Wednesday

13th Dec 2017

Analysis

'Sharing economy' masks cold business interest

  • A man in an Airbnb apartment in the UK (Photo: Tim Regan)

The EU is currently considering how it should respond to the phenomenon which is often called the "sharing economy".

But there is a danger that lawmakers get caught up in a slick Silicon Valley narrative, which portrays profit-seeking companies as altruistic public services.

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  • Uber has suspended its service UberPop in France. (Photo: acanyi)

The sharing economy is the name given to the sector of companies which use technology to connect supply and demand among people rather than existing businesses.

Airbnb, for example, allows people to rent out rooms or apartments they do not use.

The phenomenon is challenging existing sectors, like tourism and transportation, and has been met with a mixture of optimism and court cases.

On Friday (3 July), Uber announced it will suspend its service UberPop, which allows people without taxi permits to sell rides, in France. The move followed protests from taxi drivers, a short questioning of two senior Uber executives by the French police, and a ban in several European cities and countries.

But there are also signs that the American companies are charmingly winning over lawmakers.

On Wednesday, MEPs of the centre-right group ECR held a hearing titled The Sharing Economy: challenges and opportunities. British Conservative MEP Vicky Ford underscored the “huge opportunities ahead”.

“I keep reminding people to focus on the digital age with optimism”, she said.

The companies that say they are part of the sharing economy have already won a framing battle.

'Sharing': a gift from PR heaven

The phrase "sharing economy" suggests a friendly, hippie-like world.

It's true that new technology has allowed people to connect with each other, and offers the possibility to share space, cars, or drilling machines and lawn mowers, resulting in benefits, such as less pressure on the environment.

But online platforms which facilitate request and demand for sleeping somewhere have existed for at least 15 years. Those websites, like Hospitality Club and Couchsurfing, offered free places to stay in people's homes.

With Airbnb, guests pay for their stay, and Airbnb receives a percentage.

That's fine, of course, but paying for a service - either from a business or a private person - is not how most people understand the word "sharing".

It is a gift from PR heaven to companies like Airbnb and Uber to be viewed as part of a sharing economy.

The fact that their business is “innovative” helps them gain sympathy, when discrediting as outdated the laws which hinder their businesses.

Antoine Aubert, director public policy EU strategy at Uber, said on Wednesday that it hoped to work with EU institutions “to make sure that innovative services like ours do not face undue restriction and can develop across the single market”.

“We are facing such restriction with new or outdated regulations in countries like France, Spain, Germany”, said Aubert, who is a former policy developer at the European Commission.

There are reasons why many courts in Europe banned UberPop.

Without the necessary taxi permits, most of the judges argued, there is no guarantee for the passenger's safety.

But Aubert said that “user safety and security is pretty much key” to Uber. He pointed out that Uber checks the driver's car insurance and criminal records, and that passengers can rate their drivers afterwards.

Solutionism

“Lots of regulation is designed to create a trust relationship and consumer protection", said Aubert.

"That kind of function can actually be fulfilled by the direct feedback kind of mechanism [which Uber has] that is actually very effective in creating a good user experience, making sure the experience is safe, and making sure you're maintaining a certain level of quality.”

The statement is reminiscent of the attitude of many of the technology companies operating from and around Silicon Valley.

Tech businesses are convinced of the power of technology to fix almost everything, something which Belarusian internet critic Evgeny Morozov calls "solutionism".

What Uber is effectively arguing here, is that its own review system can replace the independent regulatory framework.

But that is like a food company arguing that its internal checks are so good, that the government's food safety authority is no longer necessary.

It would give a lot of power to one company.

Aubert could give no guarantee to Uber's drivers that Uber will not one-sidedly change the contract - something which many internet companies give themselves the right to do, in those terms of service agreements which nobody reads.

What is to say that Uber will not at some point start paying Uber drivers a whole lot less?

Uber is not offering “jobs”, said Aubert when asked that question.

“What we are creating is, effectively, work. We're … providing the service to the drivers. The partner drivers to some extent are Uber clients.”

Market

He was supported by Daniel Dalton, MEP for the UK Conservative Party.

“If these companies start playing around with those terms and conditions, or are not paying what people feel is fair, then in a proper market basis system, other competitors will come up and challenge them and offer them better deals”, said Dalton.

In a sense, Silicon Valley's technological solutionism has a lot of common ground with the ideology of economic liberalism the Conservative Party embraced in the 1980s under Margaret Thatcher.

There is only one problem. Digital sectors have some peculiarities which make them prone to creating monopolies, or at best oligopolies.

One of them is called the network effect.

Part of the success of online platforms like Facebook, comes from the fact that 'everyone and his grandmother' is a member. The members of the platform are the most important asset.

A competing social network will only succeed if it can convince you to switch services, and that you will convince your friends and family to make the crossing.

It is not hard to see the network effect happening to the platforms of the sharing economy: the more popular Airbnb becomes with people who are looking for a place to stay, the more people who offer a place will place their offer there – and vice versa.

€497 million fine? A 'rounding error'

Monopolies listen to one thing only: tough regulation, said Bruno Segers, who was country manager in Belgium and Luxembourg for Microsoft from 2001 to 2006.

In 2004, the EU fined Microsoft with €497 million for market power abuse. But this fine did not impress the company, which had a €8 billion profit that year.

“Someone told me … this penalty was only a rounding error on our numbers”, said Segers.

He called on the commission to fine Google, which has until 17 August to respond to antitrust charges, with a penalty that is not “a single digit of revenue [but] a double digit percent of cash”. Otherwise, its behaviour will not change.

“Give them the right penalty, and they will see the light”, he noted.

In a strategy paper published in May, the EU commission announced a “comprehensive assessment of the role of [online] platforms, including in the sharing economy”.

As part of the investigation, the commission will launch a public consultation after the summer break, a commission source told this website.

Feature

EU to analyse role of Facebook and Google

The EU will start an assessment into the role of online platforms. But the increased influence of internet companies has already been discussed by 'internet critics' for several years.

Uber suspends taxi app in Spain

The American app company Uber has suspended its ride-sharing service UberPop in Spain, after a court in Madrid banned the app.

Bad week in Europe for Uber

Two European courts banned the service UberPop, and a regional minister from Brussels announced tough measures.

Facebook to shift ad revenue away from Ireland

Public pressure about low corporate taxes appear to have pressured Facebook to launch plans to stop routing international ad sales through its Dublin-based headquarters in Ireland.

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