Within the sharing economy, consumers participate in an entirely new marketplace and are empowered as part of the historic shift of leverage from traditional businesses. It’s not just a different venue for delivering existing products and services. It’s a new commerce where consumers can obtain the experience and exactness of products and services they desire: how they want them, when they want them, and at the price they want them.
Consumers are accessing a plethora of new options whether it is ride-share, home-share, web-to-door household services, or even eating out in someone else’s home. In turn, this transformative economy should trigger a matching reconsideration of how to apply the many laws and regulations governing commerce. For the benefit of consumers, the sharing economy requires a rethinking of what should be consumer protection.
Emphatically the goals of consumer protection should remain relevant and vibrant including prohibitions on discrimination, deceptive marketing and fraud. Yet today certain consumer regulations are often not applied in ways that match consumer needs. It is inappropriate to assume that laws largely devised in the 1960s and 70s are applicable to today’s fast-developing technology and Internet-based commerce. Rather than government action seeking consumer relief after the fact, consumers are now themselves a driving force behind the level of convenience and cost, and risk, they decide to accept.
Federal and state regulators need to embrace the sharing economy as a marketplace where consumer choice, satisfaction and protection is already flourishing. These consumers have a completely different set of expectations – they recognize renting a room in someone’s house need not always include ceiling sprinklers or an evacuation map on the back of the door; they understand web-based ordering of their ride-share puts the driver under surveillance, and on notice, to be caught for an illegal act; and they accept that ordering a craft from a virtual bazaar likely won’t have same return policy as a big box store.
As with all consumer-focused businesses, complaints against sharing economy companies make the news. Instances occur when a company might not supply enough transparency for some consumers to make well-informed decisions such sufficient pictures of a product offered, or a lack an updated background check on the provider, or a complete history of positive and negative reviews to compare. For some potential customers, traditional businesses provide a measure of familiarity and reassurance, and that’s the point – consumers can vote with their feet.
But over-regulation through the misapplication of legacy consumer protection regimes is not a solution that furthers the growth of our economy. Commonly an imbalance of information favors the merchant such as where a host knows how clean or noisy his room may be, or a driver knows how safe or fast he may sped. Consumer protection laws can overcome this imbalance but at a high cost that can lead to a scarcity of services, inefficiencies in their delivery, or lack of more competitive pricing. Everyone who has a bad cab story knows this.
Yet sharing economy companies provide information to consumers to overcome this information disadvantage. Online feedback, rating systems, background verification, GPS tracking, and instant transaction details, along with the digital storage of all this information, are ways to exchange critical decision-making details. As technology addresses information shortcomings in order to empower consumers to get what they pay for, excessive and inapplicable regulation can backfire by limiting the very choices of consumers.
Instead regulators should proactively work to eliminate unnecessary and burdensome rules that run counter to unique consumer interests. Regulators are well-acquainted with legal balancing tests that can weigh the empowerment of consumers participating in a sharing industry versus burdens on their choices. For instance, federal and state law enforcement agencies can challenge local government entities that use codes and rules to favor existing industries, sometimes in a monopoly-like fashion. With their anticompetitiveness mandate, State Attorneys General have stepped into the fray by pushing back against local commissions and legislative bodies seeking to saddle sharing economy companies with rules for competitive disadvantage.
Regulators should desire to cede power to consumers themselves. When a smartphone app can provide driver profiles, actionable rankings and map tracking to allow a consumer to better protect herself at the point of service than government licensing and penalties, why not let that technology blossom? When Internet consumer reviews can reveal more information about a business than any government inspection, why not encourage consumers to judge the standard of service they receive? When the so-called “gig economy” opens new avenues of employment for fellow Americans, why accumulate workplace restrictions, unproductive worker rights, and government-mandated costs that limit their opportunity?
Rather than bolster a dated regulatory framework to detriment of our growing economy, government should recognize that pro-consumer innovation enables consumer-led protection. A new regulatory model should seek to free consumers to optimize their own economic benefits, choices, risks and enjoyment.