Tech Industry Recommends FTC Take Laissez-Faire Approach to Regulating Sharing Economy

Some 1,997 public comments were filed with the FTC after its June workshop on competition, consumer protection and economic issues raised by the so-called "sharing economy." Most comments encouraged the FTC to regulate the sharing economy lightly and to end any practices that favor established companies. CEA, the Internet Association and other tech firms backed the sharing economy, which is often said to involve companies including Uber that have run into regulatory issues as they expand.

Sen. Ted Cruz, R-Texas, who was FTC director of the Office of Policy Planning, wrote a letter to FTC Chairwoman Edith Ramirez in which he cited a 2014 Nielsen global survey saying 68 percent of respondents indicated they would share their assets for financial gain. He commended Commissioner Maureen Ohlhausen for saying that “misguided government regulation can be the barrier to innovation ... so regulators should tread carefully, particularly when considering hypothetical rather than demonstrated consumer harm.” For the benefits of innovation and job creation in a new shared economy to be fully achieved, the FTC should “continue to embrace permissionless innovation and use its statutory authority to examine anticompetitive efforts to restrict competition within the sharing economy,” Cruz said. The FTC should reject requests from incumbent businesses or members of Congress who want more regulations to apply to the sharing economy, he said.

A Democratic New York state senator and a group representing limos were among those criticizing some sharing services, though public interest groups didn't appear to weigh in. Some sharing companies and those allied with them commented, though not all such companies did. Uber, for instance, didn't appear to have filed comments. The company didn't immediately return our query Wednesday.

“Online platforms that facilitate and profit from illegal hotel activity are bad for tenants, tourists and residents of New York,” New York Sen. Liz Krueger commented. “Illegal hotel activity, and the online platforms which facilitate and profit from it, threaten New York City's already dwindling stock of affordable housing." The National Limousine Association said the purpose of regulating the passenger transportation industry “should be applied in the public interests to all operators of passenger transportation,” including transportation network companies. “The public and regulatory interaction with TNCs continues to suffer from misperceptions that affect the safety of the public, the consumer rights of the passengers, the fair treatment of TNC drivers, and the fair application of laws towards bona fide operators of passenger transportation.”

Lyft and other TNCs “do not oppose regulation, rather we encourage the promulgation of fair regulation that takes into account not only safety and accountability, but also innovation,” Lyft said in comments.

TechFreedom President Berin Szoka and its Legal Fellow Tom Struble along with International Center for Law and Economics Executive Director Geoffrey Manne and ICLE Associate Director Ben Sperry commended the FTC for “advocating on behalf of consumers against laws that protect monopolies and the politically powerful by choking new entrants into traditionally stagnant markets,” said joint comments.

“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,” CEA CEO Gary Shapiro said in a news release and in comments to the FTC. “Whether they succeed -- and other innovators follow -- should depend on consumers’ adoption and trust in the platform, not the regulations that govern its activities.”

“It is unsurprising that incumbent industries do not want to compete with the sharing economy,” said Internet Association President Michael Beckerman in a news release and in comments. Speaking of incumbents, he said “regulators should be careful not to inadvertently advance their anti-competitive agendas.” A "vibrant sharing economy means lower prices and higher quality services for consumers and the communities in which they live,” Beckerman said. R Street Institute Senior Fellow Ian Adams suggested in comments that “consumer-protection mechanisms must be narrowly tailored, both as to their depth and breadth.”

Szoka, Struble, Manne and Sperry asked the FTC to examine why the agency doesn’t have a dedicated competition advocacy bureau, why the agency never reconstituted the Internet Task Force, what the FTC’s long-term plans for effective competition advocacy were, and several related questions. They said the agency should decide which online intermediaries should be granted immunity under Section 230 of the FTC Act. Many sharing economy operators “function primarily as little more than platforms for coordinating more efficient transactions between buyers and sellers of resources,” they said. The Free State Foundation also backed the sharing economy.

The FTC should focus on the benefits sharing platforms have brought to the national economy, wrote Computer & Communications Industry Association Public Policy Vice President Daniel O’Connor in comments. “The FTC has a unique role as both a consumer watchdog and a promoter of competition; this expertise will help the Commission adroitly weigh the costs and benefits of prescriptive regulation in this space,” O’Connor said. “The Commission should encourage narrowly crafted regulations that are necessary to achieve legitimate public policy goals, and ensure that those regulations are the least competition restrictive means of accomplishing the desired ends.”

“The commission should avoid applying any sector- or technology-specific privacy- or security-related policies to sharing economy operators,” and apply existing best practice guidance for other digital economy operators to the sharing economy operators, said George Mason University’s Mercatus Center researchers Matt Mitchell, Adam Thierer and Christopher Koopman. The FTC can “take steps to [push companies to] implement ‘privacy by design’ and ‘security by design’ when formulating their business models,” but “should be cautious to avoid disadvantaging certain data-driven business models over others,” they said.

Businesses need “clear standards about whether users should be able to see the bulk of the information associated with their profile and be provided an opportunity to correct and dispute the information,” Wall at Law attorney Alex Wall commented. He said the standards must incorporate privacy and due process as well to reduce the probability EU and other trade partners don’t develop “more protectionist laws that will hurt American commerce.”

“These innovative companies understand that the data shared via their platforms can be sensitive and personal and each takes the obligation to secure data seriously,” Shapiro said. “The Commission’s existing, case-by-case evaluation of potential privacy and security threats provides companies the flexibility to innovate while protecting consumers,” he said. "Sharing economy platforms have evolved to the point where existing consumer safeguards makes the services safer than the incumbent competitors looking to stifle competition," Beckerman said.