The European authorities, keen to ensure that the potential economic benefits of sharing economy platforms are realised, have been busy reviewing the existing barriers which could impede growth in the sector.
At the end of last month we saw two reports that confirmed prevailing thinking that there are regulatory barriers that need to be tackled to enable the sector to achieve its potential.
European Parliament Report
Firstly, on 25 January 2016, the European Parliament’s Think Tank published a study on the current economic, social and legal state of play of the sharing economy in Europe and the impact of failing to take action at the EU level.
The study estimates the potential size of the sharing economy in Europe at €572 billion (£445bn) in annual consumption. However, the study warns that substantial barriers prevent the full benefits of the sharing economy from being realised.
In particular, the study identifies that within the EU the relevant legal frameworks vary significantly across member states.
Regulatory barriers which could inhibit the development of the sharing economy include: (i) outright or effective bans on sharing economy platforms, (ii) regulatory costs which deter self-employment, (iii) regulatory costs which deter marginal transactions, and (iv) inconsistencies or idiosyncrasies in intellectual property rules.
The study advises EU policy-makers to strike an adequate balance between freedom for business and the necessary regulatory protection, and includes the following recommendations.
- The EU needs to establish clear criteria to determine into which legal category digital platforms belong. (This reflects a common debate about the term ‘sharing economy’ – it’s such a wide catch-all term for businesses across many sectors, with many different business models)
- The EU should provide guidelines on the threshold between what constitutes a professional activity exercised on a sharing economy platform and what doesn’t. This could help set a level playing field for offline and online services, including in terms of time and space limits and income thresholds.
- The EU should create common rules focused on a fairly narrow set of sectors for which there is an obvious need for a new legal framework (e.g. passenger transport). Sharing economy start-ups will be relieved to know that the study advises that the EU should avoid over-regulating new operators which need room to manoeuvre to innovate and grow. But the larger players may be discouraged that the study suggests rules should be concentrated on already well-established sectors (e.g. apartment rental). The study suggests that it would also be worth considering the role that self-regulation can play (which is an approach advocated by many in the sharing economy sector). The study also suggests that a solution might lie in the outsourcing of certain legislative and control functions to the platforms themselves.
- The study highlights concerns around social exclusion which might be created if users don’t have a sufficient reputational rating score. It suggests that the EU should create a legal framework on the principles and functioning of reputational rating systems in order to ensure there isn’t social exclusion and to boost the trust users have in sharing economy platforms.
- Despite regular warning headlines that sharing economy platforms could become dominant and inhibit competition, the study concludes that there is no current evidence for this assertion. It believes that for the time being existing EU competition rules are sufficient to deal with the sharing economy.
- The study recommends that EU employment regulations shouldn’t be altered to specifically include sharing economy providers. People working for providers should be allowed to remain self-employed and platforms should be enabled (and in some cases, encouraged) to develop their own means of supplying benefits to workers, besides cash remuneration. A remaining issue is whether providers should become employees of platforms. The study recommends that the most appropriate move would be to include sharing economy providers in the scope of general rules applicable to self-employment. The best complimentary approach would be to allow (and potentially encourage) platforms to develop their own benefits options that could compete with insurance products that workers could obtain elsewhere.
- Lastly, the study identifies that EU policy changes may also be needed in the following areas:
- data protection
- manufacturing sectors (e.g., in terms of the automotive sector)
- planning (e.g., in terms of transport infrastructure)
- intellectual property rules – the study suggests that ongoing reform may be needed to take account of the increased importance of a cross-border hiring model, which may render geo-blocking and related restrictions superfluous
Regulatory barriers are not the only barriers impeding the growth of the sharing economy. The study also identifies challenges, for example, in terms of digital access and skills, and tax.
European Commission Consultation
A day after the ThinkTank study, on 26 January 2016, the European Commission published the initial results of its recent public consultation which covered the sharing economy. These initial results appear to be consistent with the study, in that Commission reported that:
- A large majority of businesses and consumers agreed that there are regulatory and other obstacles to the development of the sharing economy in Europe. Uncertainty over the rights and obligations of users and providers are generally considered a key obstacle hampering the sharing economy.
- Sharing economy service providers, platforms and public authorities favour more guidance and better information on the application of existing rules as a policy response. Unsurprisingly, ‘traditional' service providers that still mainly operate without extensive involvement of online platforms favour new rules for the sharing economy.
In terms of next steps, the Commission is now carrying out an in-depth analysis of the replies to the public consultation and is expected to publish a full report in early March 2016.
Erasmus said, 'There is no joy in possession without sharing'. Thanks to the proliferation of new ‘sharing economy’ digital platforms, millions of strangers around the world are now experiencing both the joy - and the financial benefits - of shared resources. European governments and institutions have also caught up with the scale of the potential economic opportunity.
However, it’s clear that we have work to do in Europe to address existing legal barriers and challenges if the sharing economy is going to move from being disruptive to an established part of the economy.