Regulating the Sharing Economy: New and Old Insights Into an Oversight Regime for the Peer-to-peer Economy

• Publication year: 2021
• Citation: Vol. 95

95 Nebraska L. Rev. 87. Regulating the Sharing Economy: New and Old Insights into an Oversight Regime for the Peer-to-Peer Economy

Regulating the Sharing Economy: New and Old Insights into an Oversight Regime for the Peer-to-Peer Economy

Raymond H. Brescia(fn*)

TABLE OF CONTENTS

I. Introduction .......................................... 88

II. Regulation, the Legal Profession, and the Sharing Economy .............................................. 93
A. Latent Resources and an Independent Workforce. . . 94
B. Regulation, Independence, and Consumer Protection in a Relationship of Trust ......................... 95
1. Attorney-Client Relationships, Trust, and Regulation .................................... 95
2. Sharing Economy Relationships, Trust, and Regulation .................................... 99
C. Consumer Protection in a Relationship Designed to Encourage Creativity and Innovation, While Generating Profit ................................. 106

III. The Evolution of Regulation of the Legal Profession. . . . 110
A. Brief History of Regulation of the Legal Profession, from the Colonial to the Contemporary Eras ....... 110
B. Key Questions and Themes Underlying the Evolution of the Regulation of the Legal Profession ......................................... 113
1. Self-Regulation to Secure Professional Independence and Uphold the Rule of Law ..... 114
2. Self-Regulation to Fend Off Regulation by Outside Entities ............................... 118
3. Barriers to Entry .............................. 120

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4. The Right to a Livelihood ...................... 121
C. The Legal Profession's Regulatory Regime ......... 122
1. Barriers to Entry .............................. 123
2. Unauthorized Practice of Law .................. 124
3. Codes of Conduct and Self-Regulation .......... 125
4. Disciplinary Machinery ........................ 126
5. An Insurance Regime .......................... 127
6. Recourse through the Courts and Tort
Liability ....................................... 129
D. New Governance and Regulation of the Legal Profession: Flexibility, Adaptability, and Local Experimentation .................................. 131

IV. What the Evolution of the Regulation of the Legal Profession and New Governance Theory Can Tell Us about the Need for and the Contours of Regulation of the Sharing Economy ................................. 133
A. Self-Regulation, Barriers to Entry, and Codes of Conduct ........................................... 136
B. Disciplinary Machinery ............................ 140
C. Ongoing Judicial Oversight to Ensure Consumer Protection with "Supervisor" Liability .............. 141
D. Insurance Mechanisms ............................ 142
E. Flexibility, Adaptability, and Local Experimentation .................................. 143

V. Conclusion ............................................ 144

I. INTRODUCTION

Recent startup ventures that are based on new models made possible by the Internet and mobile technologies have upended a range of industries, including taxi services, retail sales, and hotels. They typically offer convenience and low cost to consumers and job and income opportunities for producers. They are investment targets for large and small investors and have made their founders very wealthy. Some companies that use these new models have grown at such a rapid pace that their market capitalization far exceeds that of traditional companies located within those industries.(fn1) An example of this is the housing services company Airbnb, which is valued at $26 billion, more than the hotel chain Marriott and its competitor, Hilton.(fn2) These companies, thriving in a new transnational economy that is connected

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virtually, are doing what many would call disrupting the normal way of doing business in these industries, offering services to the consumer in a more efficient and effective manner directly through the Internet and mobile technologies.(fn3) They are unleashing latent assets that can be deployed in new, innovative, and lucrative ways. These new economic actors, and the networks and platforms they have created, have become significant drivers of economic activity and made their founders very rich, while attracting billions of dollars from investors.

For lack of a better term, many of these companies operate within what many call the "sharing economy."(fn4) Not surprisingly, they have faced stiff resistance from their more traditional counterparts, industry incumbents who face significant encroachments on their customer bases and profits. Government actors are struggling to keep up with these new business models, and the activities of these companies can raise significant consumer protection concerns.(fn5) Indeed, consumer protection watchdogs raise concerns about product and service safety.(fn6) While consumers appreciate the panoply of choices and the fact that sharing economy platforms often offer a lower cost for products and services than traditional providers, safety concerns and a reticence to trust relatively unregulated platforms threaten to undermine their growth and profitability and are driving some jurisdictions to heavily regulate or ban certain enterprises outright.(fn7) Elected officials and other government actors share consumer protection concerns and also raise fears that new models of product and service delivery can sidestep tax- and fee-generating mechanisms, like

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hotel taxes and licensing fees collected from providers within these industries.(fn8) Labor leaders and workers fear the erosion of traditional worker protections in sharing economy platforms.(fn9) The founders and leaders of these sharing economy companies bristle over calls for regulation, saying any such effort will stifle the entrepreneurial spirit and innovation.(fn10) The search is on for the right level of oversight that will regulate these new economic models effectively without chilling innovation or harming consumer and worker interests.(fn11)

What proponents and detractors alike fail to recognize is that the sharing economy-for lack of a better term-can learn from an industry that has struggled, over the centuries, to find the right balance between innovation and oversight. This sector has shared features of these new economic actors and has experimented with and put into place regulatory components that attempt to find the sweet spot between regulation, consumer protection, and creativity. Indeed, one industry has exhibited the features of the sharing economy for centuries and has developed a regulatory approach that attempts to strike a delicate balance between consumer protection and provider independence. Like sharing economy platforms, it has involved the provision of on-demand services by independent actors that have tapped into latent assets to serve a range of customers at the same time. It has organized itself primarily through outsourcing, where providers offer services to customers based on reputation. The customer is free to change service providers, generally, at will; the customer pays for services as needed and in accordance with his or her use of those services.

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In these ways, the sharing economy, whether consciously or unconsciously, is borrowing features from the manner in which the legal profession has delivered legal services in the United States since the birth of the nation. As the legal profession grew and its role became more central in the functioning of the economy and society, finding the right balance between consumer protection, innovation, and regulatory oversight has been a central theme in the evolution of the profession's regulation.

The major components of legal professional oversight have not changed much over the last 100 years or so. These components are designed to encourage both zealous advocacy and creativity while ensuring quality control and consumer protection. In fact, the elements of this balance have always been seen through the lens of a sort of legal profession exceptionalism-the notion that there is something different about the practice of law that requires a zealous vigilance around the frontiers of oversight and that regulation of the profession must be undertaken in such a way that will protect the important role the legal profession plays in ensuring the proper functioning of American democracy.(fn12) It is perhaps no accident that there is a similar ex-ceptionalism that now permeates the debate around regulation of the sharing economy-the notion that disruptive innovation in a range of industries, designed to supercharge the economy, unleash capital, create opportunity for millions, and improve consumer access should not be held down by stifling regulatory oversight.

A more recent development that can also inform questions regarding the most efficient and effective way to regulate the sharing economy has been the emergence of so-called "New Governance" models of regulatory oversight. Developed in response to changes in technology, economic forces, globalization, and a need to make regulatory systems more experimental, adaptive, transparent, and responsive, New Governance models promote an engaged dialogue among stakeholders: regulators, the regulated, and consumers.(fn13) They straddle the government, private, and civil society sectors in a search for optimal approaches to regulation that encourage innovation while protecting consumers. Interestingly, just as the sharing economy shares features of the legal profession in the U.S., the regulatory infrastructure that governs the legal profession has itself developed through an approach that has many of the hallmarks of New Governance Theory, long before its emergence as a theory. Indeed, this infrastructure, which

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hinges on a self-regulatory model, has been experimental, decentralized, iterative, and adaptive.

Because the legal profession...