US Regulator Investigating Uber, Airbnb, Sharing Economy for Consumer Abuse and Financial Risk

The tech industry tends to be contemptuous of government regulation. In fact, Uber's entire growth model appears predicated on defiance of  local authority everywhere in the world.

But cooler heads and/or adult supervision might remind these latest subjects of unwanted federal attention that IBM, Microsoft, Google and other seemingly 'untouchable' innovation avatars learned the hard way that those 'bureaucrats' can be powerful adversaries.

There is an ill-defined trip-wire that tech companies seem to cross when it appears they have accrued sufficient power to upset traditional economic models, threatening too many livelihoods. Use of personal information will be just a starting point. And when the full force of the Federal government turns its attention to such matters, history teaches us they tend to get some if not most of their way. JL

Barney Jopson and Tim Bradshaw report in the Financial Times:

Uber, Airbnb and other pioneers of the “sharing economy” are coming under heightened scrutiny from a US watchdog that wants to know if consumers are at risk from their use of personal data and liability regimes.
Uber, Airbnb and other pioneers of the “sharing economy” are coming under heightened scrutiny from a US watchdog that wants to know if consumers are at risk from their use of personal data and liability regimes.The Federal Trade Commission is examining internet businesses that facilitate peer-to-peer transactions for transport, accommodation and ecommerce as their explosive growth creates friction around the world.
Marina Lao, director of the FTC’s policy planning office, told the Financial Times: “Essentially we want to see how we can regulate these new business models in a way that would protect consumers and not hinder innovation.”

Uber has become a poster child for digital intermediaries that are sparking the ire of industry incumbents as it faces legal tangles from Paris and Brussels to Delhi and Beijing.

In the US, the past actions of the FTC — which enforces federal antitrust and consumer protection laws — indicate that it sees ride-hailing apps such as Uber, Lyft and Sidecar as a positive force for competition
It has written to state and city legislators urging them not to pass laws that would put them at a disadvantage to traditional taxis.
But the agency wants to probe two practices that are central to peer-to-peer platforms — the accumulation of personal data and the use of rating systems — as well as questions over legal liability for injuries.
“We want to see to what extent sharing economy platforms should be able to monitor participants by collecting, let’s say, location data,” said Ms Lao. “And if they do monitor, how can they do so while adequately protecting the privacy of the participants?”
Last year, Uber came under fire after claims that its employees could look up the ride history of individual users or even watch them during trips in a live “God view” mode. Uber insisted that it prohibits employees from accessing customer data, unless for “legitimate business purposes”.
To overcome the anonymity of internet interactions, digital platforms have made extensive use of customer feedback to assess the quality of vendors — beginning with Amazon and eBay’s long-established use of rating mechanisms for third party sellers.
Ms Lao said: “You wouldn’t get in a car with someone you don’t know at all unless there is something to create trust, so these ratings systems and these trust mechanism are very important to sharing economy platforms.”Uber and Airbnb allow for two-way ratings, letting providers score their customers too.
Ms Lao said the regulator was also interested in “whether the platform has liability when someone is injured from a transaction undertaken through the platform”. The answer was not clear, she said, because peer-to-peer businesses are intermediaries, not service providers.

In March and April, Airbnb banned two of its users and had to pay compensation to hosts after separate incidents in which rented properties in New York City and Calgary, Canada, were trashed by guests who apparently held sex parties there.

Airbnb takes several steps to verify the identity of its users, including asking them to send scans of their passport or driver’s licence, as well as offering a $1m “host guarantee” in the event of damage.To advance its enquiries, the watchdog is preparing to hold a workshop on the sharing economy in June. It is already soliciting comments from tech companies, the incumbents they are challenging and users.
Ms Lao said it was too early to say what action, if any, the FTC would take once its research was finished. “We’re going in with an open mind. We don’t have a preconception of whether the sharing economy is good or bad.”

She said the FTC had been prompted to examine the sharing economy after traditional taxi operators in several parts of the US — including Washington DC and Chicago — sought to block Uber’s entry into local markets.