Sharing Economy Ratings May Substitute for Regulation

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By Alexis Kramer

Nov. 17 — Reputation rating systems may reduce the need for consumer protection regulation of the sharing economy, the Federal Trade Commission said in a report released Nov. 17.

Sharing economy platforms such as Uber Technologies Inc. and Airbnb Inc. have systems that allow users to give feedback on the quality of goods and services they receive. Using such rating systems, consumers and providers can access information about the person or service with whom they are dealing, the FTC said in a report on the issues facing sharing economy platforms, participants and regulators.

The report underscores the challenge lawmakers face in deciding whether and how to regulate the growing sector, which is expected to generate $335 billion by 2025, according to a study by PricewaterhouseCoopers.

“It is important to allow competition and innovation to continue to flourish, while at the same time ensuring that consumers using these online and app-enabled platforms are adequately protected,” FTC Chairwoman Edith Ramirez said in a statement.

The FTC said sharing economy platforms generally have strong incentives to provide rating systems for their customers. Rating systems promote confidence in transactions between buyers and sellers and increase profitability, the agency said. It cited evidence that such systems have helped to spur the sharing economy’s tremendous growth.

The commission also said, however, that platforms may have less of an incentive to address the impacts on third parties, such as pedestrians and motorists who face risks from Uber drivers. Regulators “may be less able to rely on platform actions to address those concerns,” the FTC said.

To contact the reporter on this story: Alexis Kramer in Washington at aKramer@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com

For More Information

Full text of the report is available at http://src.bna.com/j9T.

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