Despite all the enthusiasm around the collaborative economy, regulatory challenges could dampen the outlook of many disruptive, peer-to-peer (p2p) business models. As many magazines have written much about previously, the sharing economy has brought forth many innovative business models that enable individuals to save and earn money, reconnect with their local communities and shift to more sustainable and environmentally conscious lifestyles. The innovative, untried nature of these emerging online business models also puts them in a head-on collision course with regulators. While many of these disruptive business ideas are shaking up established industries, like hospitality or urban transportation, there is still a huge lack of regulatory framework. Arun Sundararajan, professor at New York University Stern School of Business, recently gave an excellent interview with TechCrunch about how to regulate the sharing economy without blocking further innovation.
It's not surprising, when there is something new and innovative, for there to be regulatory challenges around safety,
he told TechCrunch.
He also pointed out that while many incumbent industries fear that they will be made obsolete and substituted by these new businesses, the reality looks different. Similar to what Brian Chesky, co-founder of Airbnb, said at the Travel Innovation Summit in Phoenix, Sundararajan argued that we also seeing an expansion of existing markets. Airbnb has for instance created a market for things that never had a market before, like tree houses and castles.
When does an activity become commercial?
Especially p2p marketplaces are faced with these issues, since they enable private individuals to undergo business-like transactions such as renting out their space, car or offering their labor. An increasing number of such transactions has begun to cross the line from being recreational or making a few extra dollars to becoming a significant source of income. But does this make the activity commercial? Who is responsible in the case of an incident, the user or the platform? As Shareable Magazine has pointed out, these open questions put many platforms in a legal grey area. Sundararajan emphasized that now is a good time to take a step back and look at what the role of regulators should be in the sharing economy. In an industry this new, there is still a lot of work to be done. But if marketplaces start working together to raise awareness for these issues and approach regulators collaboratively, it should only be a matter of time for these challenges to be overcome. http://www.youtube.com/watch?v=FJpI5OW1EjI Here are some of the most pressing ongoing regulatory issues related to p2p business models:
Taxis Challenge Ridesharing
One of the most prominent regulatory issues of the past months has been taking place in on-demand ridesharing in California. The two San Francisco startups SideCar and Lyft enable people driving through the city to give others a ride by connecting through a smartphone app. Since these services' drivers do not have certified taxi licenses (but do undergo extensive screening), California regulators sent them cease-and-desist letters, leading to an uproar in the California ridesharing community. In 2010 Uber, a high-end on demand ridesharing service, was also in hot water for competing with regular taxis. The Taxi and Limousine Commission of New York (TLC), the only taxi provider in the city, refused to grant the company the right to operate in the municipality.
Do short term apartment rentals violate rental laws?
P2p vacation rentals -- marketplaces that let people rent out their living space for short periods of time to travelers--are increasingly being challenged by city authorities. Many local laws in urban areas prohibit short-term rentals for under 30 days. Nor is the hotel industry exactly thrilled about its new competitors, who are neither regulated nor pay hotel taxes. Just a few weeks ago, the New York Times reported that many Airbnb hosts in New York are breaking the law (unknowingly) and could be subject to five figure fines or eviction. This has unleashed debates on who is responsible for informing hosts on their local laws and who is accountable in the rare case that something does happen. Since these limitations are not stopping the p2p rental market from continuing to grow at a rapid pace, solutions to these legal challenges are needed soon.
Insurance and p2p carsharing
Even though the actual risk of being dropped by your insurance company when renting out your car on p2p platforms like Getaround, Autonetzer or Voiturelib is very low, it is worth mentioning that insurance is another important area in which the majority of marketplaces still lack a regulatory framework. Another version of this article was originally published on the TrustCloud blog. Photo credit: CC timsamoff