Swopping views on how to deal with sharing economy

Photo: archive of Uber

The sharing economy is one of those vogue terms that can perhaps best be explained by some of the concepts which have been made possible by the Internet, digital applications, and credit cards. Crowd funding is one. Others are flat and house renting applications such as Airbnb or Booking, or perhaps one of the most famous of all, the car renting and delivery service, Uber. But they have often clashed with tradition sectors of the economy, like hotels and taxi firms, and authorities are looking on and wondering whether to regulate.

Photo: archive of Uber
This week in Prague the country’s Chamber of Commerce hosted a round table looking at the battle between traditional market players and the newcomers, the applications that often put the many in touch with the even more numerous customers or consumers.

Obviously, there has been quite a lot of friction between the established firms, who often complain that they are burdened with a lot of local rules and regulations, and the newcomers, who have in many cases slipped under the radar of the regulators.

And the moderator at the round table was not playing down his hand when he described this as a hot topic and not one for the Czech cucumber season. Some countries, such as Spain and Denmark, have heeded the pleas and the established companies and sought to limit the impact of the new players. Some, such as Britain, are taking a hands off approach. And that’s largely been the attitude in the Czech Republic as well. though government officials admit that they are still trying to get to grips with the evolving concept and some legislation down the line cannot be ruled out.

To give an idea of the scale of this business, it’s estimated that almost 10,000 Czech flats or rooms, mostly in Prague, are being offered on the platform Airbnb with the occupancy rate averaging in June at around 73 percent.

Take, perhaps, another of the main platforms in this market worldwide, Uber. The director of Central European operations is Mateusz Litewski and he described where the company now is in the Czech Republic:

“I think Prague is the city where the highest number of tourists are using the service.”

“At present we have something close to 80,000 passenger accounts, rider accounts, since we launched two years ago. Now we are currently only operating in Prague in the Czech Republic, unlike in other countries. In Poland, for example, we are in seven cities. In Prague we see tremendous growth and see that both Prague citizens and tourists alike are really liking the service and are using it regularly. I think Prague is the city where the highest number of tourists are using the service just because it’s the same app in the 480 cities where we operate. Whether you come in from London, New York, or from New Dehli, you have Uber on your phone and you land at Václav Havel airport and the first thing you do is check whether you can get an Uber.”

And as is appropriate for an app whose basic success is as a new means of bringing offer and demand together, Prague has taken off on the former side as well with many drivers signing up to earn a bit of extra money. By the way, Uber’s earnings represent around a quarter of the total fee. Mateusz Litewski again:

Mateusz Litewski, photo: archive of Mateusz Litewski
“We see continued growth, both in the Uber Black, the more luxury product, and in Uber pool, the more affordable ride sharing solution. We see that Prague citizens really like us and we see that the drivers, by large, are using Uber as an additional source of income. I think this is the market with the highest share of part-time drivers. The fact that our platform, our app, is completely flexible. There is no fixed cost, there is no monthly requirement of how many hours you have to put in or maximum and minimum number of hours. A lot of people, they will finish their job and sign on for two hours, do a few trips, and then end their day.”

But the arrival of the new apps has not been without controversy. Prague taxi drivers in one instance blocked the main motorway though the centre of the capital in protest at rival Uber drivers saying they were undercutting their services. The tax drivers say they have to wait several months to be licensed and have to meet many conditions and pass tests set by Prague City Hall. The Uber drivers can just set up without registration or qualifications. But at Tuesday’s round table representatives of Prague taxi drivers said they would welcome being relieved of much of their regulation rather than going the other way and seeking for the existing rules to be imposed on everyone else. That was a change in tack highlighted by Uber’s Litewski:

“I think that there is a lot of mutual interest among new players like Uber and other apps and the traditional players to deregulate and level the playing field.”

“Uber is a business model that was inconceivable 10 years ago, it is something brand new. And we see that a lot of the regulation is tailored for a pre-Smart phone era, if you will. So we continue to be open for debate and constructive dialogue with authorities about ways to modernize. The encouraging thing is that we heard in this round table today that they traditional market players, the taxi companies, are interested in making their lives easier.

With the progress of new technologies, cashless payments, GPS tracking, a lot of the old restrictions no longer serve their purpose because technology does it better. So I think that there is a lot of mutual interest among new players like Uber and other apps and the traditional players to deregulate and level the playing field that is focused on the consumer and delivering to the consumer the best service that he wants.”

But the regulation lite approach has not been the rule across the whole of Central Europe. In fact, Uber has withdrawn its offer in Hungary because of a clampdown by the authorities in Budapest which made it just about impossible to keep the drivers on the road.

“In Poland, the Czech Republic, and Hungary, we were launched just about the same time, the second half of 2014. In Poland the business has been growing, we are active in seven cities and doing tens of thousands of trips every month. In Prague we are growing and in Budapest we were growing as well. However, the regulatory approach has been very restrictive and we have decided at present to suspend our operations in Budapest, hoping to continue the dialogue about private hire transportation.”

Tomáš Prouza, photo: archive of Czech Government
And some degree of regulation might be on the cards in the Czech Republic as well. Secretary of State of European Affairs, Tomáš Prouza, who is also charged with piloting the government’s digital agenda, said that the current Czech legal environment for the sharing economy needed to be evaluated as well as the consumer protection offered and whether the new players are paying their fair share of tax or other payments. While users rank and comment on the services offers by their part-time drivers or hosts, there is some suspicion that these rankings and comments can be manipulated by some to improve their standing and attractiveness. This is an extract of what Mr. Prouza had to say:

“I don’t have a revolutionary presentation today of what we will do. I think we are at the start of the discussion and have to establish two things. The first is that we must better understand the economic character of the shared economy. We all have in our minds the big successful brands. However, a lot of the market is really made up of small sized initiatives of a few individuals. So we have to map out how big this economy is and how we can help it develop. And the second thing is that we have to look at how the Czech legal code deals not just with the shared economy but with the digital economy as a whole.”

“We must better understand the economic character of the shared economy.”

The legal analysis should be delivered in the third quarter of this year. More generally, the European Commission in Brussels has already published a consultation paper outlining how it would like to map out its approach to the new economy. In a preliminary analysis it sees the new services developing into a market of around 150-160 billion euros a year, that’s around the size of the total Czech economy.

For the most part Brussels only wants to regulate as a final resort if abuses threaten consumers or competition. But it is also looking at discouraging individual states from coming up with too many rules on the new services for fear that a patchwork of new national rules result which suffocate the new services or prevent them developing with a real European dimension.