United States: FTC Report On Sharing Economy Cautions Regulators Not To Impede Innovation

David Kully is a partner in Holland & Knights Washington, D.C. office.

Nicholas Melzer is a partner in Holland & Knights Los Angeles office

Michael Boardman is an Associate in Holland & Knights Los Angeles office


  • The Federal Trade Commission (FTC) recently released a report discussing the economic and regulatory implications of the growth of "sharing-economy" companies such as Uber, Lyft and Airbnb.
  • The FTC applauds the disruptive innovation brought by these businesses and the significant consumer benefits that have emerged through competition with traditional suppliers of similar services.
  • Through its report, the FTC signals that it will continue to be an advocate against regulatory efforts to protect incumbent businesses from competition and innovation offered by companies in the sharing economy.

In 1942, economist Joseph Schumpeter observed that the "creative destruction" of innovation often drives economic growth in market economies as companies continuously introduce new products or services, or new ways to produce or supply products or services, to meet the demands of consumers. On Nov. 17, 2016, the Federal Trade Commission (FTC) released a report titled "The 'Sharing' Economy: Issues Facing Platforms, Participants & Regulators" that highlights how consumers have benefited from the creative destruction introduced by new businesses such as Uber and Airbnb. The report also analyzes economic and regulatory issues facing participants in these newly disrupted markets.

Though it purports "not to support or oppose any particular business model" (Report, p13) or "to identify areas for [FTC] investigation and enforcement" (p15), the FTC report likely will be cited for years to come as a source of competition and regulatory policy guidance in the sharing economy. In the report's first paragraph, the FTC endorses Schumpeter's creative destruction as "a major driver of long-term consumer welfare gains" (p1) and reiterates its belief that regulators should not automatically subject new businesses such as Uber and Airbnb to the same regulations applicable to the traditional businesses with which they compete (p52). It recognizes the "inherent tension" between the competitive benefits that sharing- economy businesses can provide and their potential to impose some consumer harms (p14), and notes the FTC's past efforts to convince regulators to intervene with narrowly tailored rules only when necessary "to protect consumers and the public or to serve some other legitimate public goal" (p7).

Businesses in or anticipating entry into the sharing economy should take note of the FTC's report. Companies reasonably can expect that the FTC will be an advocate for them against efforts by states or municipalities to insulate incumbent businesses from the competition and creative destruction that new entrants might cause. However, new businesses should be sensitive to the privacy and consumer protection concerns that are likely to draw the attention of the FTC and other regulators.


The central subject of the FTC's report (and its 2015 workshop on the sharing economy) is "how regulators can pursue legitimate regulatory goals such as those relating to health, safety, or consumer protection, while avoiding regulations that may unnecessarily chill innovation, entry, and competition" (p51). The FTC advocates for balancing these "competing goals by limiting regulation to targeted measures no broader than needed to achieve the regulatory goals" (p64). But it also observed the existence of a variety of competing viewpoints on the subject. Some competitors in the sharing economy favor establishing a level regulatory playing field for traditional businesses and new entrants to avoid giving certain competitors an unfair advantage (p55-56). Others have expressed concerns about regulatory capture by incumbent businesses pushing protectionist policies or establishing an unfortunate "Brother, May I" scenario under which new entrants have to request permission from competitors to compete in new ways (p56). Still others have noted the need for "a regulatory approach flexible enough to allow adaptation to novel and potentially unforeseen situations" (p57), as well as a general caution against "preemptive regulation" that might impede innovation (p57-58).

In analyzing the challenges facing participants and regulators, the report focuses on two of the fastest-growing and most disruptive sectors of the sharing economy: for-hire transport (companies such as Uber and Lyft) and short-term lodging (companies such as Airbnb). The FTC observes that for-hire transport platforms have "had a dramatic impact on competitive conditions" in the transportation sector (p68) and that the hotel sector is struggling to adapt to the proliferation of rooms available through companies such as Airbnb. Some have lost a significant amount of business, while others have started using the Airbnb platform to advertise available rooms (p71). Unsurprisingly, traditional businesses in these sectors have been vocal in their criticism of startups such as Uber and Airbnb, requesting that these new businesses be subject to the same or similar regulations as the traditional enterprises in order to "level the playing field" (p71).

The FTC suggests that regulators in these industries consider similarities and differences between sharing-economy businesses and traditional suppliers in considering whether to "extend or tailor existing regulations to sharing economy participants, or if aspects of sharing economy platforms limit the need for such regulation" (p73). The report noted broad consensus on the "importance of consumer protection and public safety" in these two sectors, but also that traditional businesses and new innovators differed on the need for government regulations to protect consumers (p78-79).

Lastly, the report articulates clearly the FTC's views concerning the obligations of sharing- economy businesses to protect the privacy of their participants, and notes its authority to pursue enforcement actions under Section 5 of the Federal Trade Commission Act for violations of those obligations. The report observes that while "trust mechanisms" such as systems to rate Uber drivers or Airbnb properties "have played an important role in addressing consumer protection" concerns (p80), those mechanisms rely on the collection of information about participants and necessitate the adoption of appropriate privacy and data security measures. The FTC recognizes that "honoring consumer privacy does not mean consumers' data should never be disclosed," but believes that sharing economy businesses must "clearly and conspicuously [disclose] what information will remain private and what will not, enabling consumers to make informed decisions" (p61-62).


Though the FTC takes pains to repeatedly explain that the report "does not represent the views of the Commission," only those of participants in its 2015 workshop (p10, note 10), and that it "aims to synthesize and present ... information ... not to identify areas for Commission investigation and enforcement" (p15), the report still sends a message to regulators and traditional businesses facing new pressures from the sharing economy. The FTC's support for the creative destruction wrought by new technologies is crystal clear, as is its belief that nothing about the sharing economy removes it from the FTC's purview: "The opportunity to compete in the marketplace affords potential innovators the incentives to undertake the expensive, difficult, and risky process of creating and introducing innovative products and services. Preserving such opportunities has long been a core part of the [FTC's] competition mission" (p1).

The FTC recognizes that regulators face a "challenging task" of protecting the public while not chilling incentives for innovation and impeding entry, and it offers those regulators "broadly applicable principles" to help them balance "competition policy and regulatory goals" (p7). Specifically, the FTC explains that "regulators should impose requirements only when there is evidence that regulation is needed to protect consumers and the public or to serve some other legitimate public goal" and that "regulatory actions should be tailored so that they are no more restrictive than necessary to serve those goals." Consistent with those principles, the FTC has in the past "generally cautioned regulators 'not to impose legacy regulations on new business models simply because they happen to fall outside of existing regulatory schemes' " (p52). In the FTC's view, "any necessary regulations 'should be flexible enough to allow new forms of competition,' and 'narrowly tailored to the specific public policy goals that have been identified' " (p52).

The FTC report also reminds sharing-economy businesses that they are not immune from scrutiny under the antitrust laws. Specifically, the report warns that the "two-sided network effects" that make platforms such as Uber so appealing, also may create a barrier to entry, "protecting a dominant incumbent" (p26), and that vertical integration in the sharing economy could "in some circumstances result in anticompetitive foreclosure" (p28). In short, though the "sharing economy can produce disruptive innovation that greatly benefits consumers," participants "should not be permitted to engage in unfair or deceptive acts or practices simply because they are introducing innovative products or services" (p51).

Finally, the FTC cautions participants to be truthful with data and zealously guard consumer privacy (areas in which the FTC has taken keen interest in recent years). It expressly warns sharing-economy businesses of potential liability under Section 5 of the FTC Act for misrepresenting data privacy policies or failing to reasonably secure data (p62-63).

In summary, the FTC clearly has articulated its commitment to support the rapid innovation that the sharing economy has created, subject to appropriate regulation to protect legitimate government interests. The FTC will pursue its mandate of protecting consumers and encouraging competition in these rapidly changing and emerging markets by continuing its advocacy with regulators and bringing enforcement actions, if necessary. However, participants in these markets should be cognizant of the limits imposed by the antitrust laws, seek guidance where appropriate and maintain effective compliance programs aimed at minimizing consumer harm and protecting consumer privacy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions