Sharing Economy and Regulation

The shared economy has become popular through companies like Airbnb and Uber, which have registered rapid growth in the last five years. Some projections estimate that companies in the industry are expected to generate revenues of about $ 335 billion globally by 2025, and the scope for further geographic expansion remains considerable. But like any rapid industry growth, governments, regulators and industry have inherent interests, and this has generated ever-increasing difficulties.
Although the best-known shared-economy applications are primarily in the transportation and hosting industries, there are companies in a number of other areas that have been able to identify market inefficiencies. Examples of this are We Are Pop Up, for office sharing; EatWith, Meal Sharing, Traveling Spoon, for meal sharing. There are also clothing-sharing apps — Yerdle — and Knowledge — like udemy or Skillshare.
In all cases, the commonalities are disintermediation, sharing overcapacity, increased productivity and business challenges for traditional operators such as taxi companies, hotels, restaurants and utilities. Airbnb, for example, is active in more than 190 countries and valued at more than $ 20 billion dollars. Uber, launched six years ago, operates in more than 300 cities and in more than 60 countries, has more than one million drivers worldwide and is valued at over $ 50 billion dollars.
If on the one hand we have this promising scenario, on the other, not so much. Courts in Belgium, France, Germany, Italy and the Netherlands have declared services derived from the shared economy using non-professional drivers, such as the UberPOP service, as illegal. The service was also effectively banned in New York areas in the summer of 2015. A California court ruled that a driver of a joint-stock company is an employee, not an autonomous, and a judge subsequently recommended that Uber be fined U $ 7.3 million and suspended from operating in the state. The South Korean government has banned Uber to encourage the development of local applications. And Delhi authorities have imposed a temporary ban on Uber after a rape case by an application driver in the Indian capital.
In this context, regulators and governments are beginning to question the long-term impact of the shared-economy business model vis-à-vis traditional operators and communities. The mayor of Paris, for example, set up a team of 20 agents to repress hosts who were sharing rooms deemed illegal by applications such as AirBnB. As a result, 20 owners of 56 apartments were fined.
The issue of regulation for these applications is the central point for defining the future of the society we want. For example, the European Union considers it too early to decide whether the service provided by Uber is a digital service or a transport service. In this case, we must observe the behavior of other disruptive industries, as in the case of telecommunications and energy producers, to make the most appropriate policy decision and to identify the areas that should be regulated.
Clarifying the roles and responsibilities for identifying and punishing abuses, coexisting with traditional operators, paying taxes, preventing data privacy abuse are some of the things that should be observed with parsimony.
The shared economy is growing rapidly and creating new opportunities around the world. Like all major disruptions, it is putting pressure on existing business models and regulatory milestones. Participants have the opportunity to play a role in developing long-term solutions that encourage innovation and at the same time protect consumers and society from possible unimagined harm in a simple, short-term analysis.

Note: This text was based on article Alberto Marchi McKinsey’s publication.

This text was for blog

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