Can we regulate Uber into ‘doing the right thing’?

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Following calls this week for greater regulation of tech firms from both Sadiq Khan, London mayor, and, separately, Tim Berners-Lee, inventor of the world wide web, today’s feature focuses on the platform economy and how to regulate it. This has been explored in a paper by Michèle Finck, senior research fellow at the Max Planck Institute for Innovation and lecturer in EU law at the University of Oxford.

At the end of 2017, ride-sharing platform Uber suffered its latest legal vanquishment when the European Court of Justice ruled that it is ‘a transport company’ and consequently must abide by EU transport rules to operate within EU borders. This decision follows myriad legal entanglements globally. In the UK, it is in the dock over alleged sexual harassment by drivers, not paying its drivers holiday or sick pay, and not paying enough tax.

But we love Uber. We take around 40 million rides monthly in 633 cities, and the company’s gross bookings (published in 2017) stood at a whopping $20 billion (£14 million). We love it so much we can’t wait to ‘uberise’ everything.

So on the one hand we don’t like what these companies do (exploit workers, take health and safety risks, don’t pay enough taxes) but on the other hand we LOVE what these companies do (provide cheap, convenient, comfortable transport that we don’t have to wait for).

Is it possible for us to embrace the innovation while maintaining a modicum of what we might loosely term a level of ‘morality’? Can we regulate these companies into doing the right thing by society?

So far, technologies disrupt first and regulators desperately chase after them: a bit like the infamous stable door being shut after the horse has bolted far, far away. In Germany (where Uber doesn’t currently operate), you use the word uber to mean ‘above’. As with all digital disrupters, part of Uber’s very success is that it has deliberately found space above and beyond the current regulatory framework, it has forged new paths which defy the framework.

But we can’t just draw up new regulations and impose them; this doesn’t really work. Sometimes, there just isn’t the legal language to cope: a key personality in the digital economy is the “prosumer”, someone who not only produces but also consumes a product (such as Twitter users). But there is no legal definition of a prosumer, whereas a prosumer may yet have rights which need protecting or powers which need regulating.

Regulations tend to be imposed nationally whereas platformers operate supra-nationally which means that companies can forum shop. (Ireland’s more relaxed approach to data protection has meant that tech companies such as LinkedIn want to be head-quartered there under its rules despite operating over the rest of the EU where data protection is much more heavily legislated.)

There is a problem with sheer volume: a business may find that the regulations which apply to its services are so multi-faceted that working out what it can and cannot do becomes almost impossible (or at least prohibitively expensive once you have paid all the lawyers to work out what rules apply). One fintech lawyer tells me that regulations in financial services are such that it is “beyond our capacity to handle them”.

In a paper published last year as part of the LSE’s Working Papers series, Michèle Finck argues that our only hope may be something called ‘co-regulation’ whereby regulators work with tech companies to come up with a set of rules together:

“We need to recognise that regulation could be more of a ‘process’, a collaborative effort between authority, industry and other stakeholders.”

There’s a good example in relation to Airbnb and the city of Amsterdam, cited in Finck’s paper. The public policy challenge of Airbnb is the disruption it is causing to the traditional rental market so that people who actually want to live and work in Amsterdam can’t find affordable and stable housing. This in turn is leading to the city (and others like it such as Florence) rapidly turning into a city for visitors rather than a city with visitors.

These concerns culminated, in 2014, in Airbnb signing a memorandum of understanding with the city of Amsterdam which puts a cap on the number of days a home can be rented out (currently 60). Though there have been question marks raised about some Airbnb hosts breaking the rules, this is a good start: tech company plus public authority work in tandem to meet a public policy objective.

There’s more. The new ‘co-regulated’ rules are relatively easily put in place and enforced: the platform just tweaks its algorithm. Airbnb also collects a tourist tax for Amsterdam, again, a simple reprogramming of its algorithm makes this possible. As Finck puts it, compare this form of tax collection with a traditional one:

“[E]nsuring tax compliance is a costly burdensome task for public authorities, too often qualified by limited success.”

Comparing Airbnb and Uber usefully demonstrates the potential for co-regulation: whereas Uber has a serious public image problem, spending more and more time in court and with lawyers (Hogan Lovells is representing Uber in the UK), losing CEOs alongside all the law suits, Airbnb maintains itself as a “trusted” platform, a company which, to some degree, has some of those ‘morals’ we were talking about.

This is the first in an occasional Legal Cheek Journal series, looking at new and interesting legal research. If you are working on a paper or research which you’d like to share with Legal Cheek, email us.