The Rise of the Sharing Economy: Why Own When You Can Share?

There are few areas growing as quickly and creating as many questions as the sharing economy.  The term appeared in our vernacular just a decade ago, but has transformed the way we catch a ride, find a place to stay, borrow tools, and more.  

Consumers love the convenience and choices new services, such as Lyft, Airbnb, and Task Rabbit provide, but they also face opposition from incumbent industries and present questions about how and if government should regulate peer-to-peer services. The Federal Trade Commission (FTC) sought to explore how this new business model works and how involved government should be in this rapidly evolving marketplace at a workshop on June 9th.

FTC Commissioner Olhlhausen giving opening remarks at the Sharing Economy workshop.

FTC Commissioner Olhlhausen giving opening remarks at the Sharing Economy workshop.

FTC Commissioner Maureen Ohlhausen started the day with opening remarks. She emphasized that just because the Commission is holding a workshop does not mean an enforcement action is imminent. Her view on the sharing economy was largely positive.  She sees “…the rise of the sharing economy as yet another example of how free markets have the potential to introduce transformative change,” and cautioned local governments from protecting existing competitors directly or by enabling existing actors with protectionist policies.

Throughout the day, panelists questioned the appropriate role for government to play in the sharing economy.  Generally government concerns come down to consumer safety and preventing market dominance by one company.  Some suggested that technology and reputation systems, such as user generated customer ratings, supplant the need for regulations and cautioned the government from applying old regulations to new business models. Panelist Glen Weyl however, questioned whether there are built in market incentives for companies to protect privacy, speech, and other public goods, and suggested government may have a role to play.

Panelists also discussed whether young companies using a sharing model will merely replace existing companies to become the new dominant market player. Most panelists agreed that government should look for warning signs of market dominance, but so far there were few signs that government needs to be intervene. Instead, government should assess whether they have the tools to address competition issues should they arise.  

One area of potential concern is data driven mergers. Companies that collect consumer information create significant value and if that value is concentrated in one company it can give that company a competitive advantage.  Some panelists argued that these types of mergers defy traditional antitrust analysis. Others believed the FTC already has the tools to address these future problems.

In addition to potential merger review in the future, the FTC can also protect competition by working with local governments. Currently, the FTC makes recommendations to states and local policymakers when requested. Some panelists suggested the FTC could look into local government policies that impede competition and ensure new market entrants are protected.  


Update as of August 10, 2015

The FTC received more than two thousand comments regarding the workshop.  Read the Apps Alliance comments here.  

For more information email Policy@appalliance.org.


Michelle Lease

Policy Counsel