The new sharing economy: how the rise of Uber and AirBnb is challenging consumer law

Whether you call it collaborative consumption, the peer economy or P2P (peer-to-peer) business, the new sharing economy is the latest product of a highly-connected technologically-enabled world. 

Before the rise of the internet, the sharing of assets between individuals happened, of course, but typically only on a relatively localised scale.

Now, websites can instantly match up resource owners with renters, while customers with smartphones can use geo-location apps to find the nearest service providers, mobile cashless billing systems to pay and social media to rate or review the quality of service. Technology has reduced infrastructure and transaction costs to amounts approaching zero, and just as eBay allowed individuals to compete with retailers, new businesses such as AirBnb, Uber and EatWith enable users to become taxi drivers, hoteliers or restaurateurs.

The speed at which the sharing economy is growing is phenomenal: a PwC report from August 2014 expects revenue from commercial peer-to-peer transactions to increase by 2,200 per cent to $335bn worldwide over the next decade. Unsurprisingly, regulators are having difficulty keeping pace. 

In the UK, key consumer legislation stems from the 1970s and 80s, and even the main regulations governing digital commerce are now more than a decade old. Trying to bend old consumer law to deal with new business models is always difficult, but when new technology is challenging the very definition of a consumer, it is practically impossible.

The yet-to-be-implemented Consumer Rights Bill is still based on the traditional concepts of traders and consumers; while the definitions do allow some flexibility, it is arguably not enough to be able to effectively regulate the grey area between private ownership and public commerce where peer-to-peer businesses sit.

The sharing model works like this: imagine an individual with a privately-held but under-used resource such as a car or spare bedroom. By using a P2P site, the individual is able to generate revenue on her assets just as a commercial provider would do, but without having to comply with the same legal standards.

This has, perhaps inevitably, led to disputes between sharing-economy service providers and the policy makers. AirBnb was recently fined €30,000 in Barcelona for breach of regional property rental laws, and local authorities in Germany have repeatedly sought to ban Uber for not following licensing protocol.

However, not all European jurisdictions are taking the same stance. In Amsterdam, legislation has been passed to help jump-start local P2P platforms, and in the UK the Department for Business, Innovation and Skills is currently undertaking a review of the potential benefits of the sharing economy. 

It is not surprising different views prevail across the EU: what is heralded as a battle of champions of innovation against protectors of vested interests in one jurisdiction is re-defined in another as a fight for fairness and consumer protection against loophole-exploiters backed with VC-millions. What is clear: even without considering the tax or employment law implications of a sharing economy, any policy maker looking to pass unifying regulation has an unenviable task.   

Andy Moseby is a partner at Kemp Little

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