Sharing Economy Growth Outpaces Regulatory Oversight

  

Americans use of sharing platforms skyrocketed in 2014. Last year, Airbnb hit a milestone of one million properties and 25 million guests, with accommodations ranging from simple apartments to medieval castles. On the transportation side, Uber garnered $40 billion from investors to continue expanding its ridesharing platform over competitors like Lyft and SideCar.

But the new “sharing economy” promises to disrupt more than just the hospitality or transportation industries. It seems there’s a sharing platform for nearly every type of business (or at the least the certainty that one is being developed). TaskRabbit allows users to outsource their tedious chores. Rather than buying an axe or a weed trimmer, NeighborGoods, StreetBank and similar platforms allow users to rent or barter tools with others in the community. Many sharing economy platforms are just scratching the surface, however, of the good and services generated in the digital marketplace. Companies like uShip allow carriers to bid on freight to haul while individuals or businesses can list their cargo and delivery locations for transporters nearby.

What remains to be seen is if or how much sharing platforms actually impact their respective competitors. Will EatFeastly and SupperShare take a bite out of traditional restaurants’ revenues? Will retail sales of everything from bicycles to power tools feel the crunch of “shared” ownership?

Lawmakers are just playing catchup in addressing upheavals caused by the sharing economy, and so far most of that attention is focused on big players like Airbnb and Uber. In October, New York Attorney General Eric Schneiderman released a report that found that commercial users are using Airbnb to run multimillion-dollar (and mostly illegal) businesses. Last month, the San Jose City Council voted last month to impose a 10 percent tax on anyone who stays in a strangers’ home through service; the same charge already levied against rooms booked at traditional hotels.

Uber is receiving even more scrutiny from regulators. Several states have warned or fined transportation network companies and their drivers for operating outside various laws. Lawmakers in Arizona, California, Georgia, Illinois, Maryland, New Jersey, Oklahoma, Rhode Island and the District of Columbia also have considered bills to regulate some aspect of transportation network companies.

While lawmakers scramble to reign in Airbnb and Uber, other sharing platforms will undoubtedly reap the benefits of little government oversight or public attention. Besides disrupting traditional industries, sharing platforms raise a host of issues on everything from insurance coverage to workers’ compensation. For example, would a host’s insurance cover medical costs if her EatFeastly guests become severely ill after a meal? And who is liable if an uShip driver has an accident while carrying cargo for third-party?

The fact is that most sharing economy users only carry personal home or auto insurance on their possessions. This insurance is invalid if items are used for business use and doesn’t extend to third-parties filing a claim. Traditional retailers, restaurants and other companies must not only carry the necessary insurance coverage, but also obtain and pay for the necessary licenses and permits to keep their doors open. A host for EatFeastly or NeighborGoods has a cost advantage over his traditional competitors until something goes wrong. A sick or injured customer could bankrupt their entrepreneurial host.

These and other scenarios will undoubtedly play out over the coming years as insurance companies, regulators, and lawmakers debate everything from applicable coverage to business versus personal use of private property. Perhaps the biggest challenge for lawmakers and businesses alike will be addressing the blurred lines between business and personal use created by the new sharing economy.