Debate rages over regulating the ‘on-demand’ economy

The Federal Trade Commission is flooded with input from business groups and consumers about how to regulate fast-growing companies like Uber and Airbnb in the burgeoning on-demand economy.

The FTC put out a call for comments on the issue earlier this year, and the public responded — in droves. The agency received comments from big names, like the ride hailing company Lyft, and individuals who, like many Americans, deal with services like Uber regularly. A presidential candidate chimed in, as did the owner of a bed and breakfast upset about the neweconomy’s impact on his business.

The more than 2,000 comments posted so far by the agency reflect the conflicting pressures on federal regulators as they examine issues related to services like Uber and Airbnb. They will likely have to balance industry’s pleas for a hands-off approach with the competing businesses and individual Americans who say there are downsides to the popular platforms.

“Sharing economy companies leverage the power of Internet connectivity, mobile devices and innovative software platforms to deliver unique and highly beneficial products and services to consumers,” said Gary Shapiro, president and CEO of the Consumer Electronics Association, which submitted a comment. “Whether they succeed — and other innovators follow — should depend on consumers’ adoption and trust in the platform, not the regulations that govern its activities.”

In its comment, the consumer tech trade group, which counts Uber as a member, said that the FTC should not move aggressively to impose new data protection rules on the companies and protect them from laws designed to favor dominant players in their industries.

“To the extent that sharing economy platforms raise data privacy and security concerns, regulators have the necessary tools to address them,” the group said in its filing, adding that to “supplement these tools, the Commission should encourage the development of industry self-regulatory frameworks, which can respond quickly and flexibly to consumer concerns.”

Presidential candidate Sen. Ted Cruz (R-Texas) said in a filing that the FTC should be careful not to align itself with the dominant players in the marketplace.

But the trade groups and companies also argued that some level of federal regulation could protect the companies.

“We also hope that important discussions like this can be used as a vehicle to inform government and regulatory officials that Lyft, and other transportation network companies, do not oppose regulation, rather we encourage the promulgation of fair regulation that takes into account not only safety and accountability, but also innovation,” the company said in its comment.

The Internet Association, which represents a number of sharing economy companies, said that, as a think tank “argued in 2001, so can the argument be made today that ‘there is no way to build a robust digital economy if commerce is governed by 50 different sets of state laws, many of them erected as a result of protectionist pressure from powerful local entrenched interests and mercantilist impulses.’ ”

“If the past is prologue, the same argument holds true for today’s emerging sharing economy,” the group said.

The companies also had many vocal supporters who said they used the services, sometimes to earn a living.

“If this income were to remain only with large hotel chains the money would not stay in the local community and would go into the pockets of big business instead of the middle class that so badly needs a small share,” said a commenter who claimed to be a retired person living on a fixed income who rented through Airbnb. “Please help this service in anyway possible.”

The agency also faced calls to regulate the on-demand economy from competitors and others wary of the effect that the services have had on the marketplace.

“Basic oversight and regulation is needed on these platforms and the sharing economy to ensure that short-term renters are following the rules in their local jurisdiction,” a bed and breakfast association from California said in a filing.

A Vermont man who said he owned a bed and breakfast ticked off the different requirements he must meet to keep his business open, like paying licensing fees and submitting to fire inspections.

“In short, I play by the rules. I protect the safety and well-being of my guests,” he said. “And I submit to all local, state and federal regulations. A majority of those participating in the ‘sharing economy’ such as AirBnB guests do not. The FTC must step up and do something to create a level playing field.”

Though the comments have no binding effect, they form a record for the agency to draw on as it considers whether — and possibly how — to regulate the on-demand economy.

“The comments become a part of the record of the workshop, which will inform us as we consider all the issues going forward,” said agency spokesman Peter Kaplan in an email.

The FTC asked for the comments earlier this year as part of a June workshop about the on-demand economy. The submission deadline was this week, with some comments arriving as early as April.

An immediate crackdown by the agency on Uber and others seems unlikely. At the well-attended workshop, FTC Commissioner Maureen Ohlhausen said that she wanted “to assure [attendees] that we did not convene today’s workshop as a prelude to some planned, big enforcement push in this space.”

But the sheer volume of comments was indicative of the intense interest in the on-demand economy among the public at large. The two previous workshops held by the agency brought in fewer than 100 public comments each.

Companies in the on-demand economy have become major players in tech. Uber is said to be the most valuable venture-capital-backed startup in the United States, and reportedly recently raised money at a $51 billion valuation. Airbnb is believed to be the second most valuable.

The changes affected by the companies, particularly in the labor market, have also attracted the attention of politicians on Capitol Hill and some presidential candidates.

Sen. Mark Warner (D-Va.) has proposed crafting legislation to build a safety net for workers at the companies, which use independent contractors not entitled to protections like unemployment benefits. Democratic presidential candidates have also cautiously suggested doing something to help the workers.