Sharing economy: rapid expansion, rise in legal issues

The development of new business models on the Internet, especially those related to the so-called sharing economy - such as Uber - has been accompanied by a rising number of legal and regulatory issues that threaten to jeopardise the business models’ existence. The study 'Mapping Uber' looks at the main policy issues, and the legal action undertaken against the company in various countries.

Ride-sharing application Uber has seen a rapid expansion in the past three years. This has been accompanied by a wave of legal controversies, including court cases, rulings by regulatory authorities, and decisions by other administrative bodies. Most issues associated with the sharing economy are related to the fact that the sharing economy’s business model is still not clearly regulated.

In expanding its business, Uber presented serious competition to traditional taxi services. Many of the initial cases against the company were initiated by taxi associations on unfair competition grounds. The key question, in 2017, was related to how Uber is classified within the scope of the regulatory regime. The answer came in December 2017, when the Court of Justice of the European Union (CJEU) ruled that Uber was a transport company, and not an information services provider. The main question in 2018 is: how will this ruling affect Uber's operations in the EU, its business model and that of other companies operating in the sharing economy, and all the drivers and contractants working in the industry?

Courts of various instances were faced with other related legal issues. Among these is the question of whether Uber’s drivers are direct employees or independent contractors. If they are employees, the company needs to provide them with employee benefits, such as social security. The UK courts have already taken a stand, in that drivers are considered to be employees. In the USA, the question is still pending. Although the CJEU's ruling in December 2017 did not address the question of employment, it may also have a bearing on the issue.

The lack of licences, safety considerations, and the non-fulfillment of other conditions that are generally necessary for taxi drivers (such as the type of car being used, insurance requirements, etc.) have also been raised in court cases.

In the USA, which has the largest number of cases and class actions against Uber on record, the situation is even more complex due to procedural issues. Numerous disputes are awaiting a final decision on whether drivers can sue Uber in a court of law, or whether they need to resort to arbitration, since drivers’ contracts contain an arbitration clause to which drivers would have agreed before joining the company as service providers. 

Uber’s enormous exposure to litigation has triggered a chain of other cases. Among related issues are background checks for drivers, reports to regulatory authorities, the alleged drivers’ discrimination against blind people, and physical assault of customers.

The lack of a clearly defined regulatory regime is perhaps the main reason for so many court cases. At the same time, legal loopholes are a motivation for some to exploit the situation through endless litigation for profit-making. That is why the international community should promptly react in creating a predictable legal framework for the sharing economy that will, at the same time, respect the interests of traditional professions as well as stimulate the digital economy and new business models.

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