How to Regulate the Sharing Economy? Look to the Law Governing Lawyers

Whether it is ride-hailing services, the opportunity to rent a spare room for a short-term stay, the chance to participate in an on-line auction for Star Wars memorabilia, or the excuse to purchase artisanal jewelry, Sharing Economy platforms are connecting consumers to providers in new and technology-enabled ways, making life easier, more convenient, less expensive, and maybe a little more interesting. What companies in this Sharing Economy are doing is disrupting incumbent industries, upending regulatory schemes, and challenging the legal infrastructure and the governments that oversee it. National and local governments are taking wildly different tacks in their approach to the Sharing Economy, with some European cities and even countries effectively banning Sharing Economy platforms or cities across the United States embracing the new economic engines as ways to offer constituents goods and services that are more convenient and often less expensive than those offered by traditional businesses. Regardless of the approach, fights are brewing across the globe over the proper role for regulation in the Sharing Economy.

And this is a fight worth having. Regulation in many of the industries where Sharing Economy platforms are thriving serves an important consumer protection purpose. Even though Sharing Economy companies strive to serve the common good, they are also out to make a profit. When it comes to regulation, however, what many are saying is "trust us, don't regulate us." But what Sharing Economy platforms don't seem to understand is that regulation can actually lead to trust, which can foster more economic activity.

There is another industry that has, for centuries, operated under the notion that some regulation is actually good for business, but it opts to regulate itself as a way to fend off more onerous regulation. Let us regulate our profession ourselves says this industry and stay out of our business model. Malpractice lawsuits on the periphery, for the worst cases of abuse, are fine, but, leave the regulation of the profession to the profession. That industry is the legal services industry. As I explore in greater depth here, because of the similarities between the legal profession and Sharing Economy models, any effort to regulate the new, peer-to-peer economy can learn from the manner in which lawyers have been regulated for well over a century.

For the most part, the regulation of lawyers has proceeded under the belief that too much state intervention gets in the way of the lawyer doing his or her job. Imagine a criminal case where the state could listen in on all of the conversations between a lawyer and his or her client. Or think of the strategy sessions around groundbreaking civil rights lawsuits. What if the state could step in and say "no creative lawyering allowed." Against the backdrop of this freedom from regulation are a number of means of ensuring lawyers do not take advantage of their clients: there are barriers to entry to the profession that strive to admit into the profession only those individuals with the requisite skill and moral fitness to practice law; there are codes of conduct that lawyers must follow; lawyers are disciplined and subject to malpractice lawsuits when they engage in improper conduct and take advantage of clients; and lawyers can be stripped of the right to practice law in the event of egregious violations of trust. In the end, though, we regulate lawyers through a "light touch" approach that provides some degree of guidance and oversight, but also gives lawyers the latitude to practice their craft outside the watchful and intrusive eye of the state.

Some argue that the Sharing Economy shares the legal profession's need for such light touch oversight. If a driver for Lyft or Uber had to follow the same licensing requirements as taxi drivers in many cities face, it is unlikely that any would sign up to work within the platform. Sharing Economy companies are trying to create new, peer-to-peer economic models that are, like the attorney-client relationship, difficult to regulate. That does not mean we should not try. The consumer protection ramifications are too great, as the risks to consumers who get in the back of a stranger's car or rent a room in a stranger's house are obvious.

The Sharing Economy should embrace the components of the law governing lawyers: self-regulation through the imposition of meaningful barriers to entry and the promulgation of robust codes of conduct for Sharing Economy providers; recourse through the courts for significant violations of consumer interests, including holding Sharing Economy platforms liable and not just providers; and dispute resolution mechanisms, including the courts, that can offer the opportunity to remove providers from Sharing Economy platforms for significant violations of consumer trust.

At present, some Sharing Economy platforms have made weak overtures toward the creation of codes of conduct. For example, Uber's "Code of Conduct" is just 592 words in length. It urges "safety," "compliance with the law" and a "zero-tolerance policy regarding all forms of discrimination, harassment or abuse." Compare that to Airbnb, which has virtually no standards. It merely suggests that hosts might provide "amenities"; indeed, according to its website, hosts "should consider providing basic amenities like soap, toilet paper, sheets, and towels."

What Sharing Economy platforms should learn is what the legal profession learned a long time ago; regulate yourself or someone else will do the regulating for you. As an American Bar Association report stated in the 1980s, if lawyers did not band together to combat a perceived lack of professionalism in the bar "far more extensive and perhaps less-considered proposals may arise from governmental and quasi-governmental entities attempting to regulate the profession." The report continued: "The challenge remains. It is up to us to seize the opportunity while it is ours."

The challenge for Sharing Economy platforms is clear, and it is a challenge the legal profession has long embraced. Accept some form of regulation, including meaningful self-regulation, or someone else is going to do it for you.