Competition Policy Implications of Sharing Economy Enterprises

Max Huffman, Indiana University Robert H. McKinney School of Law identifies Competition Policy Implications of Sharing Economy Enterprises.

ABSTRACT: As the sharing economy increases its share of the aggregate of overall productivity in nations around the globe, it is natural that it will attract competition policy concerns. Long experience shows that new firm and enterprise structures, contract relationships, and industries attract law enforcement and regulator attention — both because they upend traditional norms governing the way economies are believed to function and because they may violate legal rules developed around those norms.

Experience also shows the danger of stifling innovation in business practices by hewing to a traditional view of the “right” way for economies to operate. Such stifling may undermine growth and development where old ways are preferred to innovation. Stifling may have asymmetric impacts on those not currently in the market.

The law must accommodate the immutable goal of market access. The sharing economy presents a particular challenge because, as I define it below, the foundational enterprise structure challenges traditional norms, disrupting regulatory systems to achieve greater economic efficiency. The degree of intervention to limit activity by sharing economy enterprises that is appropriate depends on the legitimacy of the regulatory structure being disrupted. That in turn might best be understood as the accessibility of the jurisdiction’s markets in the status quo ante.

The paper outlines a structure for analyzing the impact of sharing economy enterprises on economic outcomes across a variety of jurisdictions, including both the developing and the developed world. Part I gives a “first principles” look at the role of competition policy in protecting markets, suggesting that the need for competition policy in the context of the sharing economy depends on the regulatory state of affairs in the industry it is disrupting. Part II considers the sharing economy as an enterprise structure, including its seven defining characteristics and how those characteristics may confound traditional competition law principles. Part III discusses the benefits to markets the sharing economy promises and set those against the apparent competition policy concerns.