In the last decade, there have been a lot of popular businesses like Uber and Airbnb operating in the sharing economy (Penn & Wihbey, 2016). With Airbnb valued at $10 billion and Uber at $18,2 billion, they are disrupting the traditional hotel chains and taxis companies respectively (Cannon & Summers, 2014). It is not hard to see why since the pricing is lower, more transparent and on top of that gives both suppliers and users more flexibility (Zervas, Proserpio & Byers, 2014).
While there have been a lot of upsides, especially from the customer’s perspective, there are also some negatives. For example, Uber and Lyfe still have a lot regulatory issues in multiple countries and are even banned from some areas (GCF, 2017). The Uber drivers don’t have to abide all these rules traditional taxi drivers are bound by, which leads to an unfair competitive advantage. Furthermore, traditional hotels are held to a certain standard, have regulations and are being inspected for safety risks like firetraps. The apartments on Airbnb have none of the aforementioned rules and safety checks, so the customer could possibly be exposed to one or more risks.
Although services like Uber have unwritten rules, for example, an Uber drive is expected to take the shortest route. If the customer is not happy with the driver or the route he took, there is an option to leave a bad review or even ask Uber for a compensation. So in a way, Uber and similar companies are already being regulated, although not in the traditional way with rules but by the users themselves. If you add more rules and regulations to this system, it may hinder the natural process.
The sharing economy gives back power to the user, but this also comes with downsides. In general, these companies do give customers more options to pick from, though you have to be aware of the added risks. Rules do not always mean better service and could even hurt what makes the sharing economy so strong, a user regulated service. It is an interesting question how many rules exactly should be in place if any.
References:
- Cannon, S., & Summers, L. H. (2014). How Uber and the sharing economy can win over regulators. Harvard business review, 13(10), 24-28.
- Edelman, B.G., Geradin, D. (2015) Efficiencies and regulatory shortcuts: How should we regulate companies like Airbnb and uber?
- Koopman, C., Mitchell, M.D. and Thierer, A.D. (2015) The Sharing Economy and Consumer Protection Regulation: The Case for Policy Change. The Journal of Business, Entrepreneurship & the Law, Vol. 8 Iss 2, 2015
- GCF, n.d. Sharing Economy: Legal and Safety issues in the Sharing economy. [Online]
Available at: https://www.gcflearnfree.org/sharingeconomy/legal-and-safety-issues-in-the-sharing-economy/1/ - Penn, O. & Wihbey, J., 2016. Uber, Airbnb and consequences of the sharing economy: Research roundup – Journalist’s Resource. [Online]
Available at: https://journalistsresource.org/studies/economics/business/airbnb-lyft-uber-bike-share-sharing-economy-research-roundup - Zervas, G., Proserpio, D., & Byers, J. W. (2014). The rise of the sharing economy: Estimating the impact of Airbnb on the hotel industry. Journal of Marketing Research.
Picture:
http://dailysignal.com/wp-content/uploads/airbnb-1250×650.jpg
Why, then, would these unwritten rules and self-regulation not work for other companies? Why would trade unions need to exist, or CAOs (Collective Labour Agreements), and the like? Or regulations regarding safety, worktime, and ever so on? I think it should be pretty clear, historically speaking, that such libertarianism is undesirable – just think of the stereotypical hypercapitalism, and realise that that actually exists without such laws.
Firing someone by WhatsApp message in the middle of the night? Perfectly legal in the USA. Meanwhile, the EU, thanks to all its EU-wide regulations, guarantees that we enjoy products with some of the highest quality and safety standards.
What is ‘the natural process’, and why is this desirable? I mean, you can argue that Darwinism, or Ayn Rand’s fantasy, is ‘the natural order’, but… What value does ‘natural’ have? The internet is not ‘natural’, nor is the entirety of civilisation (which, I would note, is a process of ever-increasing and ever-expanding order, structure, and regulation).
Another blog-post argued that it might be wrong for governments to uphold the law; to punish Uber because its business model is based on breaking the law, and capturing a large enough userbase within the timeframe it has before it is forced to adhere to the law. That is a pretty despicable way of doing business, and should never become the norm, in my opinion.
So I don’t agree with the idea that regulations and whatnot are bad – I would argue the exact opposite, in fact. But I would be interested in arguments to the contrary, for it is always interesting to expand one’s views and perspectives. 🙂
Hi Patrick, you left your own opinion out of the article, do you think that these kind of companies should be regulated? Do you think that Uber drivers would still work for Uber instead of a taxi company if they have many regulations to take care of? Or would people still rent out their homes on Airbnb if there are a lot of regulations?
It would be nice to hear your opinion too since you researched the topic !
Reading your post, came to my mind a recent “war” that happened in Greece and is still on about Taxibeat. Taxibeat is a greek platform, also launched in other countries, connecting passengers with available professional drivers nearby. From one hand customers can find a taxi for their transportation through a mobile app and taxi drivers from the other , can be connected to passengers “through a fair reward system” (taxibeat.com). Right now about 8,000 taxi drivers offer their services through the platform but Taxibeat is threatened by greek government’s regulations. These regulations were initially supposed to defend platforms such as Uber (no significant market share in Greece though) but finally all transportation platforms are on the scope. According to Greek authorities “Innovation needs to adjust to each country’s laws,” the head of the union, Thymios Lyberopoulos, told Reuters. “You can’t have a group of professionals being normally taxed … and a few others not paying at all for the same job, because there is no specific framework.” The draft law includes three-year contracts between companies and taxi drivers transforming in this way platforms such as Taxibeat from “intermidiaries” into integrated transportation companies. This is also the case for Airbnb: those who offer their houses through the platform, probably make money from other activities and use Airbnb as extra money source. At least initially, Airbnb service providers faced some illegalities like rooms subtenancy. The reason? Landlords and local authorities may not allow this sort of subletting and Airbnb administrators may already know that.
Uber faces similar frustrations in London as last week it was decided to ban Uber cars. Citing concerns that the ride-hailing company is not “fit and proper” in its compliance with regulations, Transport for London, announced that it won’t be renewing Uber’s license to operate in the city. Transport for London said that Uber demonstrates a “lack of corporate responsibility” tied to a number of its behaviors, such as failing to report sexual assault by its drivers and using lax background checks.
So, either for taxes and financial regulation reasons or for safety reasons, we can observe a tendency in many countries to limit the activity of those platforms by adding regulations that make their operations unfeasible. Do these regulations raise concerns on discouraging the operation and launch of new innovative business models that facilitate customers experiences ?
References:
http://www.reuters.com/article/us-taxibeat-greece-regulations/greek-plan-to-regulate-taxi-apps-draws-customers-ire-idUSKCN1C427X
http://www.skai.gr/news/greece/article/356421/neofueis-epiheiriseis-gia-beat-dioxi-tis-neofuous-epiheirimatikotitas-11/
http://www.nytimes.com/2012/12/01/your-money/a-warning-for-airbnb-hosts-who-may-be-breaking-the-law.html
http://money.cnn.com/2017/09/29/technology/uber-london-ceo-meeting/index.html