The following essay was written by our colleague Guido Smorto. It will be published in the forthcoming Cambridge Handbook on the Law and Regulation of the Sharing Economy but Guido has kindly allowed us to upload the essay and publish an extract. You can download the whole text here.

Guido Smorto: Known by many names – platform, sharing, peer-to-peer (p2p), collaborative economy, and so on – entirely new business models have emerged in recent years, whereby online platforms use digital technologies to connect distinct groups of users in order to facilitate transactions for the exchange of assets and services. Compared to both offline and online providers, these platforms do not act as direct suppliers, but leverage the widespread diffusion of internet and mobile technologies to operate as virtual meeting points for supply and demand, providing ancillary facilities for the smooth functioning of these markets.[1]

This dramatic shift in business organisation and market structure has opened an intense debate on the persisting need for those regulatory measures that typically protect the weaker party in bilateral business-to-consumer (b2c) transactions. In the platform economy both customers and providers are said be empowered, with the former enjoying wider choice and lower prices and the latter benefiting from countless new business opportunities, while platforms make transactions safe and efficient by adopting new mechanisms to enhance trust. Widespread calls for a more “levelled playing field” makes a strong argument for reconsidering the scope of regulation and delegating regulatory responsibility to the platforms. Accordingly, the appeal for lighter rules and reliance on self-regulatory mechanisms is pervasive.[2]

The chapter calls into question these assumptions. It demonstrates that platforms make frequent use of boilerplate, architecture and algorithms to leverage their power over users – whether customers or providers [3] – and that it is still not clear to what extent effective market-based solutions are emerging to tackle these issues. Part I illustrates the reasons for the alleged reduction of disparities, and it explains why such conclusion fails to fully appreciate the many grounds to the contrary. Part II scrutinizes terms and conditions adopted by online platforms to assess whether they mirror an imbalance in the parties’ rights and obligations. The article concludes that it is crucial to protect the weaker parties in these emerging markets, and it presents some brief recommendations.

Click here to read the whole text: The Protection of the Weaker Parties in the Platform Economy

[1] Cf. Kenneth A. Bamberger & Orly Lobel, Platform Market Power, 32 Berkeley Tech. L.J. (forthcoming 2017),; Liran Einav et al., Peer-to-Peer Markets, Annual Review of Economics, vol. 8, 615 (2016); Bertin Martens, An Economic Policy Perspective on Online Platforms, Institute for Prospective Technological Studies Digital Economy Working Paper 2016/05. JRC101501 (2016),

[2] See generally Adam Thierer et al., How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the “Lemons Problem”, 70 U. Miami L. Rev. 830 (2016); Christopher Koopman et al., The Sharing Economy and Consumer Protection Regulation: The Case for Policy Change, 8 J. Bus. Entrepreneurship & L. 529 (2015); Molly Cohen & Arun Sundararajan, Self-Regulation and Innovation in the Peer-to-Peer Sharing Economy, U. Chi. L. Rev. Dialogue 116 (2015); Darcy Allen & Chris Berg, The Sharing Economy: How Over-Regulation Could Destroy an Economic Revolution, Institute of Public Affairs (2014).

[3] See Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions “A European agenda for the collaborative economy” {SWD(2016) 184 final}, at 3 (“The collaborative economy involves three categories of actors: (i) service providers who share assets, resources, time and/or skills — these can be private individuals offering services on an occasional basis (‘peers’) or service providers acting in their professional capacity (“professional services providers”); (ii) users of these; and (iii) intermediaries that connect — via an online platform — providers with users and that facilitate transactions between them (‘collaborative platforms’)”).

Photo by Tankesmedjan Futurion

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