How to Defeat Monopoly Power in the Sharing Economy

The RSA’s recent report explores the emergence of a new kind of monopoly power in the sharing economy, and considers how we might challenge increasing economic concentrations of power through rethinking our approach to governance and regulation.

The RSA (Royal Society for the Encouragement of Arts, Manufactures, and Commerce), a 260-year-old charity in the UK, launched a programme of research on the sharing economy in November 2015 as part of our wider work on the economy, enterprise and manufacturing. Last month, we released Fair Share, a primer to help make sense of how the sharing economy has changed since 2009 as newer platform-based business models have gained ground.

We set out to first clarify what the sharing economy is given that the term "sharing" is now disputed by the media and commentators who argue that any exchange involving a fee does not constitute sharing. This is a too literal and limiting interpretation of what it means to share. Instead we would agree with many others, such as Benita Matofska of Compare and Share, that the sharing economy describes more than exchange; it is a socio-economic system involving a spectrum of activity based on maximising the potential of our underused human and physical resources, from our skills to our things.

The sharing economy is diverse, encompassing local, grassroots-funded initiatives such as tool libraries and timebanks, but also global, venture-backed corporations (the twin titans being Airbnb and Uber). Some may contest that the real sharing economy does not include the likes of these corporations, but the RSA would note that the shunning of these companies was a gradual development that corresponded with their growing size. It is true that as these companies have scaled, they have found it difficult to sustain their initial social value, but this is a risk that many start-ups in the sharing economy face as good ideas take off and platforms seek to serve more people. Platform-based models naturally tend to scale upwards because of the network effect, so unless we are conscious of managing or actively countering this predisposition we will continue to lose promising endeavours to the ‘dark side’ of the sharing economy.

It is not that the RSA thinks that success in the sharing economy relates to scale, but rather that reclaiming power in the sharing economy will entail acknowledging and confronting the scale of some of these platforms through taking a different approach to governance and regulation.

Our primer thus breaks down different types of business models in the sharing economy, but zeroes in on platforms because they are the most likely to scale upwards, and quickly, to a point where they are exercising monopoly power. The platform business model in and of itself is not necessarily problematic; as we explain, there can be variations of this model that are co-operative and/or decentralised. In fact, blockchain-based versions have the potential to be genuinely peer-to-peer. However, some businesses are exploiting the network effect to crowdsource monopoly power -- this is where it can get especially problematic as some of these platforms (which we refer to as ‘networked monopolies’) set the terms and conditions for gig workers who are offering their services.

While we are hopeful that experiments with blockchain-based sharing platforms will empower workers (or at the very least serve their interests in the absence of a rent-seeking intermediary), we also need to consider the welfare of consumers, workers at large (those in traditional industries as well as those who are locked into other sharing platforms), communities, the state, the economy, and the environment. Blockchain-based platforms will not resolve all issues simply by virtue of being; some form of collaborative governance will be needed to balance interests.

The RSA proposes "shared regulation" as a starting point for defeating monopoly power in the sharing economy. Neither top-down, centralised solutions from the state nor solely self-regulation on the part of businesses will result in a fairer sharing economy. As monopoly power is rife in the wider economy, we should not assume that tweaking anti-trust legislation will make much of a difference either. What we need is to disperse political power and engage a range of stakeholders in a participatory process of governance and regulation.

The RSA doesn’t have the answers yet, nor would we expect to arrive at them entirely on our own. This primer marks a year-long exploration of how we address trade-offs in the sharing economy and, in the spirit of the commons, collectively determine how "shared regulation" evolves.

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If you’d like to get involved with the RSA’s work on the sharing economy, please feel free to get in touch with me directly at brhmie.balaram@rsa.org.uk

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