Excerpted from Martijn Arets et al.:

“There is little doubt that the sharing economy can make a contribution to a more sustainable economy. While sharing used to be limited to a small circle of family and friends, the internet platforms allow us to share with anyone in society. This means that physical assets can be used more efficiently, and less energy and materials are needed in our economy. At the same time, the sharing economy has come under fire. Critics have pointed to undesirable effects, such as platform monopolies, privacy violations, exploitation of labour, and unfair competition.

Our scheme can be used to place the various criticisms in the context in which they engage. The first two critiques (monopoly, privacy) are not specific to the sharing economy, but are problems associated with all sorts of internet-based businesses, including search engines (Google), social media (Facebook) and data storage (Dropbox). All platforms that enable interactions between people are characterized by network effects: the more people participate, the more attractive it becomes for others to join. For this reason, monopolies emerge and privacy-sensitive information gets concentrated in the hands of the businesses concerned. Concerning new forms of exploitation, many point to the increased flexibility and precariousness of work for freelancers who work for a platform (for example, UberX drivers). This criticism applies to the on-demand economy and not to the sharing economy as we have defined it.

The last criticism is that of unfair competition between the new platforms and existing businesses. Individuals providing their goods or services to others are competing with existing providers but are not necessarily bound by the same rules and regulations. Despite growing criticism, most platforms don’t seem eager to take the responsibility and to respect regulations. Notably, Uber has continued offering UberX despite court bans in various countries, and Airbnb only barely cooperates with municipalities in their aim to collect taxes and to help combat illegal hotels.

Regulation will determine whether businesses like Uber and Airbnb will be integrated into the sharing economy or not. An illustration is the regulatory process that the Dutch municipality of Amsterdam has initiated with Airbnb. The municipality wants to ensure that people only occasionally rent out their house whilst away (sharing economy), rather than run a permanent, unregulated hotel (not sharing economy). It has chosen to allow its residents to rent out their homes for up to 60 days per year. Customers are also supposed to pay tourist tax via Airbnb, although its enforcement leaves much to be desired (not least because Airbnb does not want to share its data with the municipality). The philosophy of the policy is important here: it is trying to regulate the rental of homes in such a way that it becomes part of the sharing economy as previously defined. Without this regulation, Airbnb would create an incentive for illegal renting with negative consequences for the local residents (higher rents, nuisance and speculation).

In the case of Uber, regulation is still largely lacking. Many options for regulating UberX are possible. The debate tends however to be narrowly focused on what requirements UberX drivers must meet compared with regular drivers – that is on regulating Uber as a provider of taxi services. But where a company like Uber presents itself so prominently as a “sharing” service, regulators could encourage the company to organize its services as such. In Uber’s case, that would mean doing away with the on-demand taxi model it has now and becoming a supply-driven ridesharing platform such as BlaBlaCar. On this type of platform, drivers post trips that they are going to make anyway, and other people can join these rides.

The risk of monopoly in the sharing economy is a real one. As with any other market, regulations are required to ensure sufficient competition between platforms. The key here is to empower users vis-à-vis the platform. For example, new rules are needed to let users switch easily between platforms, and to take with them their personal reviews and ratings from one platform to the other. This stops users from getting locked in in one platform which can then extract most of the value generated by platform interactions and transactions. Most of all, the ownership of data generated by users through use of sharing platforms should be a major issue of regulatory concern.”