The sharing economy has ushered in some absolutely fantastic methods to try and optimise the utilisation of resources
The shared economy ushers in advantages of lowering capital costs, reducing barriers to entry and bringing efficiencies. An ideal example of this is Airbnb, an absolutely brilliant business.
However, problems with this model arise from the absence of a clear regulator or legal rules on various issues: characterisation of the business, responsibilities/liabilities for the service promised and taxation.
Look at, for example, all these mobility solution providers. Are they a platform or a taxi service? Are the drivers, third-party consultants or employees? Are these platforms liable for the actions of their drivers? If not, then who is?
If I am promised a service by these platforms and they provide a network they rely on, ought they not to be liable? How do we tax these companies? How do they handle safety?
These issues have not been placed before an Indian court but they have arisen before multiple courts in other countries and these courts have provided various answers.
An educated guess would be that courts in India would grapple with these issues soon and when they do, the answer they provide may well determine the contours of the sharing economy.
The sharing economy has ushered in some absolutely fantastic methods to try and optimise the utilisation of resources.
As of now, many of these companies have skirted traditional laws but those days may well be over soon.
In fact, I suspect that many traditional companies may have “structured” themselves to avoid the laws and eventually this may come back to haunt them.
More and more governments are looking closely at regulating these companies. An example of an attempt to regulate the sharing economy is the Karnataka On-Demand Taxi Aggregator Rules.
Now, I am not holding up these rules as being perfect, but they do reflect the government’s recognition of the fact that traditional laws are inefficient and that the opportunity to build a business and then misuse it is so large that the absence of regulation is not an answer.
The writer is founder of Spice Route Legal, a law firm focused on private equity and M&A
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