Forefront by TSMP: The Sharing Economy – Too Smart Not To Share

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Forefront by TSMP

2 November 2015

The Sharing Economy – Too Smart Not To Share

The sharing economy has enormous potential to optimise a society’s resources and to change the way people relate to each other, but it is not without its risks and detractors. What is the legal position in Singapore?

By Stefanie Yuen Thio, Gordon Lim

Cover photo credit: Unsplash.com

It’s 20 minutes to nine and you are running late for a meeting. Five cabs have sped by, all proclaiming ‘HIRED’ in angry red capital letters of rejection. You fire up the Uber app on your smartphone and, five minutes later, are on your way in a friendly stranger’s Camry.

Uber and other businesses such as AirBnB, iCarsClub (“Rent your neighbour’s car”), and Bonappetour (“Dine at homes around the world”) are part of the sharing economy. Essentially, these companies provide a platform for information to be shared, matching demand with supply at a C-to-C level. This enables individuals to monetize their unutilized time, skills and/or assets, and offers consumers interesting (and often cheaper) alternatives to the traditional options. The sharing economy has enormous potential to optimise a society’s resources and to change the way people relate to each other, but it is not without its risks and detractors.

Dare to Share?

There have been nightmares galore reported by users of the sharing economy. Two Stockholm women apparently handed over the keys to their AirBnB-listed apartment only to have their flat used as a brothel. They found out when police raided the place and arrested the prostitutes who were plying their trade. Sexual assaults have also been reported in ride-sharing services.

Interest groups have also taken up the cudgels to defend their turf: Uber has been banned in a number of countries including Germany, France, Thailand and Malaysia. Certain apartments listed on AirBnB are illegal in Barcelona and some US cities. While many of these prohibitions are the result of successful regulatory challenges mounted by taxi unions and hoteliers, media reports of drivers and homeowners abusing their customers’ trust (including in the form of sexual assaults) suggest that the calls for tighter regulation may have merit.

What is the legal position in Singapore?

Ride-Sharing

Singapore’s Land Transport Authority issued a statement in June 2015 suggesting that services such as UberX and Grabcar (where drivers ferry pre-booked passengers using their own vehicles) might be considered ‘chauffeured vehicle services’ and thus legal, as long as drivers are appropriately covered by insurance, do not ply the roads for hire and do not pick up passengers at taxi stands. However the authority has also stated that it is considering requiring drivers of chauffeured vehicles to obtain Taxi Driver’s Vocational Licenses (which taxi drivers are required to hold).

On his private blog as recently as in October this year, Minister for Transport Mr Khaw Boon Wan wrote that he has been “intrigued by the emerging sharing economy”, and that “we must not resist new innovations and new business models.” However, he also cautioned that “we must always be fair to players, whether incumbent or insurgents, and strike a balanced approach.”

As things stand, the relative ease with which private car drivers can offer their services for hire means that commuters have more transport options, but lighter regulatory oversight may also mean more passenger safety concerns. Uber requires that drivers who register through its service have a commercial vehicle licence and the attendant insurance.

Accommodation

Sharing of homes is a less welcome prospect in Singapore. Here, renting your apartment to tourists is prohibited. Owners of Housing Development Board (HDB) flats must obtain the HDB’s permission before subletting their flats (or parts thereof), and short-term stays of less than six months are not permitted. Similarly, the Urban Redevelopment Authority (URA) does not permit owners of private residential properties to rent out their properties (or rooms in their properties) for periods of less than six months (however on 14 October, it was reported in the press that AirBnB is in discussions with the URA to establish clearer guidelines on short-term leasing).

The rationale for this rule is that short-term tourist rentals would lead to high occupier turnover and high human traffic, which would be disruptive to neighbours and pose security concerns.

And these fears are certainly valid if the horror stories can be believed. In August this year, the New York Times reported that a 19-year old American male had claimed to have been sexually assaulted by his transsexual Airbnb host in a fourth-floor flat in Spain. The host, who was born a male but lives as a female, had allegedly locked him in the Madrid apartment and was begging him to engage in a sexual act or face consequences.

Singapore homeowners renting out their properties on short-term leases to tourists and students are at risk of regulatory sanctions (HDB homeowners’ flats may be confiscated). Short-term lessors and lessees may have difficulty pursuing contractual claims against each other in Court, as short-term lease agreements may potentially be illegal and therefore unenforceable.

Peer-to-peer Dining

These days you can pay to eat in someone’s house. And if you have a home, you may be tempted to make a few extra dollars by hosting strangers to a meal in your house. These dinners are touted on social dining websites as cosy “local experiences” but are essentially commercial transactions carried out in a home-turned-restaurant for the evening.

For food safety reasons, all food establishments in Singapore must be licensed, and subject to scrutiny by the National Environment Agency (NEA). “Food establishment” is defined broadly under the Sale of Food Act (i.e. any place used for the sale, manufacture, preparation or storage for sale of food intended for human consumption), and operating a food establishment without a license is a criminal offence.

That said, the NEA permits the small-scale sale of food under the HDB/URA home-based small scale business scheme, where small amounts of food can be prepared at home and sold without a food establishment license. The caveat is that such food can only be distributed to friends and family. It is hard to envision how a stranger, who made a reservation on a website followed by a PayPal payment for a meal in your “home restaurant”, could be considered “friends and family”. And surely concerns about food safety are just as relevant here.

Closing Thoughts

The argument for allowing these “sharing economy” transactions dates from the time of Adam.

Adam Smith, that is.

The free market efficiently matches buyers and sellers; regulation adds layers of complexity and increases costs. New economy proponents also point to service providers’ and customers’ ability to give each other ratings, meaning that such businesses are self-policing. Uber, for example, requires customers to rate their prior experiences before making a new booking.

However, rating systems may not be good enough. Customers only give ratings when the transaction is over; in the meantime they are (often entirely) at the mercy of their drivers or hosts. This problem is particularly serious where drivers and hosts abuse their position and exploit or assault customers. In addition, the various sharing platforms (somewhat ironically) do not share rating information with one another, which means information on a vendor with a poor track record would not be known to users of another website. It is important to also remember that these platforms are essentially information aggregators; they do not warrant the safety or quality of the product. The customer is contracting directly with the service provider, and will have to seek recourse against that party.

Policy-makers would also have to juggle the rights of the public. A perfectly satisfactory transaction between the parties may have negative effects on others. For example, operating a thriving AirBnB apartment may make your neighbours feel uneasy due to the high volume of strangers coming and going.

For now, these are issues only state-imposed rules and regulations can address. These have to be carefully calibrated to protect the rights of consumers and the public at large.

The sharing economy has the potential to revolutionize commerce and society. The Prime Minister has very publicly stated his support for the development of Singapore’s Smart Nation Programme, harnessing infocomm technology, networks and data. This willingness of our nation’s leaders to embrace change is encouraging.

Companies like Uber and AirBnB have been called the great “disruptors” of our age, and their advent has been uncomfortable for traditional businesses. But if Singapore aims to stay on the forefront of global cutting edge development, we must embrace and adapt to what will surely be the “new normal” of tomorrow.