2. What is the Sharing Economy?
Pages 53 - 54
• Definition. The Sharing Economy (aka the Peer-to-Peer or On-
Demand Economy or Collaborative Consumption) has exploded.
• Many Players. While you have probably heard of Uber, Lyft, and
Airbnb, you may not have heard of WeWork (workspace sharing),
Feastly (food sharing), PostMates (personal services) or Rubicon
Global (waste collection).
• Definition. Peer-to-peer sharing of underutilized assets, usually
through community-based online platforms.
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3. The Sharing Economy Is Old
Page 54
• Not New. Despite the huge amount of press that the Sharing Economy has
received lately, it is not an entirely new concept. For example:
• Event Parking. Paying for parking at a sporting event or concert by
“renting” an unutilized parking space at a home or a business
which is empty or closed during the event.
• Boarding Houses. Mentioned in films ranging from “It’s a Wonderful
Life” to “Forest Gump”, boarding houses are historical examples of
the Sharing Economy – unused rooms in a private home being
used by travelers seeking temporary lodging.
• Carpooling. Workers reduce the cost of commuting by sharing fuel
costs and cars.
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4. The Sharing Economy Has Grown
Pages 54
• What Is New Is The Scope. A 2015 PricewaterhouseCoopers study
estimated that the international Sharing Economy reached $15
billion in 2015 and is expected to reach $335 billion by 2025.
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5. The Sharing Economy Has Grown
Pages 54 - 55
• Enabling Factors. Three major forces came together at the right time
to provide exponential growth to the Sharing Economy.
• Economics
• Technology
• Culture
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6. Economics Changed the Sharing
Economy
Page 54
• Economics. The Great Recession forced many to reconsider the
necessity of possessions and consider alternative sources of
income.
• Result. More individuals were forced to accept the idea of renting
out a room in their home to a stranger or driving for a ride-sharing
service in their spare time and also had to look to alternative means
of obtaining goods and services due to rising costs of infrequently
used goods.
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7. Technology Changed the Sharing
Economy
Page 55
• Technology. The growth of the Internet and widespread use of social
media and mobile devices decreased transaction costs and
increased transparency and accessibility.
• Lower Initial Expenses. Easy market entry due to lower startup
expenses, low-cost advertising and app development.
• Trustworthy Transactions. Both parties can use social media and
background check services to ensure the trustworthiness of the
other party and rate and provide feedback on their experience.
• Payment Options. Low cost options for payment processing such as
credit cards and mobile payments.
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8. Culture Changed the Sharing
Economy
Pages 55
• Culture. Changes in our values have aligned with the strengths of
the Sharing Economy.
• Use v. Ownership. Younger people often do not place value in the
ownership of goods and instead value access to the functionality the
goods provide. This is similar to the shift over the past decade away
from directly installing software on computers to providing access to
the software remotely via a “software-as-a-service” model.
• Green Perspective. People of all ages are more environmentally
concerned. By using idle assets rather than buying new assets, we
can reduce society’s overall demand for resources.
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9. Future of the Sharing Economy
Pages 56
• Future Growth. The Sharing Economy has taken off in the past half-
decade, but it will only continue to grow.
• Analogous to Online Shopping. The online economy started out
small and tentative just like the Sharing Economy. But then it grew.
• Parties learned to trust each other.
• Concerns about credit card theft were largely resolved.
• Novel legal issues were largely addressed – jurisdiction and
choice of law, risk of loss, distribution channel issues (think
transactions between e-bay/seller/buyer).
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10. Factors Fueling Future Growth
Page 56
Societal Shifts. Projected demographic and economic shifts may
increase the popularity of the Sharing Economy.
• Retirees. There will be a rapid growth in retirees seeking part-time
income, a strong characteristic of the Sharing Economy.
• College Students. The growing cost of college education may force
students and parents into the Sharing Economy to fund tuition via
flexible jobs.
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11. Business Benefits
Page 56 - 57
Benefits: As the Sharing Economy grows, more businesses will seek
the benefits of operating in the Sharing Economy:
• Asset-Light: Sharing Economy companies do not have to own large
fleets of cars, inventory of goods or build physical structures, which
reduces fixed asset and maintenance costs.
• Lower Labor Costs: These companies typically maintain full-time
staff but with fewer employees, leading to lower expenses on
salaries, benefits and smaller office spaces
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12. Case Study: Rubicon Global
Page 57
Waste and Recycling Sharing: Rubicon Global connects small,
independent waste and recycling haulers with consumers and
businesses in an effort to deliver sustainable waste management
services and cost reduction.
• Innovative Technology: Uses big data and a cloud-based software
platform to enable efficiencies in waste and recycling pickups by
allowing users to schedule pickups when needed and employing
cameras and sensors to monitor dumpster levels
• Sharing Economy: Allowing customers to customize their pickups
gives smaller, independent haulers greater access to customers and
reduces the cost of pickups for customers by eliminating
unnecessary pickups.
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13. Case Study: Rubicon Global
Page 57 - 58
Disrupting an Outdated Industry: Waste industry is dominated by large
companies and similar to the taxi industry, has seen very little
technological innovation
• Rubicon’s Growth: Rubicon has raised $30 million in funding in
January 2015 and $50 million in September 2015
• Valued at $500 million.
• Doubled in size every year for the past 3 years
• Largest third-party provider of waste and recycling in North
America
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14. Case Study: Rubicon Global
Page 58
Beyond the Business Model: Many companies in the Sharing Economy
focus on societal goals in addition to profits
• Sustainability: Rubicon’s model reduces emissions and greenhouse
gases due to fewer truck pickups, diverts waste streams from
landfills and incinerators
• Goal to create zero waste for 100% of Rubicon’s
customers by 2022
• Research and Development: Rubicon runs a R&D lab where the
company tests new recycling technology to help make waste
obsolete.
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15. Ask for Forgiveness, Not Permission
Page 58
In Process Negotiation.
• Because of the high cost of initial investment, traditional entities try
to address or change the regulatory landscape before entering into
business.
• The low cost of initial investment has led Sharing Economy
companies to start doing business without first resolving potential
regulatory hurdles. They then negotiate with regulators while
continuing to do business.
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16. Support of In Process Negotiation
Page 58 - 59
Public and Political Support. This allows the Sharing Economy company to
develop public acceptance and leverage for their negotiations.
Leveraging Digital Information. Because Sharing Economy companies have
access to their users’ digital information they are very effective at persuading
their users to lobby elected officials.
• Example: August 2015, Uber email to Boston customers encouraging them
to voice opposition to a proposed bill that would impose regulations on
Uber
Consumer Support against Legislators: Sharing Economy companies
champion themselves as consumers’ champions.
• Example: Uber gained support from consumers and privacy advocates in
pushing back against legislation that requires disclosure of certain trip
information.
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17. Responding to Challenges
Page 59 - 60
Two Types of Regulations. Challenges to Sharing Economy entities
tend to fall into two broad categories.
• Economic Justifications
• Consumer Protection
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18. Economic Justifications
Page 59 - 60
• Economic Justifications. Arguments center on value of limiting
suppliers in an industry and typically come from incumbent or
interested parties.
• Regulatory Capture. In some industries, this can be an example of
the economic concept of Regulatory Capture, where the regulators
are more interested in protecting those regulated than the public.
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19. Consumer Protection Justifications
Page 59 - 60
Consumer Protections. Whether these companies can provide the
same level of safety since often not held to the same legal and
regulatory standards that used to protect consumers. Sharing
Economy entities respond in three ways:
• Does not apply
• Out-of-date or Anti-innovation
• Comply in spirit
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20. Regulation Does Not Apply
Page 59 - 60
Does not apply. Arguing that the regulation does not apply to the
Sharing Economy entity.
• Example: Uber claims that it is a matchmaking service between
riders and drivers and not a provider of transportation services;
therefore it is not subject to the laws applicable to taxi companies.
• Doesn’t always work: Uber drivers in New York City are now
subject to many taxi regulations, such as obtaining a TLC
license, requiring a TLC license plate, being affiliated with a
base and having enough insurance to merit a FH-1 (for hire)
card.
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21. Out-of-Date and Anti-Innovation
Page 60
Out-of-Date and Anti-Innovation. Arguing that the traditional concerns
are no longer valid.
Asymmetrical Information Problem. Many regulations were enacted to
address the Asymmetrical Information Problem, whereby a consumer
does not have access to information about the seller or product until it
is too late. However, Sharing Economy companies argue that they
have solved the Asymmetrical Information Problem through
technology and that, as a result, regulations to address the
Asymmetrical Information Problem should not apply to them.
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22. Asymmetrical Information Example
Page 60
Clean Taxis. You cannot tell if a taxi is clean until after you get in and,
therefore, regulations require regular inspections to ensure that taxis
are properly maintained. However, Uber claims that such regulations
don’t make sense when applied to Uber’s business model because
passengers can see how other passengers have rated specific drivers
prior to getting in the car. Drivers who have vehicle cleanliness issues
will receive poor ratings, passengers will not ride with them, and those
drivers will be driven out by competition.
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23. Comply with Regulation
Page 60
Comply in Sprit. Complying with the spirit of the regulation but not
admitting that it applies.
• For example, although it maintains that state and local regulations
that require minimum amounts of insurance don’t apply to the
company, Uber maintains a national $1M hybrid insurance policy
that covers drivers while a passenger is in the car. This vastly
exceeds amounts required by most state and local regulations
applicable to taxis.
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24. Traditional Legal Challenges
Pages 60 - 62
Traditional Legal Issues. Other legal issues for Sharing Economy
entities tend to be traditional in nature.
• Misrepresentation
• Neglect or Fraud
• Data Protection
• Contractor/Employee Classification
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25. Misrepresentation
Page 60
Misrepresentation. Sharing Economy entities have to actually do what
they say they do.
• In December of 2014, San Francisco and Los Angeles sued Uber
under consumer protection laws alleging that Uber misleads its
riders on the rigors of its background checks and appropriate fees.
• In February 2016, Uber agreed to pay a $28.5 million to settle a
different class-action suit over claims that its background checks
were “industry leading”. The settlement also requires that the
company reword the language around the fee that the company
charges for each ride, from a “safe ride fee” to a “booking fee”.
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26. Neglect and Fraud
Page 61
Neglect and Fraud. Similar to claims of misrepresentation, these
companies may face claims of neglect and fraud for failing to
appropriately screen their service providers.
• In October 2015, two women sued Uber accusing the company of
neglect and fraud after Uber drivers in two separate incidents
assaulted them.
• In December 2015, a woman sued Airbnb, alleging negligence and
invasion of privacy after finding a hidden camera in the California
home she rented through the service.
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27. Data Protection
Pages 60
Data Protection. While traditional company must worry about data
protection and privacy even the smallest Sharing Economy
companies need to take steps to address data protection and privacy.
• Most Sharing Economy companies use GPS technologies,
automatic credit card payments and process a wealth of stored data
• How Sharing Economy companies manage access and control of
data is essential to building customer trust.
• Example of Violation: the New York general manager at Uber used
Uber travel data of another journalist without her permission.
Further, the company used a “God View” tool to track customers’
locations at a launch party.
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28. Contractor Classification
Pages 60 - 61
Contractor/Employee Classification. The inventory of Sharing Economy
companies is generally provided by a vast number of individuals,
whom the Sharing Economy companies claim are independent
contractors. There are different rules for determining who is an
employee or a contractor depending on the applications – different
federal laws, state laws, and regulations.
• Current class action lawsuit against Uber over whether Uber drivers
are independent contractors or employees, which will affect payment
of expenses, whether drivers may be fired at will, how many hours
drivers work, entitlement to benefits, etc.
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29. Other Legal Issues
Page 62 - 63
Miscellaneous Other Issues. Depending on the specific sector and business
model, there are a myriad of other unresolved potential issues for Sharing
Economy companies.
• Insurance and Liability. How will insurance be structured when other
people are using the insured asset? Which party will be liable if a consumer
is injured.
• Zoning Laws. Are current zoning rules governing short-term rentals
applicable?
• Accessibility Issues and Anti-Discrimination. How do companies monitor
accessibility and ensure anti-discrimination policies are followed?
• Trust and Safety Concerns. How to build customer trust when interacting
with an unknown service provider?
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30. Take Aways
Pages 12 - 13
• The Sharing Economy is not new, but rapid technological and
societal developments have caused it to grow quickly and our
traditional legal systems are struggling to keep up. Projected
societal changes suggest that this will continue or accelerate.
• So far, the legal issues facing the Sharing Economy are being
handled in both the business and political arenas. However, as the
losers and winners emerge from those discussions, we can expect
more specific regulations and guidance to emerge.
• Representatives of Sharing Economy entities need to worry about
traditional problems as well as novel issues and should keep a close
eye on the employee/contractor issue, as that could result in a major
stumbling block for the Sharing Economy.
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