Is the European Commission about to embrace the sharing economy?

Profile picture for user ddpreez By Derek du Preez May 31, 2016
Summary:
The European Commission is set to lay out some guidelines that call for a lift on bans on such services as Uber and Airbnb - but will it work?

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In an unexpected move, the European Commission is looking to make nice with some of Silicon Valley’s fastest growing technology companies by implementing guidelines to harmonise member states’ approach to the so-called ‘sharing economy’.

According to the Financial Times, draft regulation set to be unveiled on Thursday, will call for cities and countries in the EU to view bans on companies such as Uber and Airbnb as a “last resort”.

While the UK has broadly welcomed the sharing economy companies, other member states have viewed the US-based companies as a threat to local business.

The term ‘sharing economy’ is the buzzphrase that is used to describe a new generation of ‘platform companies’ that have very few employees or assets, but instead bring together consumers and people that want to provide there time or assets or both as a service. All the while taking a cut.

For example, Uber doesn’t own any taxis, but instead provides people that own or lease cars with a platform to connect with people looking for a ride. Airbnb doesn’t own any property, but provides a platform for people that do to rent out their property to those looking for somewhere to stay.

However, while the approach has the ability to rapidly scale via the networks these companies operate, it has meant that the traditional taxi and hotel industries are taking a hit. The problem is that the likes of Uber and Airbnb are often sidestepping or challenging regulation that the traditional industries have to follow as part of the implied social contract that keeps them in business.

Uber is embroiled in numerous legal actions in the United States to ensure that its drivers are considered contractors rather than employees. Where it loses, Uber has to provide the benefits that are available to employees. This has a significant impact on the Uber business model.

I met with Uber’s chief adviser towards the end of last year, where he said that new laws were required globally for the sharing economy. He said:

But there’s no doubt that we are learning as we go along about the best way to work with government. But the debate over Uber has moved a lot. Just 14 months ago there wasn’t a single place in the United States that had passed regulations around ride sharing. Not a single one. Now you have over 60.

We are eager to continue to work with governments, we have made a lot of regulatory progress here in the US. That’s what is required. How does Uber, or a competitor of Uber’s, fit into 40 year old transportation law? It’s not going to be a very satisfying or productive conversation. What’s required is for states and countries to say let’s create a new set of laws that enables more competition in the transportation sector.

Harmonisation

Given that the French government has sought the arrest of Uber executives while Berlin introduced swingeing penalties for people renting out their entire homes on Airbnb, the proposed, softer European-wide legislation will likely be welcomed by the sharing economy companies.

The new rules will call on EU governments not to limit or ban such services. Uber currently faces partial bans or suspensions in the Netherlands, Belgium, Spain and Germany.

 

However, there is one sticking point, as highlighted by the FT. The European Commission is proposing that companies that do not allow their operators to set their own prices or that force them to take customers, could be considered an “employment relationship”.

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So while a lift on bans will be welcomed, Uber will have to rethink its business model if it is to succeed in Europe.

My take

There are elements of the sharing economy that Brussels is very keen on - such as the ratings systems that these companies often employee, as it sees this as encouraging safer services.

However, I don’t think this is going to be easy to implement, even if we talk about it in terms of ‘harmonisation’. Although harmonisation sounds nice in principle, there could be a backlash from both member states and industries that are trying to protect incumbent industries.

Are cities or countries that have made the decision to ban Uber going to be happy that the EC wants them to now go back on that decision? If so then how will this play out?

Equally, while the apparent green light is good news for these companies, Uber will not wish to operate where its operators are considered employees. It has fought hard elsewhere to have those restrictions removed. The sting in the tail of the current proposals could find the UK siding with Uber against the EC’s proposals.

It’s going to be interesting…

Image credit - Image sourced via Uber

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