Law and Ethics in the Sharing Economy
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Ten slides for a ten minute presentation on the two polarities of the sharing economy - the platforms and the commons-oriented outcomes. Regulators - though vested with the powers to legislate and regulate for public health, safety, welfare, and morals - should avoid find a regulatory balance that encourages the development of the outcomes-oriented sharing economy, while also reducing adverse community externalities due to the platforms.
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Law and Ethics in the Sharing Economy
- 1. State OutcomesPlatforms Platforms, Outcomes and the Police Powers of the State Law & Ethics in the Sharing Economy Karen Francis-McWhite, MSU College of Law February 27, 2015
- 2. Introduction: So Many Names
- 3. Introduction: So Many Names
- 4. Introduction: Method Why Critical Cultural Legal Studies? Culture Legal Culture (Internal & External) Values Positivist & Natural Law Norms Role of Law in Society Institutions Legal Authors & Authorities Artifacts The Law
- 7. Sharing Economy: Outcomes • Inclusive Prosperity • Democratic &/or highly participatory governance • Crowdfunding Investment & Risk • No Artificial Scarcities • Open-Source Portals • Justice and the Common Good
- 8. Sharing Economy: Legs & Regs
- 9. Sharing Economy: Legs & Regs Transportation Network Companies (TNCs) Are: • A company or organization (in California) • That provides transportation services • Using an online-enabled platform to connect passengers with drivers • Using their personal vehicles
- 10. Creating a Participatory Legal Culture Hybrid Regulatory Schema Remember the 9th Amendment and the last clause of the 10th
Notas del editor
- Since the onset of the Great Recession, there has been an explosion of resource sharing and nano-enterprise by resilient individuals and communities, often facilitated by technology platforms. While this economic development is rooted in the trauma of scarcity and loss, it has become a powerful economic force that is known by many uplifting names including the New Economy, Regenerative Economy, Solidarity Economy, Next Economy, Caring Economy, Community Resilience, Community Economics, Cooperative Economy, Grassroots Economy, Oppositional Economy, Access Economy, and the High Road Economy. References: Marissa Mommaerts, Ken White, Voices and Reflections of the Community Resilience and New Economy Movement, Resilience.org (Sept. 9, 2014), Available at: http://www.resilience.org/stories/2014-09-09/voices-and-reflections-of-the-community-resilience-and-new-economy-movement; Jenny Kasan and Janelle Orsi, “The Legal Landscape of the Sharing Economy,” 27 J. Envtl. L. and Litig. 1, 5 (2012). Image Credits: Collaborative Consumption: http://us.123rf.com/450wm/radiantskies/radiantskies1212/radiantskies121200241/16631678-abstract-word-cloud-for-collaborative-consumption-with-related-tags-and-terms.jpg http://tradepal.tumblr.com/post/17903462793/from-sharing-economy-to-sheconomy
- My paper argues that the legal community can best understand the sharing economy debates and innovations, by: (1) breaking the sharing economy into two primary categories – the sharing economy as platform or processes, and the sharing economy as outcomes, and; (2) subsequently analyzing the tensions between the positivist law of the existing legal system, and the ethics in the emergent legal culture of the outcomes-oriented sharing economy. This understanding provides a necessary foundation for creating a regulatory schema that empowers and partners with the outcomes-oriented sharing economy, rather than subsuming it in a heavy-handed response to defiant sharing economy platforms. The legal community can benefit from becoming a co-creator with outcomes-oriented sharers, of a more participatory and inclusive legal culture. To do so, legal actors must temper their reactions to sharing economy platforms AND closely scrutinize extant legal structures, reforming and even replacing those structures that impede the development of a more inclusive and just legal culture. Image Credits: http://www.visualistan.com/2014/10/sharing-economy-infographic.html
- I used a Critical Cultural Legal Studies approach because A critical cultural studies lens accomplishes two main tasks. First, it helps us see the interplay between the use of mass media and narrative, and the creation of an alternative sharing economy culture. Second, it helps us understand how sharers develop agency over their activities, and the laws that seek to regulate them. So I drew a lot on the trade press, white papers and the like, as well as on statutes and case filings. But I did not draw as much from legal scholarship because the legal community, with a few notable exceptions I discuss later, has been late to this conversation. Chaffing Cultures Values – ideas about what is important Norms – expectations about behavior Institutions – transmit and uphold the values and the norms Artifacts – the material aspects of a culture Legal Culture: The nebulous interplay between law (positivist AND natural) and culture Role of law in society Role of different legal sources Who and what has authority to create THE Law Image Sources: http://www.urbanbound.com/blog/how-to-create-the-right-startup-culture-for-your-company
- Sharing Economy Platforms Are all venture capital backed, and the major platforms like Airbnb and Uber, have stratospheric valuations in the tens of billions of dollars. The platforms “create service providers who are “in between” personal and professional. The State: Under the 10th Amendment, the States have police powers to make the laws and regulations that benefit their communities, focused on public safety, health, welfare and morals. States have the power to delegate their authority to subsidiary agencies to enact measures that support these priorities. To the extent the sharing economy platforms adversely impact the four police power domains, State actors tend to respond with suspicion and prohibition. But the State is beginning to demonstrate greater tolerance for the other “side” of the sharing economy, what I call the “outcomes-oriented sharing economy.” Outcomes-Oriented Sharers: Advocate the development of a more collaborative, commons-based economy that prioritizes a solidarity economy of exchange and co-creation, as opposed to the selling/buying focus of the platform-focused sharing economy. They also envision government action based on the principle of subsidiarity, which requires that government decisions strive to be made at the level closest to the impacted people (e.g. participatory governance models). References: ” Arun Sundararajan, “Services, like Airbnb, Mean We Need to Adapt to a New Economy,” N.Y. Times, Room for Debate (May 6, 2014), Available at: http://www.nytimes.com/roomfordebate/2014/05/06/regulating-the-sharing-economy/services-like-airbnb-mean-we-need-to-adapt-to-a-new-economy.
- Sharing economy platforms emerged in the service gaps of the current economic model of production and consumption. When goods, services or lodging was not affordable through conventional market transactions, people could meet their needs through Craigslist, eBay or Etsy. Those same platforms helped users who owned excess “stuff” sell, or rent those items, thereby revivifying erstwhile dead capital as additional means of helping people meet their immediate needs. What began for many users as a lifeline, has become a livelihood and an opportunity to build a community with a strong peer-to-peer orientation. However, the majority of more recent sharing economy technology platforms are profit-driven corporate entities with actual legal duties to their shareholders to their stockholders and the companies themselves. References: Matthew Yglesias, “When is a taxi not a taxi? The new car service company Uber exposes the idiocy of American cities’ cab regulations,” Slate Technocracy (Dec 15, 2011), Available at: http://www.slate.com/articles/technology/technocracy/2011/12/uber_car_service_exposing_the_idiocy_of_american_city_taxi_regulations_.html; Image Sources: Pablo Barros, “Collaborative Consumption and the Sharing Economy in Developing Markets” (Apr 15, 2013), http://www.sustainablebrands.com/news_and_views/behavior_change/collaborative-consumption-and-sharing-economy-developing-markets. http://www.slideshare.net/josanku/o2o-and-sharing-economy
- Outcomes-oriented sharers often express their understanding that the process of sharing, bartering, and engaging in other forms of cooperative economics is a means of creating a new normal of interdependence. Michelle Regner writes in “The Heart of the Sharing Economy,” that the sharing economy “connects [people] to what [they] need, when [they] need it but it also introduces [them] to what [they] can provide others.” This mutual provisioning is based on equal parties collaborating with each other, rather than one party engaging in charitable giving to the other. Many sharing economy users focus on the transformative potential of sharing economy outcomes even as they meet their individual imminent needs. They want to create a new socioeconomic and legal common sense that not only deconstructs the existing system; it also creates positive exemplars of how we can produce, consume and exchange goods (and services). Unlike the platforms-focused sharing economy, the outcomes-oriented sharing economy emphasizes six core principles for the development of a “true” sharing economy: (1) “inclusive prosperity” insures that the people who create wealth as workers AND as investors enjoy a fair distribution of the wealth they create; (2) economic enterprise must have “democratic and/or highly participatory governance” to insure meaningful participation in decision-making by all stakeholders; (3) investment and risk-distribution should be shared through crowdfunding; (4) sharing resources more efficiently and sustainably should not be allowed to create artificial scarcities (e.g. the long-term rental housing crunches precipitated by the rise in Airbnb use); (5) transparent and accountable exchange of knowledge through open-source portals; and (6) all true sharing economy efforts must foreground justice and equity for the common good. References: Michelle Regner, “The Heart of the Sharing Economy,” Near-Me.com (5/20/2014), Available at https://near-me.com/blog/heart-sharing-economy. Boaventura De Sousa Santos, Toward a New Legal Common Sense: Law, Globalization, and Emancipation, Law in Context Series (2d ed. 2002). Chris Tittle, “Toward a True Sharing Economy,” Sustainable Economies Law Center Blog (Nov. 14, 2014), Available at: http://www.theselc.org/toward_a_true_sharing_economy. Juliet Schor, “Debating the Sharing Economy,” Great Transition Initiative (Oct 2014), Available at: http://greattransition.org/publication/debating-the-sharing-economy.
- Regulatory regimes within the legal system have reduced the sharing economy to the technology platforms/processes as these have been the most combative towards the legal system, are the easiest to regulate, and are the most prominent aspects of the sharing economy. While websites like Craigslist and Etsy manage to exist without enduring onerous regulations specially crafted to curtail their niche markets, this has often been because those platforms do not fundamentally disrupt existing industries or legal policy. Rather, those platforms primarily create more efficient secondary markets. Two categories of sharing platforms that have received the bulk of the institutional legal system’s attention are transportation network companies (e.g. Uber and Lyft) and short-term rental listing sites (e.g. Airbnb), in large part because these sectors have been enthusiastically disruptive of both existing industry and legal policy, by design. Ride sharing apps like Uber and Lyft quickly disrupted the taxi industry and raised alarms about safety and accountability among regulators and other critics. As a result, regulators, particularly in California where the apps were developed and first widely used, began fining the app companies and curtailing the activities of drivers using the apps. In September 2013, after two years of citing Uber and Lyft for operating “unlicensed taxi services,” the California Public Utility Commission reached a compromise with them and created a new category of transportation service, transportation network companies. References: Ken Yeung, “California becomes first state to regulate ride-sharing services, benefiting Uber, Lyft, Sidecar, and Instantcab,” The Next Web Blog (Sept 19, 2013), Available at http://thenextweb.com/insider/2013/09/19/california-becomes-first-state-to-regulate-ride-sharing-services/.
- The California legislature defined a transportation network company (TNC) as “a company or organization operating in California that provides transportation services using an online-enabled platform to connect passengers with drivers using their personal vehicles” (emphasis added). The four core elements – company or organization, providing transportation services, online-enabled platform, and personal vehicles – have been adopted in the majority of the other TNC statutes passed or pending. Since 2013, there have been Transportation Network Company Statutes introduced in Washington, D.C., the United States Senate (Accessible Transportation for All Act, 113 S. 2887) and nine states (Colorado, California, Pennsylvania, Michigan, New Jersey, Minnesota, Texas, Louisiana, Maryland). TNCs are regulated as a subset of private transportation companies, akin to on-demand limousine service, which indicates that for all the discourse about the drivers “working for themselves,” their relationship with the TNCs is more akin to that of employee to employer. Uber and Lyft require applications, have codes for driver conduct and at one point, Uber practiced variable pricing based on peak times, without passing the surcharges on to the drivers. It is also worth noting that Uber’s original name was UberCab, further indicating the intention of the company to disrupt the taxi industry, not empower a network of independent drivers working for themselves. Thus regulators have been acutely concerned about Uber’s impact not only on the drivers – who have increasingly begun to strike and demand better working conditions – but also on public safety and transportation needs. Regulation of the TNCs has some merits, particularly given the caused by some TNC drivers, such as: property damage, injuries, sexual assaults and death (pictured here is 6 year old Sofia Liu, killed by a driver in San Francisco). TNCs also present another challenge to city transportation planners. TNCs do not own any of the transportation infrastructure on which they rely, rather, TNC drivers own their own vehicles. The cities, by contrast, have extensive and expensive mass transportation infrastructures that they need people to use and pay to maintain. Where TNC platforms have thrived, there has been a corollary anxiety by planners about the deleterious impact of TNC use on mass transit use and budgets. However care should be taken to not overly proscribe TNCs, despite concerns about government budgets and public safety, because an overly inclusive definition can adversely impact strategies for community development and efficient management of resources by individuals. It also incentivizes those who want to use TNCs under less onerous terms to operate illegally. Communities that are not regularly served by affordable cab companies or reliable public transit could deploy a local ridesharing app to facilitate ridesharing by those neighbors with transportation, for those neighbors without. Yet most TNC statutes, following the California model, appear to undermine the possibility of creating a neighborhood-based organization that uses an online platform to facilitate carpool arrangements. Furthermore, statutes regarding TNCs and commercial carpooling services appear not to distinguish between those services that disrupt the taxi industry (e.g. Uber, Lyft and SideCar) and those that facilitate true ridesharing between a driver and a passenger going to the same destination (e.g. Ridester, Ridejoy, Zimride, ShareYourRide.com, and CoEd Road Trips). This can pose a problem for those who rely on true ridesharing as a means of offsetting their transportation costs and use the online platforms as an efficient means to find a driver or rider. Perhaps if the true ridesharing platforms avoid blurring the employer/employee distinction like Uber has, they may be able to defeat the second element – providing transportation services – because the platforms would then only be providing a sort of bulletin board service for drivers and riders to find each other. It remains to be seen, and possibly negotiated, whether true ridesharing will be distinguished from Uber, Lyft and Sidecar, and thereby regulated differently, if at all. Short-term rental housing platforms, namely Airbnb has had similar issues and impacts. However, unlike Uber, which has taken a doggedly pugilisitic approach to regulation, Airbnb offers an example of how platforms can work with regulators to come a bit closer to creating a participatory legal culture that aligns with the outcomes-oriented commitment to the common good. References: California Public Utilities Commission, Basic Information for Transportation Network Companies and Applicants, Available at: http://www.cpuc.ca.gov/NR/rdonlyres/1788F1F1-EA38-4B68-B221-4116994F2252/0/TNC_App_Instrctns.pdf. See also California Public Utilities Commission, “Overview of Limousine and Transportation Network Company Regulations,” http://www.cpuc.ca.gov/NR/rdonlyres/208D6DD5-F4A3-4A66-8B7C-65CDB0F4265E/0/TNCLimoRegulation_v1.pdf. See Frank Gruber, “UberCab: Roll in style with on-demand car service,” Tech Cocktail (July 12, 2010), Available at: http://tech.co/ubercab-roll-in-style-with-on-demand-car-service-2010-07. See Rebecca Burns, “The sharing economy’s ‘first strike’: Uber drivers turn off the app,” In These Times (Oct 22, 2014), Available at: http://inthesetimes.com/working/entry/17279/the_sharing_economy_first_strike_uber_drivers_turn_off_the_app; Ellen Huet, “Drivers for Uber, Lyft stuck in insurance limbo,” SF Gate (Feb 2, 2014), Available at: http://www.sfgate.com/bayarea/article/Drivers-for-Uber-Lyft-stuck-in-insurance-limbo-5183379.php; Luz Lazo, “Uber drivers find themselves making less than expected,” St. Louis Post-Dispatch (Sept 7, 2014), Available at: http://www.stltoday.com/business/local/uber-drivers-find-themselves-making-less-than-expected/article_a95750f9-b57b-5dea-8edf-830bf5c2c6d8.html. Chase Cain and Wire Services, “Uber driver arrested in San Francisco crash that killed girl,” NBC Bay Area (Jan 15, 2014), Available at: http://www.nbcbayarea.com/news/local/Uber-Driver-Arrested-in-San-Francisco-Crash-That-Killed-Girl-238491691.html; Ellen Huet, “Lyft’s first fatality: passenger dies in crash near Sacramento,” Forbes Tech (Nov 2, 2014); Available at: http://www.forbes.com/sites/ellenhuet/2014/11/02/lyfts-first-fatality-passenger-death-crash-sacramento/; Olivia Nuzzi, “More Bad News for Uber: Driver Arrested in Los Angeles Rape Case,” The Daily Beast (Jun 4, 2014), http://www.thedailybeast.com/articles/2014/06/04/more-bad-news-for-uber-driver-arrested-in-los-angeles-rape-case.html; “Former Uber X Driver Arrested for Raping Passenger,” CBS Chicago (Dec 29, 2014), http://chicago.cbslocal.com/2014/12/29/police-cab-driver-charged-with-sexual-assault-of-passenger/. See Marc Scribner, “Regulator – True Ridesharing Illegal in California,” Competitive Enterprise Institute (Sept 15, 2014), https://cei.org/blog/regulator-true-ridesharing-illegal-california; Tarun Wadhwa, “Could Lyft and Uber Put Public Transit Out of Business?” Forbes Tech (Nov 13, 2014), http://www.forbes.com/sites/tarunwadhwa/2014/11/13/will-lyft-and-ubers-shared-ride-service-put-public-transit-out-of-business/.
- Key approaches that I believe strike a balance between the needs of the platforms and transformational sharing economy outcomes: Hybrid Regulatory Schema, introduced by Arun Sundarajan, professor and faculty fellow at the NYU Stern School of Business. This hybrid regulatory schema that: (1) respects the controls coded into the platforms through digital reputation systems, which are based on identity verification and post-transaction ratings, along with supplier screening, particularly on TNC platforms; (2) incorporates just enough legislative and regulatory oversight to insure that the sharing economy does not create externalities that undermine core legal values (e.g. accessibility considerations under the Americans with Disabilities Act) or public policy (e.g. minimizing traffic congestion, while maximizing air quality controls); and (3) creates self-regulatory organizations that monitor and enforce community-generated regulations, in a manner akin to the American Bar Association and the state bars self-regulation of the legal profession. Such a schema suggests that the economic activities of the sharing economy can work with relevant aspects of the legal system. the outcomes-oriented sharing economy strives to occupy transactional spaces that had previously enjoyed minimal regulation because they: “1.) happen[ed] on a small scale; 2.) involve[d] greater accountability; 3.) [were] motivated by a spirit of giving, not by profit; 4.) engage[d] people working together as equals; and/or 5.) involve[d] significant transparency.” That they may use sharing economy platforms as a means to pursue these kinds of transactions, should not expose outcomes-oriented sharers to a bevy of onerous regulations. As legislators and regulators develop a regulatory strategy for the sharing economy, it is imperative that they understand which aspects of the sharing economy they wish to target. The sharing economy as platform and process already has disrupted legacy professions and dramatically impacted commerce, and housing and transportation policy. Nevertheless, rather than merely respond with narrow regulations meant to stifle the expansion of sharing platforms, legal actors within the legal system should closely evaluate: (1) the service gaps that the platforms fill; (2) their positive AND deleterious impact on the public good; (3) the extent to which those platforms can be integrated into the existing system of laws; and (4) the extent to which the legal system needs to adapt itself to help foster the expansion of outcomes-oriented sharing economy legal culture. The legal system has an opportunity to co-create a more collaborative, participatory legal culture rooted in innovative transactions, but with larger implications for how we interact, build community, and sustain ourselves. The core elements of what constitute actual sharing have already been gleaned. Now the legal system can decide whether to work with outcomes-oriented sharers to develop a coherent legal culture around those elements, or to ignore their efforts and the elements of their exchanges in a dogged and narrow pursuit of sharing economy platforms. Janelle Orsi, “Narrow Rules Narrow Our Economic Options,” N.Y. Times, Room for Debate, (May 7, 2014), http://www.nytimes.com/roomfordebate/2014/05/06/regulating-the-sharing-economy/narrow-rules-narrow-our-economic-options. References See “Why the government does not need to regulate the sharing economy,” Wired (Oct 22, 2012), Available at: http://www.wired.com/2012/10/from-airbnb-to-coursera-why-the-government-shouldnt-regulate-the-sharing-economy/; “Trusting the sharing economy to regulate itself,” N.Y. Times Economix (Mar 3, 2014), Available at: http://economix.blogs.nytimes.com/2014/03/03/trusting-the-sharing-economy-to-regulate-itself/?_r=0; “Services like Airbnb mean we need to adapt to a new economy,” N.Y. Times Room for Debate (May 6, 2014), Available at: http://www.nytimes.com/roomfordebate/2014/05/06/regulating-the-sharing-economy/services-like-airbnb-mean-we-need-to-adapt-to-a-new-economy.