The Federal Trade Commission today released a highly-detailed analysis of the collaborative or ‘sharing’ economy. Entitled The “Sharing” Economy: Issues Facing Platforms, Participants & Regulators, the 89-page document (plus appendices, including one that contains links to 62 other comments and attachments from interested parties, extracted from more than 2,000 submissions to the Commission) takes a four-part approach to its investigation:
- Chapter 1 of the document “focuses on the economics of sharing economy marketplaces, particularly how these platforms use technology to facilitate low-cost transacting among many small suppliers and buyers, as well as certain competition issues that may arise as sharing economy marketplaces mature.”
- Chapter 2 “provides an overview of why trust mechanisms are important in the sharing economy, how particular platforms employ trust mechanisms, and how these mechanisms work to promote buyer and seller satisfaction.” The extent to which trust mechanisms like seller rating systems are seen as an important instrument for providing a degree of self-regulation in the sharing economy.
- Chapter 3 covers the contentious issue of regulation. Unsurprisingly, new market entrants find that regulations “may be outmoded, may reflect erroneous assessments of regulatory needs, or may be designed to protect incumbent and entrenched competitors” while those established market participants believe that sharing economy upstarts “should be subject to the same regulatory requirements to ensure a level playing field.” Given that new sharing economy companies “may have incentives to understate the extent to which regulation of their activities is needed to protect consumers and third parties,” while “conversely incumbents may have incentives to respond to new entry by using the regulatory process to impede competition,” it’s unsurprising that this discussion concludes without a clear resolution.
- Chapter 4 looks specifically at Uber and Airbnb as firms shaping ” the rise of the sharing economy in two key sectors, short-term lodging and for-hire transportation service, the competition between platform-based suppliers and traditional incumbents, and the resulting debate over how regulators should respond.”
The report will leave advocates for both sides of the sharing economy debate unsatisfied, as the FTC does not take a firm stance in support of either established competitors or new market entrants. However, those looking for evidence that regulators are taking the sharing economy seriously will likely appreciate the depth of research that is evident in the text. Innovators like Uber and Airbnb will be an important force in an expanding number of market sectors, and it’s important that regulators be informed and appropriately contemplative before taking any action that may work to the advantage or disadvantage of those working (or investing in) firms that compete in an increasingly-dynamic economy.
Read the FTC release on the Sharing Economy report: https://www.ftc.gov/news-events/press-releases/2016/11/ftc-sharing-economy-report-explores-evolving-internet-app-based (includes link to the report)
Link directly to The “Sharing” Economy: Issues Facing Platforms, Participants and Regulators: https://www.ftc.gov/system/files/documents/reports/sharing-economy-issues-facing-platforms-participants-regulators-federal-trade-commission-staff/p151200_ftc_staff_report_on_the_sharing_economy.pdf