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Regulatory barriers must be tackled for sharing economy to succeed in Europe

Sue McLean, Morrison & Foerster | March 1, 2016
European Parliament and European Commission have both released reports highlighting challenges for the sharing economy.

The European authorities, keen to ensure that the potential economic benefits of sharing economy platforms are realised, have been busy reviewing the existing barriers which could impede growth in the sector.

At the end of last month we saw two reports that confirmed prevailing thinking that there are regulatory barriers that need to be tackled to enable the sector to achieve its potential.

European Parliament Report

Firstly, on 25 January 2016, the European Parliament's Think Tank published a study on the current economic, social and legal state of play of the sharing economy in Europe and the impact of failing to take action at the EU level.

The study estimates the potential size of the sharing economy in Europe at 572 billion (£445bn) in annual consumption. However, the study warns that substantial barriers prevent the full benefits of the sharing economy from being realised.

In particular, the study identifies that within the EU the relevant legal frameworks vary significantly across member states.

Regulatory barriers which could inhibit the development of the sharing economy include: (i) outright or effective bans on sharing economy platforms, (ii) regulatory costs which deter self-employment, (iii) regulatory costs which deter marginal transactions, and (iv) inconsistencies or idiosyncrasies in intellectual property rules.

The study advises EU policy-makers to strike an adequate balance between freedom for business and the necessary regulatory protection, and includes the following recommendations.

The EU needs to establish clear criteria to determine into which legal category digital platforms belong. (This reflects a common debate about the term 'sharing economy' - it's such a wide catch-all term for businesses across many sectors, with many different business models)

The EU should provide guidelines on the threshold between what constitutes a professional activity exercised on a sharing economy platform and what doesn't. This could help set a level playing field for offline and online services, including in terms of time and space limits and income thresholds.

The EU should create common rules focused on a fairly narrow set of sectors for which there is an obvious need for a new legal framework (e.g. passenger transport). Sharing economy start-ups will be relieved to know that the study advises that the EU should avoid over-regulating new operators which need room to manoeuvre to innovate and grow. But the larger players may be discouraged that the study suggests rules should be concentrated on already well-established sectors (e.g. apartment rental). The study suggests that it would also be worth considering the role that self-regulation can play (which is an approach advocated by many in the sharing economy sector). The study also suggests that a solution might lie in the outsourcing of certain legislative and control functions to the platforms themselves.

 

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