The Shared Economy

Technology   |   Technology & Telecommunications   |   May 1, 2018
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Before discussing how and whether the shared economy should be regulated, it is important to define the term. Simply, the shared economy is an economic model in which consumers grant each other access to their underutilized assets. The shared economy is also referred to as collaborative consumption, the sharing of goods and services, enabled by developments in computer technology, and the use of apps and the internet. Hamari, Juho; Sj√∂klint, Mimmi; Ukkonen, Antti (2016). “The Sharing Economy: Why People Participate in Collaborative Consumption.” Journal of the Association for Information Science and Technology. 67 (9):2047–2059. doi:10.1002/asi.23552. A direct result of this type of economy is that consumers will be more likely to rent or borrow, than to buy and own items.

When people are asked to name a shared economy or peer-to-peer company the most popular responses are Uber, Lyft, Airbnb, and, in the insurance industry, Lemonade and Slice. But are these really shared economy entities? Could they, instead, simply be the results of advances in information technology? Clearly, without the advances in computer technology, the shared economy would not exist. In fact, Uber defines itself not as a peer-to-peer or shared economy company but as a “... technology company that has developed an app that connects users (riders) with third party transportation providers.” These businesses are optimizing the resources the consumer can use for already-available services, as well as the constant advances in technology, especially blockchain technology. A blockchain “is a continuously growing list of records, called blocks, which are linked and secured using cryptography. [Footnotes omitted]. a timestamp and transaction data. [Footnotes omitted].”

In this article, we will use the term collaborative consumption (“CC”) since the authors believe it to be not only more appropriate, but also because it encompasses peer-to-peer and shared economy.


Since we are talking about innovative methods of providing services, the question becomes how and whether these methodologies should be regulated. For instance, the traditional methods of regulation can be divided into at least two major segments, commercial and individual consumers. However, CC blurs the lines between these two segments. Is the Uber driver the same as a commercial taxi driver and therefore someone who must comply with the same regulations as a commercial taxi driver? Is the passenger a “commercial passenger,” as the individual would be in a taxi and protected by the same existing laws that protects a “commercial passenger” in a taxi? Should the individual who rents a room or their whole house through Airbnb be regulated and pay the same taxes as those imposed upon a hotel and conform to the rules regulating the traditional hospitality industry? And is the individual who stays at the Airbnb rental protected by the same regulations and laws as someone staying at a hotel? The answers to these questions are still not clear and vary by jurisdiction. What is clear is that CC is raising issues of what rules apply to these transactions and how existing rules should or could be applied.

Additionally, the difference in regulatory laws for online and offline services can lead to situations of unfair market competition. Thus, it is appears there is a need to solve two essential issues: How can we restore a level playing field? And what rules will promote fair competition?


An increasingly popular notion is that the most effective form of regulation of CC is self-regulation. The Sharing Economy: Disruptive Effects on Regulation and Paths Forward, Urs Gasser, June 6, 2016, The rationale behind self-regulation is based upon the same theories used for the regulation of professions, such as the legal profession. How to Regulate the Sharing Economy? Look to the Law Governing Lawyers, The Huffington Post, Ray Brescia, February 10, 2016, updated February 10, 2017. The basic theories for self-regulation fall into the following: Adapted from The Sharing Economy: Disruptive Effects on Regulation and Paths Forward, Urs Gasser, June 6, 2016,

  • The CC entities have the real incentives to self-regulate, since their success is based upon consumer trust, and consumers will not use their services if they are not satisfied. In fact, 64% of consumers surveyed by PWC for its April 2015 Consumer Intelligence Series,, stated self-regulation is more important than government regulation. In addition, 69% stated they would not “trust sharing economy companies” unless the company was recommended by someone they actually trusted. Bottom line is that CC entities essentially profit by aiding in the transaction between the seller and buyer, and thus have the motivation to self-regulate. A lack of consumer trust can obstruct transactions, directly reducing the success of the platform or app.
  • In order to continually improve the technology necessary to provide their products or services, enormous amounts of data must be readily available. This data is more easily accessible by the CC entities than by the regulators;
  • Because the CC entities are driven by technology they are in the position to be able to quickly remove individuals that are not conforming to the requirements of the CC entity. Additionally, they can better regulate tax payments and monitor compliance with laws and regulations.


However, the regulatory authorities must continue to protect their constituents with the existing laws and regulations. Therefore, it is important that CC entities ensure they are not only engaging in self-regulation but also are working closely with the existing regulators to warrant they are in compliance with existing rules. This means it is also incumbent upon the regulators to think out of the box when necessary and not be viewed as hostile to technology and innovation. We are living in a quickly changing world and regulators must be willing to innovate and adapt.

On 11 May 2017, the European Court of Justice (ECJ) concluded that Uber is a transportation company and subject to stricter rules and obligations. Stricter regulation could lead the San Francisco company to suspend its application, through which unlicensed private drivers transport passengers using their own vehicles. In fact, this is something that the company has already done following bans by some national courts. It is the qualification of Uber as a transportation company instead of an information society service company that has broader ramifications. Information society service companies enjoy lighter regulatory regimes.

It has been observed by legal scholar Orly Lobel that those regulators and CC entities willing to work closely together and offer more flexible regulatory approaches will be most likely to address problems created by the CC economy while simultaneously encouraging the growth of the CC economy.


The National Association of Insurance Commissioners and various departments of insurance are exploring and developing a new concept they call the Regulatory Sandbox. The purpose of the Regulatory Sandbox is to allow insurance companies to test innovative strategies to market and create insurance products (mainly through the use of technology). To accomplish this goal the regulatory body, i.e., department of insurance, must waive a number of regulatory requirements, and the insurer in the Sandbox must be able to protect consumers from the risks being created by the lower regulatory framework and the innovative strategies.

A number of “incubators” and several states have tried the sandbox concept. However, due to the unknown consequences of its creations, it remains unclear whether the idea will succeed. Recently, U.S. insurance regulatory authorities are taking the position that a formal guideline or model act from the National Association of Insurance Commissioners (“NAIC”) is not needed. The regulators have taken the position existing state laws already provide for them to allow insurance companies to innovate and provide experimental insurance policies. Clearly, this approach is being seen in other regulatory areas as well. As long as the innovator meets and discusses its concepts first with the appropriate regulator and works with the regulator their innovative product will likely be introduced.

This article is co-authored by Florence Druguet and first appeared in Westlaw’s publication entitled Sharing Economy. The publication is part of the Emerging Areas of Practice Series.

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