On May 26, 2015, Free State Foundation (FSF) Scholars submitted comments to the Federal Trade Commission (FTC) for its upcoming June 9th workshop regarding competition, consumer protection, and economic issues raised by the “sharing economy.” FSF Scholars make several key points about the sharing economy’s positive impact and what the government’s ultimate role should be.
First, the sharing economy’s positive impact is one of fostering innovation, creating value, and providing cost savings options for consumers. From a recent PWC survey, 86 percent of U.S. adults who are familiar with the sharing economy agree that it makes life more affordable and 83 percent agree that it makes life more convenient and efficient. Further, the sharing economy is particularly beneficial for low-income consumers. As stated in a FSF blog, the sharing economy has shifted consumer preferences from owning to renting, and the additional benefits and savings low-income consumers accumulate from this shift has a substantial impact on their standard of living.
Second, as discussed in a Perspectives from FSF Scholars entitled “The Sharing Economy: A Positive Shared Vision for the Future,” the emergence and success of the sharing economy is unequivocally due to marketplace freedom and “permissionless innovation.” The lack of barriers to market entry (such as regulatory costs, licenses, and start-up fees) has enabled companies like Airbnb and Uber to quickly emerge and provide their services in many cities and towns throughout the world.
Third, fear of competition is not a valid basis for regulation. Traditional legacy businesses (such as hotel companies or taxicab commissions), which compete with sharing economy applications, argue that such emerging companies should be subjected to the same level of regulations and taxes. FSF Scholars argue that the best way to “level the playing field” is to deregulate down by eliminating old and unnecessary regulations, not regulate up. Unnecessary regulations can often be captured by well-established companies or applied in a discriminatory way by policymakers, leading to government picking winners and losers instead of consumers.
Lastly, sharing economy markets have efficient self-regulating mechanisms. Many sharing applications have online rating systems and feedback information in order to keep both buyers and sellers accountable and transparent. Other things like insurance policies and immediate payment systems help mitigate risk. FSF Scholars believe that by allowing for free-market innovation to flourish, competition - which we believe is the best form of regulation - will thrive. In competitive markets, sharing economy applications and its users have the incentive to provide friendly, safe, and healthy environments, because consumers will choose better alternatives if they do not.
FSF Scholars are very optimistic about the future of the sharing economy and all that it could possibly accomplish. Much of it is unknown and yet to be discovered, so we hope that policymakers at the FTC and at state and local levels presumably favor marketplace freedom over regulation.