Guidance not regulation will help the collaborative economy, says UK government

Out-Law News | 19 Jan 2016 | 1:27 pm | 2 min. read

More guidance should be issued on how existing legislation applies to the so-called 'collaborative economy', the UK government has said.

In response to a European Commission consultation on the regulatory environment for platforms, online intermediaries, data and cloud computing and the collaborative economy, the UK government said increased guidance and not more regulation would help encourage growth in the collaborative economy.

The collaborative, or sharing, economy is a term used to describe operations where ordinary people trade the use of their assets with consumers who have a temporary need for them, usually over digital peer-to-peer platforms.

"More guidance and better information on the application of the existing rules is required, rather than further regulation," the UK government's consultation response (48-page / 240KB PDF) said. "[The government] strongly welcomes the commitment to issue guidance to clarify the application of existing EU law to the collaborative economy. We call on the Commission to take enforcement action on the basis of that guidance to prevent disproportionate, unjustified restrictions."

The UK government said that "protectionist and disproportionate local and national restrictions" and restrictive "pre-internet age" regulations are among the "obstacles" that hinder the development of the collaborative economy in the EU.

It said policy makers should look to ensure regulations that apply to incumbents are "flexible, not burdensome" and that they minimise "barriers to entry" to head off "potential fairness issues" that could arise where "dynamic new entrants" come into existing markets and compete for business.

If there are "gaps" in regulation then any new laws that are drawn up "should be evidence-based and follow better regulation principles", the UK government said. Adopting this approach to new regulation is "particularly important" since the collaborative economy is "a still-emerging area which is changing and developing quickly". Regulating too soon "may not have the effect intended, working instead to reduce competition and increasing barriers to entry, as well as harming the incentive to innovate", it said.

The UK government said that that a UK trade body for the collaborative economy, Sharing Economy UK, is currently looking at whether "a trustmark" could be deployed to help "raise assurance in the collaborative economy for providers and customers".

"It is important to strive to minimise disproportionate burdens on business when considering regulatory action at either EU or domestic level," it said. "In that vein, industry-led alternatives to regulation – including self-regulation, standards and kitemarks – should be considered where possible."

In written evidence recently submitted to a UK parliamentary committee looking into how the UK government can support the growth of the digital economy, Airbnb said self regulation can offer a faster response to issues that develop in "fast-moving" digital markets. Airbnb is an online platform that helps match people willing to rent out their accommodation to those looking for a place to stay.

In its response paper the UK government also provided some guidance on how consumer protection laws apply in the context of the collaborative economy and how those laws might evolve in future. The Consumer Rights Act generally only applies to business-to-consumer (B2C) transactions and not consumer-to-consumer (C2C) transactions which are increasingly prevalent in the collaborative economy.

"The distinction between an individual selling as a consumer and an individual selling as a trader is becoming increasingly blurred," it said. "If the seller in a 'C2C' transaction was in fact a trader whose main income was their activity on the C2C platform, the B2C rules would apply. If the seller was simply an individual selling something or offering a service as a side-line, then consumer law would not apply."

"There are however some sector-specific exceptions in response to particular issues, such as in the secondary ticketing market, where regulations apply to C2C transactions as well as B2C transactions. We do not currently have any plans to extend the application of horizontal consumer law to C2C transactions in general. The UK Competitions and Markets Authority are keeping the issue under review but have not currently identified any evidence of a need to intervene," it said.