RSA calls for new approach to regulating the sharing economy

The rise of companies such as AirBnB and Uber has outpaced the ability of Governments to regulate them.

The rise of companies such as AirBnB and Uber has outpaced the ability of Governments to regulate them. With 23 million participants in the UK, and projected global revenues of £230bn by 2025, the sharing economy is now a major part of our lives but is facing a backlash from critics who point to low pay, insecure work and unprotected customers.

To ensure that society fully benefits from these new technologies and businesses, the RSA’s new report “Fair Share: Reclaiming power in the sharing economy” argues we need a new model of regulation known as shared regulation.

Authorities around the world have taken radically different approaches to regulating new sharing economy companies, from complete bans at one extreme to little or no regulation at the other. ‘Shared regulation’ moves beyond state and self-regulation to involve not just the businesses themselves, but crucially also their users, and other stakeholders such as civil society organisations.

Giving power to all the interested parties is important not just to resolve current problems in the sector. It will also prepare us for the impacts of future technologies such as the ‘blockchain’ technology that underpins the Bitcoin digital currency. Blockchain technology removes the roles of regulatory authorities and middle-men from commercial transactions potentially undermining our whole existing approach to economic regulation and organisation. Shared regulation provides a future-proof structure to fully harness the social and economic potential of the sharing economy.

Brhmie Balaram, Senior Researcher at the RSA and the report’s author said:

A small number of companies in the sharing economy are overtaking traditional industry giants. But this isn’t the story of David and Goliath in the sharing economy and these companies aren’t ‘disruptors’ as popularly said. These companies are networked monopolies that depend on the value created by their users to keep expanding. It’s important that we understand how this new sort of business model enables a rise to power, so we have a better shot at either managing or countering it.”

 “We are at a critical moment where a few companies in the sharing economy are establishing their power in the market, but a new, smaller wave of businesses based on blockchain technology could threaten their gains. While these newer platforms promise to be better for users, they will be even more challenging for governments to regulate than companies like Airbnb and Uber because of their decentralised nature. Governments can avoid more confusion over regulation by adopting a new shared approach, engaging these platforms early on with the help of relevant stakeholders. If governments do not act now it will be too late to have any positive influence.

Tony Greenham, Director of Economy, Enterprise and Manufacturing at the RSA said:

Many describe the rise of digital innovation, and the sharing economy in particular, as a new industrial revolution. Such revolutions drive enormous social progress but can also come at a huge social cost. Law-makers have the duty to manage the balance between allowing innovation to flourish while guarding the interests of society as whole. If the UK is to remain at the forefront of the technology revolution, we need to reinvent our approach to regulation.

The RSA primer - Fair Share: Reclaiming power in the sharing economy clarifies existing and emergent business models and presents a new frame for making sense of the trend towards platform businesses in the sector. It explains how a few companies have shot to new heights, attracting record amounts of funding in a short space of time, and what this means for other businesses, workers and society in general.

These companies are often referred to as ‘disruptors’, but the RSA introduces the concept of ‘networked monopolies’ to more accurately convey their impact on markets. The primer take readers through the process of ‘crowdsourcing monopoly power’ and how this affects gig workers in the growing on-demand labour market.

The primer recognises that regulating the sharing economy thus far has been difficult for governments in the US and UK, but warns that the emergence of new decentralised platforms enabled by blockchain technology will be even more challenging to regulate. The RSA suggests a shared approach to regulating the sector at present and engaging with newer platforms early on to influence their development in society’s best interests for the future.

The primer introduces a number of concepts:

Shared value creation
This refers to the shift from value being created by products and services to value being created by users of a platform’s online network. The RSA notes that business models which depend on shared value creation to survive tend to scale their user base as quickly as possible.

Networked monopolies
A small number of sharing platforms have been able to scale their networks to an extent where they are beginning to show signs of monopoly power ininfluencing the price, output, and investment of an industry, as well as in limiting the entry of new competitors. The RSA calls these platforms networked monopolies to distinguish them from what are traditionally known as monopolies.

Crowdsourcing monopoly power
This involves both consumers and workers. Sharing platforms strive for their networks to be ever-expanding, so that they can dominate the market; however, to maintain their position these platforms must empower the very users they depend on to fight in their corner against tighter regulations. Examples are the dispute between Uber and traditional black cabs in London and the Airbnb’s strategy against ‘Proposition F’ in San Francisco.

Shared regulation

This is the redistribution of regulatory responsibilities to parties other than government. It is a variation of self-regulation, but businesses are only one of many parties involved. Shared regulation encourages participation from platform businesses, their users (consumers and workers), community organisers, legal professionals, investors, and designers as part of a process of creative and collaborative problem-solving of challenges in the sharing economy.

Notes to editors

1. The steering group for this project is comprised of Benita Matofska, Founder of Compare and Share; Neal Gorenflo, Co-founder and Editor of Shareable.net; Michel Bauwens, Founder and Director of P2P Foundation; and Shelby Clark, CEO of Peers.
2. For more information contact RSA Interim Head of Media Sarah Horner via sarah.horner@rsa.org.uk or on 020 7451 6893 / 07799 737 970
3. Twitter: @theRSAorg  #RSAFairShare
4. Website: https://www.thersa.org/discover/publications-and-articles/reports/fair-share-reclaiming-power-in-the-sharing-economy/