Companies such as Airbnb, Uber and TaskRabbit, which epitomize what’s known as the sharing economy, are not going away, so governments must figure out ways to regulate them. And that must happen quickly, before such firms become entrenched in their ways.
That’s the message in a new report from the Mowat Centre that urges policymakers to recognize that they must step up to protect the public interest, while also ensuring that they don’t destroy innovation.
“You have a Wild West situation where people are engaging in transactions and the details haven’t been thought out,” said Mowat Centre policy director Sunil Johal, who co-authored the report, Policymaking for the Sharing Economy: Beyond Whack-A-Mole, with colleague Noah Zon.
“The scale and the speed at which these companies can grow is why in our view they are a new, emerging business model that governments can’t turn away from,” Johal said in an interview.
Making cash by renting an apartment or doing an odd job has happened for ages. The difference today is that such activities are “at a scale that blurs the boundaries of the personal and the commercial and threatens to disrupt existing markets and regulatory models,” the report says.
Johal points to the battles Uber has encountered around the world since launching its ride-sharing app, angering taxi firms who complain the giant company isn’t playing by industry rules.
Uber, which has a valuation estimated at $40 billion (U.S.), insists it’s merely a technology company that helps riders find drivers, and is therefore not subject to traditional taxi licensing rules.
The City of Toronto views things differently. It has slapped the company with 36 bylaw infractions, and is seeking a court injunction scheduled for May to stop Uber’s operations in the city altogether.
Toronto mayor John Tory has said that Uber is “here to stay,” so he believes municipalities must find a way to adapt.
“Uber is operating in Toronto, and it’s in a very murky legal area,” Johal said. “It gives a competitive advantage to those not being regulated in the same strict way.”
Even if the city is successful in its bid to shut down the company, Uber has operated here since 2012.
Johal concedes that no jurisdiction has come up with a simple solution to deal with these so-called disruptive companies that offer peer-to-peer service, such as a linking home owner to a house cleaner, or a tourist to a room, or an artisan selling a hand-made item to buyers.
Some jurisdictions have offered temporary waivers to allow companies to operate while rules are worked out, as Pennsylvania has done with Uber and Lyft.
Just last week, London introduced legislation that would permit home owners to rent out their homes as long as they did so for fewer than three months. Under existing rules, they could face fines of up to £20,000.
Johal conceded that governments are notoriously slow when it comes to change, and companies in the sharing economy tend to accelerate at breakneck speed, often ignoring governments or traditional regulators.
In the report, he noted Ontario’s Innkeepers Act still spells out rules on how and when a hotel owner can place a lien on (and, if necessary, sell) a customer’s horse.
There are important public policy concerns over short-term home rentals. These include zoning issues, health and safety, and even whether, like hotels, such rentals should be subject to taxes.
Similarly, websites such as TaskRabbit, a temporary employment agency of sorts, link individuals with those looking for someone to perform certain task. But such firms raise the question whether those hired are employees, and subject to labour law protections.
In the past, people might have hired a neighbour or friend to do electrical work around the house. Now, with the website, an electrician can easily find jobs to make some extra cash.
“Theoretically, it’s good for him, and it’s good for someone who needs a little electrical work done,” Johal said. “Home repairs are a small task, but they may have significant health and safety issues. What if he burns down the house?”
And given the growth in precarious work in a weak economy, Johal said governments should consider whether individuals hired through such sites should receive workplace protection, minimum wage, pension coverage or employment insurance.
“Short-term casual employment can be great. It’s flexible,” he said. “But what if you have to string together four or five tasks every day, and there’s no employer of record and there’s no safety net if something happened to them?”
Perhaps, he said, if someone exceeds a certain threshold, such as hours worked in a week, they would be considered an employee. Or Uber drivers who work full-time hours would need to be licensed, while those working a few hours would not face the same rules.
In the end, he believes governments need to think differently about the sharing economy, noting that the companies that have emerged in the field are just the tip of the iceberg.
Johal argued that creative governments could harness much of the data these companies collect to public benefit. For example, Uber collects information on where cars are, what routes they take and even where demand is greatest at certain times and locations.
If governments could trade access to such data for regulatory approval, companies might be interested. Johal argued that data could prove useful in developing transportation or even employment policies.
“For government, it could be a ‘You scratch my back, I’ll scratch yours,’ ” he said. “It offers certain flexibility, potentially to make smarter public policy decisions. Companies don’t want to give up the data.”
Similarly, many of these companies require detailed user reviews — so governments could tap into those and target those providers with low scores for inspections, instead of waiting for complaints.
But Johal said governments need to act quickly to make policies because once companies “are set up and operating, there will be a vested stake in the existing position,” he said He added that it’s important to develop fair and open rules for everybody. “I don’t think we have that right now,” he said.
And the jurisdictions that get it right, with a balance between innovation and fair competition, would likely be the ones to attract more emerging businesses.
“It’s not a choice between no rules or old rules. Let’s have good rules,” he said.