The sharing economy is rapidly growing and evolving. It has shifted employment norms from the traditional 9am to 5pm office job to the idea that income can be earned from a much broader range of activities. Due to this, the tourism sector is at the forefront with accommodation and transport business’ adjusting to the entrance of new distribution channels and services offered by the likes of Airbnb and Uber. However, with this has come significant challenges in the form of regulatory uncertainty and concerns about abuses. The sharing economy is an economic system based on people sharing possessions or services, either for free or for payment. (Dictionary, n.d.) Interestingly, there is not one widely approved definition of ‘the sharing economy’, definitions for the trend tend to comprise of similar attributes such as the business’ operating in the sharing economy connect buyers and sellers directly via online platforms (Business, 2017).
The sharing economy debate can be looked at by two core points of view, with one point being that it is a mechanism used to bypass established regulatory and quality measures that incumbent businesses must follow by exploiting the ‘grey area’ between shared ‘trading’ and traditional business transactions, opening up risk to both traditional operators and the consumers. The alternative view sees the sharing economy as a transformative business model that uses new technologies to more effectively serve the needs of both consumers and suppliers that can have positive social and economic benefits not realised under more traditional models of business (Chamber, 2015). Recognising a balance between these two arguments will determine the approach taken to regulate the sharing economy and whether it is good for New Zealand society. Society may be defined as a community, a nation, or a broad grouping of people with common traditions, values, institutions, and collective activities and interests (Mindtap, 2020). The thesis of this essay is that Airbnb and Uber are the pioneers of a new business revolution, known as the sharing economy, and that although some regulations and standards need to be implemented, they do not necessarily need to be identical to that of established businesses. It is important that major influences and effects the sharing economy appears to be having on New Zealand society are both looked at and analysed in order to form an opinion regarding this question.
1. Should the companies operating in the sharing economy (e.g., Airbnb and Uber) be more extensively regulated in New Zealand?
In response to the growth and rapid increase of the sharing economy, regulation is commonly seen as a means by which to restrict certain activities of this new economy (Chamber, 2015). It is proving difficult for lawmakers to keep share economy companies such as Airbnb and Uber accountable, while respecting their practical and legal status. This is due to such companies resembling established businesses like hotel and taxis yet not being treated as such under the law. The sharing economy links individual workers and companies in an employment relationship. Uber drivers and Airbnb hosts have no contractual relationship with their companies beyond a simple user agreement, which generally describes them as independent contractors who work for the consumer (Acevedo, 2016). This relationship is of benefit to companies within the sharing economy as they can circumvent important employee protections and responsibilities. This has caused backlash from workers claiming their employment rights have been infringed upon as share economy companies do not have to uphold regulations such as health insurance, worker expenses or even paying minimum wage. Regulators are faced with the problematic task of adequately protecting share economy workers but avoiding stifling the economy’s resource maximising potential to allow for continued growth. It has been suggested that a new framework for conceptualising employment is necessary, as firms have sensed that the social environment, social values, sustainability realms and expectations of business have been changing, they have realised that they must adapt as well. Social contract is a set of reciprocal understandings and expectations that characterise the relationship between major institutions (Mindtap, 2020).
Share economy companies face regulatory challenges in three key areas, with the first being protection of consumer interests. Uber drivers perform the same service as a taxi driver yet neither Uber or the Uber driver needs to adhere to the licensing and liability measures that taxi drivers must comply with. Meaning, Uber can claim they are not formally liable for poor driver conduct, an extreme competitive advantage as the full costs of the service are not internalised. Becoming a qualified compliant Uber driver used to be a process that took several months and cost up to $2000 now it takes less than a week and costs $20 (Moir, 2016). The other side of this is that share economy companies reputation relies on the quality of the service provided however I personally believe that relying on the market and reputation for consumer protection is not justifiable and platforms should be required to appropriate legal standards. A 2016 article from Stuff NZ stated that Uber had refused to comply with New Zealand Transport Agency’s vetting policy with transport minister, Simon Bridges saying “they’re breaking the law and there’s no assurance of safety” (Moir, 2016), however numerous politicians were not keen on the idea to ban the ride sharing service due to it being “well utilised”. While Uber conducts its own Ministry of Justice and driver licence checks before deciding if someone can drive, these tests aren’t enough to make them legal. Under there is no evidence of specified criminal convictions beyond seven years, traffic offending beyond seven years, medical fitness to drive, charges laid by police, history of behavioural problems and complaints to police, past transport service related complaints or overseas criminal convictions (Moir, 2016). The governments in Australian states NSW and Victoria only legalised Uber in 2015, where regulations include background checks, vehicle inspection and insurance requirements for drivers (ABC, 2016). The growth of the share economy has seen established New Zealand businesses struggle to meet demand from consumers due to the lack of scale and mobility that is imparted with a traditional organisational mode of operation (Cusumano, 2015). Business regulations are put in place to protect employees rights, protect the environment and hold companies accountable for the amount of power they have in society. Implementation of regulations means businesses are all held to the same standards of compliance and obedience to the rules thus helping ensure health, safety, fairness and a competitive business environment is protected for the greater good of society. This makes it difficult to see why share economy companies should not be made to follow the same guidelines, especially in our own country.
Banning businesses in the sharing economy or enforcing a blanket regulation will not address the issue in the long term, nor will it stop new entrants becoming more savvy and adaptative in the marketplace. Uniform regulation allows companies to find loopholes, a after all, start-ups not only in the sharing economy but in general, are always looking for an unfulfilled need in order to create a product or service which is exactly how Airbnb came about. The ease of entry and innovation in the digital world mean that new entrants in the sharing economy can provide better options and address consumer needs in ways that more traditional businesses models cannot (Chamber, 2015), yet for a consumer, the convenience, better prices and perceived sense of community that the sharing economy provides seems like a no brainer and something to take advantage off. A way to combat this issue could be for the government, key sharing companies and leading industry experts to discuss the regulatory challenges for the sharing economy, with the idea to push growth yet keep it under control, leading to a more effective and regulated approach for all sharing economy companies. Regulating the sharing economy effectively and efficiently will be difficult but if New Zealand care about not only the growth of new economy’s but established businesses, they should take appropriate measures to more extensively regulate the sharing economy companies operating in New Zealand.
2. As noted in some of the recommended reading list and in the press, these services are often seen and portrayed as ‘destructive’ to existing business models. To whom are you more sympathetic? Airbnb and Uber? Consumers? Established industry operators that compete with the sharing economy companies? Others? Explain why.
Businesses operating in the tourism industry, such as hotels, bed and breakfasts and the taxi industry are concerned that the sharing economy is infringing upon their market share by offering unregulated products and services at more competitive prices (Chamber, 2015). In 2018 American consumers spent more money on Airbnb than they did on Hilton and spending’s are catching up to world’s largest hotel company, Marriott, further proving the prevalence of sharing economy companies and the effect they have on existing business models. A look into the impact and effect that sharing economy companies have on New Zealand society is needed to justify their whether they truly are ‘destructive’. Tourism is an integral sector in the New Zealand economy, which saw it contribute $14.7billion to gross domestic product in 2016-17, representing 5.9 per cent of the economy overall. With Airbnb, a peer to peer platform which continues to take advantage of worker classifications to keep profits high and their responsibility low, operating in New Zealand this is bound to create market upset. Hospitality NZ Central Otago president Chris Buckley is not anti-Airbnb, however said “it does have knock-on effects such as visitors staying at home and cooking rather than visiting locally owned restaurants and bars.” Due to this, restaurants and bar operator’s business was affected. This has a flow on effect as “ultimately less staff will be employed to cover shifts and less money will be spent throughout the business and community.” (Tohill, 2018) Christchurch’s commercial accommodation sector was described as being in crisis due to the effects of against an unregulated home-share industry, coupled with the impact of coronavirus (Law, 2020) which could spell the end for smaller scale, family-owned and operated commercial providers.
Corporate citizenship is how companies deliver on their core values in a way that minimised harm, maximised benefits, is accountable and responsive to key stakeholders, and supports strong financial results (Mindtap, 2020) a concept which Airbnb seems to have strung away from given it is being used as a substitute for hotels, contributing to a housing shortage and not following the same regulations as traditional tourist accommodation which include higher costs, higher tax rates and increased insurance.