In many sectors, regulatory frameworks have failed to adapt and keep up with the growth of the sharing economy and the new challenges and business models it has created. This has particularly proven to be the case for ride-sharing and accommodation-sharing, which have completely disrupted the taxi and hotel industries respectively.
Listed below are the key regulatory trends impacting the sharing economy theme, as identified by GlobalData.
The sharing economy encompasses a diverse range of activities that may not be covered by regulated sectors of the economy, thus opening up wide legal grey areas. This is particularly so with regards to food and meals being shared out of private residences, which may fall outside the jurisdiction of food safety authorities.
As a result, such services may not follow established and necessary guidelines relating to the condition and hygiene of facilities and equipment, or procedures for handling and storing food. There is a clear need for clarification of the liabilities of hosts, online platforms, and authorities to ensure that all parties are clear on levels of accountability and risk.
One consistent criticism levelled at the sharing economy is its classification of workers as independent contractors, therefore disqualifying them from basic protections of employment such as minimum hours, paid time off, and worker safety. Indicative of the ongoing challenges that gig workers are likely to face, Prop 22 was recently passed in the US state of California, exempting firms such as Uber, Lyft, DoorDash and Instacart from treating their drivers like employees.
Reliability of review mechanisms
Online rating systems and peer reviews are a crucial component of the sharing economy, which relies on a critical mass of users and a requisite level of trust between them. They have, however, created a new set of challenges for regulators, not only with regards to the transparency and potential manipulation of such mechanisms, but also who should participate in reviews, the type of information that should be shared, and the particular outcomes or potential harms that trust mechanisms can bring about.
Participation in the sharing economy typically requires users to disclose a range of information about themselves, including their location, address, consumption behaviour, services provided, and photos of personal items. Sharing platforms thus have access to an immense amount of user data that can be leveraged and used selectively to influence users.
Consumer and data protection laws largely cover the deceptive use of personal information, however, the speed at which the sharing economy is evolving will require equally agile responses from a data privacy and cyber security perspective. For example, the European Union’s General Data Protection Regulation (GDPR), which came into effect in May 2018, is the most stringent privacy and security law in the world and is likely to have significant implications for the sharing economy. The GDPR will levy harsh fines against those who violate its privacy and security standards, with penalties reaching into the tens of millions of euros.
This is an edited extract from the Sharing Economy in Consumer Goods – Thematic Research report produced by GlobalData Thematic Research.