As we use the term, the "sharing economy" encompasses diverse service markets of individual buyers and sellers who collaboratively offer new consumer offerings through innovative online applications. It is characterized by an online app-based exchange of products and services, leveraging flexible peer-to-peer connections in order to pursue, on a timely basis, efficiencies through use of available supplies while simultaneously reducing transaction costs. The sharing economy is also characterized by the novel ways in which its applications facilitate trust relationships that drive the sharing and exchanging processes.
The sharing economy's positive impact is one of fostering innovation, creating value, and enabling cost savings for consumers. Internet-based applications, like Airbnb's and Uber's pathbreaking, innovative lodging and ridesharing services, use digital technology to change and enhance the way consumers live. Such applications create efficiencies and reduce costs to consumers through their technological capabilities to signal to users the supply and demand situation in particular markets at any given time. And survey research indicates that the sharing economy's positive impact on consumer welfare also includes high consumer satisfaction and added convenience.
Notably, recent research indicates the sharing economy is particularly beneficial for low-income consumers. The sharing economy has prompted shifts from outright ownership to rental transactions, thereby overcoming financial barriers to consumption. For example, consumers who would have owned a car or power saw in the past might now rent them instead, saving a significant portion of their income.
The Commission's primary focus should be on enhancement of overall consumer welfare and, concomitantly, consumer satisfaction. In this regard, a recent PWC study entitled "The Sharing Economy," reported these survey results:
- 86 percent of US adults who are familiar with the sharing economy agree the sharing economy makes life more affordable
- 83 percent agree it make life more convenient and efficient
- 81 percent agree it is less expensive to share goods than to own them individually
- 43 percent agree owning today feels like a burden
- 57 percent agree access is the new ownership
- 64 percent of consumer say that in the sharing economy, peer regulation is more important than government regulation
These results obviously provide support demonstrating the positive impact of the sharing economy with respect to increasing efficiency, affordability, and consumer ease convenience. Indeed, PWC reports that 19% of the U.S. adult population has engaged in sharing economy transactions, and of those, 72% say that they can see themselves participating in a sharing economy transaction in the next two years.
To date, firms and individuals operating within the sharing economy have been able to thrive through investment-backed entrepreneurship. The emergence of promising and successful sharing economy services is due to creative risk-taking in pursuit of opportunities, free from restrictive barriers to entry and competition. Accordingly, sharing economy services and related applications must remain free to form and operate without the strictures of any new sector-specific regulations or older regulations designed for incumbent providers of legacy services.
Unfortunately, various sharing economy services have been under attack by regulators in several states across the country. Also, some existing businesses feel threatened by the entry of these disruptive new Internet-based sharing applications. But just because businesses and individuals may lose profit or market share from a new technology or innovative idea, such as Airbnb's app enabling the sharing of lodging, does not mean that regulatory roadblocks should be erected. Consumers should be free to pick winners and losers in the market based on value and satisfaction instead of government officials applying lobby-influenced political criterion.
Concerns over regulatory capture phenomena should be brought to bear when considering public policy approaches to the sharing economy. Services like Airbnb and Uber continue to face the prospect of being banned or at least severely restricted. Fearing they will lose their market share to these new Internet applications, established hotel and taxicab enterprises often seek to persuade policymakers to apply unnecessary regulatory restrictions.
Regulatory relief should strongly be considered if the laws or regulations applicable to incumbent businesses no longer make sense. The proper way to respond to "level the playing field" between sharing economy entrants and incumbent service providers is to remove unnecessary regulations wherever they apply, not expand them in a competitive market environment.
As a general matter, the plausibility of any need for regulation of the sharing economy is diminished by its effectively self-regulating characteristics. Online reviews and accessibility of feedback information are uniquely critical to the Internet-centric business models of sharing economy services. Further, in many instances, insurance policies also offer ready means of protecting the interests of service providers, hosts, and consumers.
Of course, health, safety, and consumer protection laws and regulations of general applicability can be enforced against sharing economy service providers and hosts, just like entities that operate under legacy business models, as long as they are not formulated and implemented in a discriminatory fashion.
Sound public policy regarding the sharing economy should take into consideration the fact that services enabled by Internet-based applications have depended on the avoidance of regulatory barriers and burdens. A presumption of marketplace freedom and against regulation should guide public policy concerning the sharing economy. Clear and convincing evidence of an actual or likely harm to consumers should be demonstrated by any federal, state, or local regulatory authority or petitioning party advocating regulation before any sharing economy-specific regulatory proscription or intervention is considered. Special or partial laws and regulations designed to protect incumbent competitors from new sources of competition are unjustifiable and will harm consumers.
Further, to the extent that governing authorities determine that any regulatory action is warranted, they should focus tightly on addressing any real-world problems in the least intrusive, least costly way. And any concrete public health or safety concerns, supported by convincing evidence, should be addressed in a properly targeted way that balances the costs of regulation.
Opponents of new sharing economy business models and disruptive new Internet applications should not be allowed to succeed in misusing laws and regulations in order to stifle the services merely because they perceive adverse impact on preexisting businesses. A positive shared vision for emerging technologies in the rising sharing economy requires a free market-oriented perspective. This will foster the greatest amount of consumer welfare and consumer satisfaction among willing buyers and sellers.
