Can sharing economy companies be properly regulated? Some experts think so

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Every emerging technology can, at least for a little while, feel like an unguided missile. We don’t know exactly where it will land, what foundation it will shake, and which industries it will blow up.

The sharing economy is no exception, and right now, it’s creating regulatory nightmares for entrepreneurs and policymakers alike.

Capitalism without intelligent regulation often means trouble, and Uber has become the poster boy for this struggle. The ride sharing giant has fought bitter regulatory battles in many countries and cities, sometimes at the expense of sidetracking some of its most ambitious and promising projects.

One wrong step and regulators face the unsettling fear that their actions might do more harm than good.

Challenges of this nature are not new. Entrepreneurs have always had to negotiate with skeptical policymakers who wonder how new technologies and business models will or won’t fit into existing regulatory frameworks. Most innovative firms incur significant costs before they can meaningfully explore consumer appetite, and they don’t want that sidetracked. They realize, however, that consumers are more likely to have confidence in a new product if it operates within an existing regulatory framework.

Regulators, for their part, face the difficult task of designing guidelines that are flexible enough to reward innovation and allow fair competition while protecting consumers against the risks that new tech may create. Often, that’s a tough three-legged stool to balance on.

One wrong step and regulators face the unsettling fear that their actions might do more harm than good. “Do you want to be the city that’s viewed as anti-innovation?” asked Gary Shapiro, president and CEO of the Consumer Technology Association, during an interview with Reinvent.

 
Shapiro said he supports getting products to market first so that consumers can understand them before applying too much regulation. He also believes that legislators are generally more cautious toward new technology if they haven’t used it.

He warns that premature regulatory intervention can stifle an emerging market. This challenge is compounded by the fact that sharing services are already established and extremely popular in many markets. “You have to weigh health, safety, revenue obligations, and worker protection vs great services that delight people everywhere,” Shapiro added. At what point does “the government override the interest of allowing people to freely do business with each other?”

Platforms and governments are natural partners

Faced with this conundrum, some experts have suggested a new path: self-regulation. “The platforms and the government, rather than being at odds, are very well aligned to being partners in regulating a lot of the commercial activities that takes place on the platforms,” said Arun Sundararajan, a professor at New York University Stern School of Business and author of The Sharing Economy, in an interview with Reinvent. “Self-regulation doesn’t mean no regulation; it means regulation by someone other than the government.”

Certainly, there’s a long history of self-regulatory organizations for different kinds of industries—from chemicals, cotton, financial services, to nuclear power.

Sundararajan offered examples related to the sharing economy:

Diverse parties can work together

Lobbying and moving into gray areas