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From Antitrust Law Daily, October 2, 2015

FTC chairwoman sees continued agency advocacy on “sharing economy”

By Jeffrey May, J.D.

The FTC is working with regulators to promote competition resulting from the proliferation of new business models for ride sharing, short term lodging rentals, and other services that compete with incumbents subject to regulation, FTC Chairwoman Edith Ramirez told attendees of Fordham Law’s 42nd Annual Conference on International Antitrust Law and Policy today. Ramirez foresees that the agency will continue to focus on advocacy in the “sharing economy.” However, she cautioned that the FTC will remain vigilant and, if appropriate, bring an enforcement action to ensure that local regulators are not stifling competition through unnecessary regulation of the new business models.

With its competition and consumer protection missions, the FTC is well-equipped to address the “very complex” issues raised by the sharing economy, according to Ramirez. The agency recently conducted a workshop on the subject and received more than 2,000 comments. In the sharing economy, peer-to-peer platforms enable buyers and sellers to connect and do business. These new businesses, such as Uber and Lift in the ride-sharing area, compete with industries that have been subject to regulation.

The success of these new business models often depends on networks effects, which can lead to increased concentration, Ramirez said. The platforms have increased in size and scope in recent years. However, this is not necessarily bad for consumers, the chairwoman noted. The new business models may be more responsive to consumer demand than incumbents. Moreover, they might promote a more effective allocation of resources. Ramirez’s fellow commissioner, Maureen K. Ohlhausen, has recently spoken about how the sharing economy can “unlock additional value in assets like automobiles or spare bedrooms that are underutilized.”

“Regulatory frameworks should be flexible to allow new forms of competition,” Ramirez commented. She cautioned against the imposition of legacy regulations on new business models, as the existing regulatory schemes may entrench existing business models. She encouraged regulators to consider the public policy reasons for regulating the new technology at all. While there may be legitimate concerns, such as public safety and consumer privacy, a narrowly-tailored regulatory response was recommended. Regulators also should consider whether existing regulatory frameworks have to be reworked or abandoned, Ramirez suggested.

The FTC staff's comments to the District of Columbia Taxicab Commission in 2013 were noted as an example of the agency's efforts to assist regulators in dealing with new rivals to regulated passenger motor vehicle transportation services. In the comments, the staff questioned regulatory burdens, such as data collection requirements imposed on new services that might raise technical barriers to entry.

Enforcement actions. Ramirez noted that the FTC has in the past challenged efforts by municipalities to eliminate competition in taxicab markets. In the 1980s, the agency brought administrative actions against Minneapolis and New Orleans for combining with taxicab operators to increase fares, limit the number of taxicab licenses, and eliminate competition in violation of Sec. 5 of the FTC Act. The state action doctrine can be an impediment to these types of challenges, the chairwoman said. However, Ramirez noted the agency’s successful challenge to state action immunity claims in the U.S. Supreme Court decision in North Carolina State Board of Dental Examiners v. FTC. In that case, the Court limited the state action immunity doctrine as applied to state professional boards “controlled by active market participants.”

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