty surrounding application of existing laws (and possible exploitation of these ambiguities, to the detriment of the public interest), as well as divergent and fragmented regulatory approaches. It notes that under European Union (EU) law, market access requirements for providers (in effect, licensing requirements) must be non-discriminatory, minimally restrictive, justified, and proportionate. It also notes that under the EU’s e-Commerce Directive, platforms that are merely offering an intermediation service (and not themselves providing the underlying service) cannot be subject to prior authorization requirements.⁷ It also notes issues related to protection of consumers and workers, although it mainly focuses on legal ambiguities surrounding these ...

Table of contents

• Cover
• Title Page
• Copyright
• Table of Contents
• Acknowledgements
• Introduction: The “Sharing Economy” through the Lens of Law
• Part I: Technologies of Regulation
• Part II: Regulating Technology
• Part III: The Space Of Regulation—Local To Global
• Part IV: Regulating Markets
• Part V: Regulating Labour
• About the Contributors
• Backcover