From $17 billion, the valuation of online ride-hailing service Uber jumped to $40 billion in just six months as it gained popularity with consumers across the world. Unfortunately, it now finds itself in the eye of a massive storm for all wrong reasons. And, the destruction to its name, brand image and business model is threatening the very survival of sharing economy firms, who are products of disruptive technologies.
After one of its drivers was accused of committing rape, the Delhi Government banned Uber’s operations along with other Internet firms such as Ola and Taxi for Sure. Uber has been banned in Thailand, and interim orders are also passed against it in Spain and The Netherlands for various other reasons.
These developments, nevertheless, have brought the focus yet again on the future of Internet firms in the evolving globalized village. Internet firms are new generation outfits born out of technology-driven disruptions. And, they transcend physical barriers, and operate in a seamless global environment. Often time, their operational areas don’t fall into any set definition, either by rule or practice. That’s the catch. And, it cuts both ways for them. Countries across the world are still discovering the DNA of sharing economy firms, and the dissection process has still not given them any proper understanding of these firms.
How to regulate them? Where to step in? And, when to get out? This dilemma, often times, has resulted in authorities reacting in a knee-jerk manner to adverse developments surrounding these firms.
The sharing economy is a fledgling concept. Not surprisingly, regulators are unfamiliar with its business model. Questions have naturally been asked if these new-age firms are just out there to make profit by subverting regulations that govern the traditional models which these new- age firms are looking to disrupt.
This uneasy relationship between the Internet firms and regulators is likely to continue. As the Delhi incident has now shown, when things go wrong they can trigger a ripple effect and bring a lot of things under scrutiny.
No doubt, there is a business case for this new-age Internet firms, which are looking to ease the burden of the customer through the use of technology. The onus is on these firms to address the legitimate concerns of user safety, privacy and access.
Also, these firms need to prove that they are just intermediaries, providing a platform for consumers rather than providing services directly. Otherwise, they face a risk of being treated like any traditional firm.
In this instance, what is the provocation for banning Uber? It appears that Uber is banned for violation of radio taxi laws in India. Is it a radio taxi company? Or, is it a technology firm? Where does it fit? There are grey areas in interpretation. That is where the problem lies.
It required a rape incident for the Indian regulator to look into the business model of Uber and the like.
Indeed, it exposes the predicament of regulators. Understanding the digital economy and other apps-based businesses is still a long way to go, it appears.
Also, one needs to clearly define the rights and responsibilities of an aggregator or a platform provider or a market place.
Taking cover under market place model, can the Flipkarts and Ubers just wish away their liability when sale of products/services are facilitated by them? That is the issue here.
Given this backdrop, the nascent sharing economy firms need to be looked into from a holistic angle.
A new approach to laws and rules is very much the need of the hour, especially since these Internet firms operate in a world not defined by physical borders.
And, it also needs a collaborative effort by regulators across the globe so that there is uniformity in outlook towards these sharing economy firms.
