The collaborative economy blurs the lines between producer and consumer - a no brainer for some, a regulatory challenge for others. The European Commission, famous for slow and bureaucratic processes, has eventually determined their stance on the collaborative economy. In a communication published earlier this month, the policy makers explain the key regulatory issues at hand and provide policy guidelines for member states.

 So, what is the EU up for?

A short spoiler at the beginning: The communication focusses on topics that most of us find dry and even boring. But it is worthwhile understanding the main questions and suggestions raised by the Commission because they will determine the political discourse in the future and therefore affect stakeholders in the collaborative economy. That is why I will summarize the most important points for you as short and spicy as possible.

The EU legislative bodies are proud of strong consumer and worker protection laws, but their market and business development goals are equally pronounced. Consumer protection legislation ensures that citizens at all times can be sure that products and services offered within the EU are safe, and they have complete information about them.  At the same time, the single market policies of the EU aim at opening business opportunities under similar conditions in the entire EU.

 Under these premises, the EU is now challenged to define an appropriate guideline for member states when dealing with the sharing economy. A couple of things stand out. First of all, the EU definition of the collaborative economy is extremely broad, and includes on-demand services. This is good for policy making, but blurs the lines between the variety of collaborative models that exist. 

 Moreover, the EU recognizes the potential of the collaborative economy mostly in terms of business and job opportunities. The goal is thus to support start-ups and new business models, while mitigating any problems incurring for consumers or "employees" if that word can be used at all. And the Commission is clear: forbidding collaborative consumption start-ups should be a last resort option. They thus encourage new business models and, with some reservations, embrace disruptive tendencies.

 But which are the potential problems for consumers and employees? Product and service quality might be an issue. For example, I don't know if my Airbnb host has actually cleaned up before I arrived. Safety issues can occur if the on-demand car that I am riding is not completely checked or my driver does not have the skills to drive the car. These seem like little things, but in the bigger picture, the collaborative economy is often accused of not operating on a level playing field. Companies have to comply with a lot of regulation when operating in any EU member state. Meanwhile peer-to-peer platforms exist in a somewhat grey area. The Commission now attempts to define when a company should be regulated more like - a company, including tax payments, security and safety regulations and other laws that apply. This should be the case when

1.       Prices are set by the platform

2.       Contracts between platform and provider (say, the car driver) determine rules of use

3.       The company owns assets key to its service

 

Again, the Commission recognizes how blurred this picture can be. But this is a good first guideline.

 But, more regulatory issues are on the horizon, like: Are service providers that use a platform to, for example, rent out their car to a neighbor, professionals that need to pay taxes? The Commission argues relatively commonsensical: Yes, and No. Yes, if it is their major source of income. No, if it is just an occasional thing. Taxation should be based on these assumptions. The press release stays however silent on workers’ rights protections. It leaves questions like how should independent, free-lance workers be insured? Is the ad-hoc kind of work socially sustainable? Do we need social security legislation that is independent of one's current employer?

 These are important questions to be asked if we want a fair, equitable and accessible sharing economy. Defining regulatory frameworks is only a first step in this direction. But issues for policy makers remain. Are employees exploited on platforms? Do housing prices drive up? Or does the city suffer from a lack of economic activity that could be revived by peer-to-peer activities? Local governments need to progressively seek out their specific challenges.

 I have only touched upon some major issues here, leaving out questions of liability or VAT. If you want to read more about the EU Commission and its policy guidelines, you can read their press release and communication here and some highlights here.


by Paula Land


Picture: European Commission Vice-President Jyrki Katainen, during the Press Conference (from the website)

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