Eight Takeaways From the FTC's Sharing Economy Workshop

by

Michael J. Horney *

Introduction

The Federal Trade Commission (FTC) hosted a stimulating workshop regarding the "sharing economy" on Tuesday, June 9, 2015. The workshop offered a variety of perspectives from regulators, academics, and industry executives on the sharing economy's emerging and innovative business models.

Free State Foundation scholars submitted comments to the FTC in connection with its workshop. In these comments the FSF scholars credited the sharing economy with fostering innovation, creating value, and providing cost saving options for consumers. The FSF scholars also discussed the sharing economy's policy implications and the role for government within the sharing economy's efficient, self-regulating markets.

In this Perspectives from FSF Scholars, I will address the following eight takeaways from the FTC's sharing economy workshop. Some of the takeaways were specifically discussed at the workshop, while others, I believe, should have been discussed more.

1. Reputational Feedback Mechanisms Have Enabled Bisymmetrical Trust
2. Bisymmetrical Trust Relationships Balance Privacy With Transparency
3. Self-Regulation Is Not the Same as No Regulation
4. Deregulate Down Rather Than Regulate Up to Address Legitimate Equity Considerations
5. Horizontal Mergers Are Only a Concern if Regulations Eliminate Contestability
6. Vertical Mergers Are Only a Concern if Regulations Eliminate Contestability
7. Positive Externalities and Spillovers of the Sharing Economy Were Not Discussed Enough
8. The Sharing Economy Benefits Low-Income Users More Than High-Income Users

Conclusion

The general mission of the workshop was to discuss "competition, consumer protection, and economic issues arising in the sharing economy to promote more informed analysis of its competitive dynamics as well as benefits and risks to consumers." I would say that it succeeded in that goal. There was not much discussion on how the FTC will or should move forward. I generally think this is positive because I do not believe there is much of a role for the FTC other than encouraging a deregulatory and market-oriented approach by government. It is clear from the discussions and speeches at the FTC's workshop that such a deregulatory approach has been vital to the emergence and success of the sharing economy.

FTC Commissioner Maureen Ohlhausen's opening keynote speech set forth an important framework and key principles at the outset of the workshop:

As a life-long advocate for the beneficial effects of competition, I see the rise of the sharing economy as yet another example of how free markets have the potential to introduce transformative change. When entrepreneurs are free to innovate and compete, sometimes they will succeed and sometimes they will fail. But over time, that repeated process of experimentation, adaptation, and revision creates meaningful improvements in all of our lives.

Let me be clear where I stand: the evolution of markets should be driven by consumer demand, rather than artificial, regulatory preferences for one business model over another. Misguided government regulation can be the barrier to innovation that never falls, so regulators should tread carefully, particularly when considering hypothetical rather than demonstrated consumer harm.

The FSF scholars stated in their comments what they believe should be the proper FTC approach to the sharing economy:

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

They obviously provide support demonstrating the positive impact of the sharing economy with respect to increasing overall efficiency, affordability, convenience, and consumer satisfaction.

* Michael J. Horney is a Research Associate of the Free State Foundation, an independent, nonpartisan free market-oriented think tank located in Rockville, Maryland.