Changes in Regulatory Laws over the Sharing Economy Business on the example of Brazil: A Crucial Point for its Feasibility
Luiz Guedes da Luz Neto
Introduction
The sharing economy has been taking center stage this early 21st century, increasing its scale through the Internet, which is available anytime and anywhere through mobile devices. New business models have been created offering services and products in innovative ways to thousands of people and have impacted traditional trading, which initially did not know how to handle the competition.
Because of its innovative features, much business encompassed into the sharing economy has challenged the state regulation, which is not able to frame them. Since they are disruptive, such businesses seem not to match traditional legal categories.
This legal difficulty in framing the new activities of the sharing economy ambiance might create legal onus to innovative companies such that it will take a negative impact on their results and even compromise their presence as competitive businesses as well.
Considering this huge challenge for companies of the sharing economy, the following research question emerges: has the impact caused by state regulation directly affected the feasibility of sharing economy businesses, or is it a secondary and reflexive outcome?
As an answer for the above problem, here is the hypothesis: being drawn upon compelling laws in which the obedience is binding to anyone submitted to the authority of the state upon a particular territory, the economic state regulation has direct impact on the feasibility of activities in the sharing economy, and depending on its shaping, it may even crucially compromise some modalities.
As a first step, a descriptive methodology is applied to analyze the regulation ambiance of the sharing economy in Brazil. Then a prescriptive approach is adopted through the design of a legal framework proposal aimed to generate conditions of feasibility for the business models of the collaborative economy.
This work aims to verify how economic regulation over the sharing economy can directly impact the viability of its business models. The specific objectives are as follows: Conceptual delimitations will be defined on the main categories employed in the study for the economic regulation of the sharing economy; An analysis will be undertaken about the interaction between technology and the collaborative economy as a means for disruptive innovations; The first reactions of the state regulator with regards to the sharing economy will be verified; The need for a regulatory disruption to face reality created by the sharing economy will be ascertained; The state legal regulation as an impact factor on business feasibility will be analyzed.
This theme matters a lot today. Although national legal frames are different requiring case studies, this world phenomenon seems to have practical and real outcomes over the dynamics of the national economies anywhere, since the regulatory challenge would have similar effects. This reasoning justifies the analysis of those businesses’ impact on regulatory economics. Therefore the regulation shaping might be a decisive dimension for the business feasibility. Considering such a dimension on a large scale, it will generate whether a positive or negative impact on the nation’s wealth.
Of the conceptual limits of the categories here applied
In this article, the concepts of “sharing economy” and “collaborative economy” are understood as synonyms being used to describe “an economic model based on the swap of assets, what may or not be remunerated” (LUIZ NETO, 2017, p. 420). The sharing economy reached a range of uses because of information technology, which has erased physical barriers and decreased transactional operation costs as well.
This study takes the term digital platform as “a business model that uses technology to connect people and drive interactions. Or, in trade language, platforms aim to maximize the encounter between demand and supply.”(ROCKCONTENT, 2018).
Regulatory economics shall mean “an institute that would encompass any way of the state agency that may intervene in private choices, being such a role traditionally undertaken through state intervention.” (SADDY, 2014, p. 13).
In this article, the term feasibility means the quality of what is feasible due to the existence of a normative ambiance capable of generating both predictability and business security. For the entrepreneur, norms applied to his business mustn’t be amended to the will of the ruler of the moment, but as well from whom is about to take the task of interpreting the law for administrative and judicial purposes.
Another relevant term here taken is the regulatory frame. This expression describes the set of legal devices such as leis, portarias, decretos, etc. They are the regulatory statute itself establishing the limits within which all the agents (rulers, referees or judges, and economic agents) must play their roles, whether in or over the market.
For all the other terms here applied, the reader should consider the traditional terminology of legal sciences. Therefore, they do not deserve a particular explanation about their meaning, since they are all part of the legal knowledge for whoever is managing any expertise in Law.
Technology in conjunction with the sharing economy as the basis for disruptive innovations
The most valuable asset of the sharing economy is creativity. Creativity is how new services show up while old services would gain a reshaping to be placed on the market. The use of information technology has provided a scale gain; therefore, a reduction in the transaction cost of the sharing economy business. This way, the use of information technology combined with creativity has triggered disruptive products and services which have broken the usual logic until now employed in commerce and business.
The World Wide Web has made it possible to expand the range of business models designed and developed according to the logic of the sharing economy. In times before the Internet, such businesses had a very limited outreach with operation within the radius of the boroughs and cities where they were located.
Following the advent of the popularization of the Internet, there virtually is no geographic limits for new businesses. Besides, technological development allowed the invention of mobile devices connecting users anywhere, any time through Internet access what has considerably amplified possibilities in business.
It is relevant to remember that the sharing economy is not recent, not a twenty-first-century phenomenon, having existed for many years. It is important to recall the sharing of goods among acquaintances when neighbors used to share goods for the mutual benefit of all involved, for instance, in case one would have needed a tool to perform a service. Performing like that, this person did not invest his or her financial capital in acquiring a tool that would be used just once. However, in its traditional shaping, the sharing economy was not reproduced in scale, then companies were not attracted by it.
This traditional behavioral logic has changed with technological evolution in society. These changes have made available devices on a massive scale due to internet access with low cost and satisfactory quality connection to the Web. This possibility of increasing scale combined with low transaction costs has pushed companies and entrepreneurs to create services and products within the logic of the sharing economy.
Concerning the reduction of the transaction cost of the sharing economy business, the spreading of information technology is valuable to portable equipment, as found in a report issued by the Getúlio Vargas Foundation.
Before the spread of information technology for portable equipment, the transaction cost for this type of service was so high that it was not feasible to have a lasting service. It meant that the amount of information to keep people involved in supply and demand was extremely high. (FUNDAÇÃO GETÚLIO VARGAS, 2016).
Technology allowed the emergence of new economic players giving room for small and medium-sized companies to enter the market in conditions of effective competition with large ones already consolidated. Most interestingly, many of these technology-intensive start-ups have taken off large companies their market slice.
An interesting example is fintech, financial start-ups that have entered a highly regulated market to win customers from traditional financial institutions. Using artificial intelligence, they offered lower-cost financial products and services to their customers with more efficiency.
According to the Central Bank of Brazil, BACEN, fintechs are “companies that bring innovations to the financial markets by the intensive use of technology, with the potential to create new business models. They operate via online platforms offering industry-leading innovative digital services.” (BCB, 2019).
Technology-intensive companies have created disruptive services and products that break the traditional mindset of the market, pushing well-established companies to adjust to real challenges newly brought up. Otherwise, they would have become obsolete and consequently gone bankrupt.
Across the globe, thousands of cases demonstrate that companies, whether startups or those already in the market, have intensively used technology to deliver disruptive products and services. They have changed the economic mindset. And this paradigm shift came about with the fruitful conjunction of technology and the sharing economy.
The disruption, as mentioned earlier, has consequences not solely in Economics but at Law studies. This assessment undermines state regulators since a paradigmatic change will push the government to rethink the old shape of regulatory economics. It might be the greatest challenge for law in the twenty-first century.
First reactions from the state regulator to the sharing economy
The sharing economy has modified the paradigm of business models while it uses technology in a change that was not limited to economy and business. They have effects on national legal frames. State regulators are facing new challenges for which they do not have appropriate answers.
Before the first impact of new models of business, regulators reacted trying to ban them. It did not occur just in Brazil but also in the United States of America and Portugal.
An example of a negative reaction from the state regulator occurred in the case of the Uber ride-hailing service. In the city of João Pessoa, Paraiba state, in northeastern Brazil, the starting reaction was the law enactment number 13.105/2015 by the municipal chamber of representatives (CÂMARA MUNICIPAL DE JOÃO PESSOA, 2015). It made unlawful all ways of alternate taxi developed by app or by any digital means in the city of João Pessoa. In Portugal, such a service had a similar reaction from lawmakers discouraging transportation by private vehicles that were not regular taxis. According to Luz Neto:
The Draft Law nº. 50 / XIII at the Council of Ministers recognizes that no law in the legislation encompasses currently the reality created by online platforms of individual transportation. This proposal features a model of regulation through the establishment of a legal regime for the activity of remunerated transportation of individuals in non-chartered vehicles, except for the sharing of non-profit vehicles, and rentals of short-term driverless vehicles with sharing.
Looking at that law bill, it finds that Portugal, as much as Brazil, follows the trend of making it difficult to provide paid private transportation services offered through apps. It required compliance to many demands including a mandatory presentation of a special driving certificate going against the business logic of the sharing economy since it would create a burden on the business. It will likely make it less competitive and more expensive as well for the user. The bound advantage to the innovative service over taxis might disappear.
Later on, the regulator switched to a more appropriate posture changing from the legal ban to allowing the deployment of the ride-hailing services, in spite of some restrictions.
An example that may illustrate this change occurred when the representatives of the municipal chamber of João Pessoa repealed the law enacted in 2015 to issue a new act, the law nº 1.866/2017. In the beginning, they felt squeezed by lobby groups formed by taxi drivers and bus companies. The representatives realized over time that the collaborative economy was about to overcome the balance of power of the agents involved. Now they felt under attack, this time by a countermove from users of the ride-hailing service who wanted them to keep the service on working. Today, the municipal jurisdiction of João Pessoa remains without legal regulation over the service performed through apps.
Given the tension between taxi drivers and app ride-hailing service providers, the federal legislative branch acted proposing a regulation through a bill at the House of Representatives within the parameters of a legal authorization of the service but imposing some limitations. The House of Representatives introduced Bill 5.587-A/2016, which regulated private transportation through apps or any other digital platform. Bill No. 5,587-A/2016 (CÂMARA DOS DEPUTADOS, 2016) amended article 4th of Law No. 12.587/2012 to state as follows:
Art. 4th […]
X – Private remunerated transportation of individual passengers: remunerated service for transportation of passengers, not open to the public, utilizing rental vehicles, for individual or sharing rides exclusively ordered by users previously registered in an app or other communication platforms into a network. (my emphasis).
Bill 5587-A /2016 provided for the additions of arts. 11-A and 11-B to article 3 of Law no. 12,587 of January 3, 2012 (CÂMARA DOS DEPUTATOS, 2016):
Article 11-A. It is for exclusive responsibility of the Municipalities and the Federal District [Brasília] to regulate and oversee the individual private paid passenger transportation service as established at item X of art. 4th of this Law within their territories.
Single paragraph. In the regulation and inspection of the private individual passenger transport service, the Municipalities and the Federal District shall observe the following guidelines, given efficiency, efficacy, safety, and effectiveness in providing the service:
I – effective collection of municipal taxes due to the provision of the service;
II – Requirement to contract Passenger Personal Accident insurance (Acidentes Pessoais a Passageiros, APP) and Compulsory Personal Injury Insurance caused by Motorway Land Vehicles (Danos Pessoais causados por Veículos Automotores de Vias Terrestres, DPVAT);
III – requirement of registration of the driver as an individual contributor of the National Institute of Social Security (Instituto Nacional do Seguro Social, INSS), under the terms of point h of item V of art. 11 of Law No. 8,213 of July 24, 1991.
Art. 11-B. Municipalities that choose to regulate the private paid passenger service provided for in item X of article 4th of this Law, it will only be allowed for drivers who meet the following conditions:
I – have a National Driver’s License in category B or higher that contains the information that he or she performs the remunerated activity;
II – drive a vehicle that meets the maximum age of use of the vehicle and characteristics required by the traffic authority, and the municipal government, and the Federal District;
III – have and carry specific authorization issued by the municipal government or the Federal District of the place where the authorized service is provided;
IV – issue and keep the Vehicle Registration and Licensing Certificate (Certificado de Registro e Licenciamento de Veículo, CRLV) in the Municipality of the provision of the service, mandatorily in its name, as owner, beneficiary or leaseholder, with vehicle registration and license plate of the vehicle in the rental category.
Single paragraph. The exploitation of remunerated services of private individual passenger transport without the fulfillment of the requirements foreseen in this Law and the regulation of the municipal public power and of the Federal District will typify illegal passenger transportation.
Bill 5.587/2016 imposes limits on item IV, article 3rd of the Law 12.587/2012, without blocking the transportation work via apps. However, it makes it difficult for some variations for the use of the ride-hailing service, as shown in another publication of this author (Luz Neto, 2017, p. 427). The amendment would make it impossible for the driver to rent a vehicle for a short period to provide the service since the driver must have his or her name on the CRLV, as read on the item IV mentioned earlier,
The technological disruption experienced in these new businesses directly impacts the law, especially the state entities responsible for regulatory economics:
The emergence of this new market has generated several difficulties, which are more than known. In particular, it has created a difficulty for regulation by the government. It is unclear to some government actors even what would be the correct instance for such regulation (FUNDAÇÃO GETÚLIO VARGAS, 2016).
The doubt about the correct governmental body or agency for regulation is a minor difficulty, which will be overcome by interpreting constitutional norms. The real difficulty lies in the format of regulation over the sector. While providing security for users, a good design would match stability, foreseeability for those offering products and services, at the same time, it would be adaptable to new technologies as they arise. Thus, from a total ban on business activities of the new sector, it moved to a phase of imposing boundaries. Depending on the type and intensity, these limitations have virtually made it impossible for such new business models to compete in the market, which is detrimental to the nation’s wealth.
The common thread between the starting reaction of the regulators and the current one in Brazil is the difficulty of finding a legal frame for the new business. This way, they tried to frame it within the traditional concepts prevailing so far. The sharing economy has spawned regulatory disruption through disruptive innovation. According to Nathan Cortez, technological innovation “disrupt existing regulatory schemes” (CORTEZ, 2014, p.177). It means that the disruptive innovation presented by technology imposes disruption in the regulatory mindset. This reality is already experienced by countries, which are facing the configuration in which these challenges are present. They must rethink how to regulate these phenomena created by the intensive use of technologies, which have economic and legal repercussions.
Regulatory disruption as an outcome of the sharing economy
State regulators must accept the following fact: The technology-intensive use in the sharing economy is a lasting reality and there is no way of returning to the same conditions that prevailed in the twentieth century. That model of business and consumption that shaped western culture, and the law included in it, underwent major transformations from the late twentieth century more intensively in the first decade in the twenty-first century through the creative force embedded in the collaborative economy.
It is no longer necessary to buy a particular consumer good to use it today. For example, in the dominant market mindset over the past century, if a consumer wanted to drive a luxury car, he or she should have been able to buy it. With models generated through the sharing economy, renting a vehicle from whoever is the proprietor or in possession of it is simply sufficient with no rental agreement signed between the consumer and a particular company. The agreement can be signed between the user and whoever is the owner.
With the sharing economy developed through apps, there was the rapprochement between natural and legal persons, whoever owns the consumer good and that who wants to use it. A platform is a tool to connect people. The business of the company that developed the platform is not renting, but to develop the electronic environment, a platform that allows those interested in sharing. It changes the traditional logic of consumption wholly, with relevant impacts on the law and the way of thinking about legal regulation.
The sharing economy businesses use digital platforms through which they can make the connection between the user or consumer and whoever intends to offer the product or service. And these platforms often operate in legal gray zones, in zones of blurring, due to the innovation brought about by the sharing economy, as well stated by Vanessa Katz (2015, p. 1092):
Sharing platforms often operate in legal gray areas, and the regulatory vacuum surrounding these services has raised complex legal questions. Sharing companies erode the distinction between commercial and personal, public and private, and the definition of goods and services.
The sharing economy has annihilated the traditional and sharp distinction in the legal culture between commercial and personal use, between the private and public realms, generating legal uncertainties that have direct repercussions on state legal regulation.
While thinking about regulation along the lines existed so far, the regulator will not be able to present effective and efficient regulatory formats for the new business models that have been developed. It generates negative externalities in legal regulation, which can prevent or hinder the implementation of new services and the supply of new products.
In a seminar held in conjunction with the Municipal Chamber of São Paulo and the Getúlio Vargas Foundation, the participants presented the options regarding the sharing economy that the state regulator has:
There is a pressing issue in this debate: the state – here represented by the São Paulo City Hall and the Municipal Chamber – is required to decide on the legality of ride-hailing online platforms. Possible decisions can be made on a linear spectrum: government can totally ban these platforms, regulate them or release them entirely. (FUNDAÇÃO GETÚLIO VARGAS, 2016).
The options that the government has in the face of the reality created by the sharing economy are very clear. On the one hand, the government may opt for a total ban on these platforms. It was precisely the first reaction adopted by the state regulator, as happened in the municipality of João Pessoa, with Law nº 13.105/2015, which prohibited ride-hailing services offered through an app or any digital platform within the municipal jurisdiction. On the other hand, there was the repeal of the law mentioned above. Today, João Pessoa has no law about regulatory economics concerning to this type of transportation.
Thus at the other extreme, no law means a total liberation. It is the option of not regulating the businesses of the collaborative economy, letting the market regulate itself. Private stakeholders create their rules. At first sight, it may seem like the best option in terms of free trade, as there will be no regulatory strings attached to the creation and implementation of new products or services. However, it is difficult to predict whether there will be effective and free competition between competitors. Some players might form cartels to dominate the market, preventing other competitors from entering and participating through pricing or other instruments that may be used for the same purpose.
Between total prohibition through regulation and the absence of regulation, there is the intermediate option of regulating. Finding a regulatory format that does not block the feasibility of the sharing economy business while providing certainty and predictability for both users and consumers, as well as those offering products and services in the marketplace, is a major challenge.
It seems that the answer will not come from the regulator (e.g., regulatory agencies, the executive or legislative branch). The cases in Brazil have shown highly limiting regulations. Regulators have no incentive for paradigm-shifting, so it is easier to keep making laws and doing administrative acts traditionally. In addition to not taking the regulators out of their comfort zone, this still meets the demands of certain lobby groups that usually contribute to the election campaigns for the executive and legislative powers.
Proposal for new regulatory models seems to come from scholars, through studies, research, and qualified debates to analyze the ideological-free economic phenomenon that will give society plausible and feasible solutions that can contribute to the construction of more improved regulation. These reflections can lead to disruption in regulation, as it is already clear that traditional models of regulation have become obsolete. They no longer generate effective outcomes to create a regulatory environment for allowing the development of new businesses as well as the broadening of the economy to embrace the needs of the business models of the fourth industrial revolution.
According to a lesson taught by Thomas Khun (1997, p.133), from time to time, the paradigms of the scientific world change, requiring a new perception from the scholars about their environment. Scholars must primarily learn to figure out a new form in situations with which they are already familiar. Law is experiencing a new period of crisis, which “is a necessary precondition for the emergence of new theories” (KHUN, 1997, p. 103). The regulatory impasse is today one aspect of this crisis of law.
The university has begun to prize the issue of disruptive innovation, as stated by Cortez, when he writes that “legal scholars have examined disruptive innovation in various disciplines, such as civil procedure, environmental law, and intellectual property” (2014, p. 177-178). However, the study of disruption theory is still in its beginning, needing further investigations and use in the respective areas of knowledge. According to Cortez,
But no one has yet applied disruption theory to the field in which it should be most useful—administrative law. Administrative law scholarship contains a rich, sprawling discourse on how agencies should regulate new markets. These questions, incidentally, can be particularly vexing with categorically novel technologies and business practices. (CORTEZ, 2014, p.178)
That author understands that Administrative Law is a useful field for the application of the theory of regulatory disruption, an area with enormous possibilities of contribution to regulating new markets. He even comments that Administrative Law is the discipline that can benefit most from the application of the theory mentioned above.
Cortez made the point in saying that the theory of regulatory disruption will be most useful to administrative law. This branch of law is the most averse to change, remaining practically in the nineteenth century, sometimes maintaining almost all the dogmas of a bureaucratic public administration inspired by Weberian lines. Not only is Administrative Law the most reluctant to thinking revolutions, but also other branches of public law, such as Constitutional Law, and Economic Law. It seems that they share the same mindset as Administrative Law, and are therefore more difficult to incorporate change.
The theory of regulatory disruption may be the beginning of the response to the new regulatory challenge posed by the sharing economy. It may not be sufficient, as also recognized by Cortez (2014, p. 179). The object of the present article is not the analysis of the regulatory disruption theory however. The mention of this theory is used to reinforce the specific objectives analyzed in this study based on the idea that the regulatory response is necessary for the current horizon of technological innovations because it demands the paradigm shift. It seems that the change needs to be intense, radical, since disruptive innovations are requiring disruption of regulation, given that the traditional model accepted hitherto no longer satisfies.
If factual reality has considerably changed in the field of sharing economics through the use of technologies, the regulatory framework needs to be redesigned as an adaptation to this new reality. Otherwise, instead of creating a regulatory environment conducive to the development, deployment, and provision of new services and products, the law will act as a deterrent to business evolution, generating huge losses for the entire economy.
There is no point in tinkering the existing regulation as it was designed based on past business models. These reforms will not work in the pursuit of optimal regulation that seeks the best results for market players, as it will be replicating insufficient modified models of a past regulatory culture that can no longer legally approach new businesses.
In this way, a real regulatory disruption needs to be met, capable of facing not only the present challenges, which are already huge but also the future ones. A satisfactory regulatory response today should embrace the challenges that will come with the evolution of technology that will increasingly be employed in the sharing economy.
Legal regulation as an impact factor on business sustainability
The State has the monopoly on the use of violence, being the sole legal entity that has the monopoly on physical power, the legitimate violence, i.e., legitimated by law with constitutional competence to issue abstract and effective erga omnis legal norms. Thus, the legal rule issued by the State has the dimension of enforcement, and one may be asked to comply by force with what is predicted in law under the state authority. Therefore, due to coercibility, state regulation is the most used, although there are examples of self-regulation.
Through regulation, state intervention has the power to alter market forces. It can encourage competition between economic actors or might guarantee monopolies to certain groups depending on how the government manages its policy on the sector. It is an instrument with a wide capacity to change the economic balance, whether or not promoting free competition. By interfering with economic dynamics, the State can choose who remains in the market or who is unable to participate in it, whether or not it encourages competition, establishing artificial monopolies, among other negative externalities.
Due to these features above described, the interest groups of the already consolidated economic sectors in the market have called for state regulation as a barrier to the entry of new competitors, especially those that bring innovations to the market. They are against business models that are disrupting the industry in the market.
Considering the direct influence of state legal regulation over the balance among economic agents, it plays an important role in the feasibility of the business because of the competition between players in the market. Offering to the market a minimum of feasible conditions means a state regulation worded to be stable, clear, and able to absorb the concept of new technologies, new products and services designed in the sharing economy within its legal framework.
It is impossible to elaborate and undertake a business model when there is no stability in the rules that compose the state regulatory acquis. Regulation must not be changed at all times by the state, creating an environment in which it is impossible to make a certain degree of predictability for the future. In a scenario without legal certainty, it is not possible to produce medium and long-term productive investments that are so important for the socio-economic development of a country. Hence it is important to assert that stability is a positive outcome of the rules enacted by lawmakers and enforced by the administrative public sector.
In addition to being stable, the regulation needs to be clear, avoiding doubts for the interpreter of the norm. Clear rules tend to generate certainty[1] regarding its normative content, which contributes to lasting effects as it removes the lack of certainty and foreseeability found in an imprecise and obscurely worded norm.
Added to this is the possibility of legal regulation to adapt to technological progress. It is valuable for the society that the regulatory norm may absorb in its frame the concept of new technologies, new products, and services conceived in the sharing economy. This dimension is of fundamental importance since technological advance occurs at a speed that is not compatible with the normative change operated by the State, tending to become outdated in a short time given the faster advance of technology.
An important feature is the possibility of the legal regulation to adapt to technological advances for the sector in question. There is a delay that causes the rule to become outdated in a short time, given the faster pace of technological improvements. The regulatory norm must absorb within its framework the concept of new technologies, new products and services designed in the sharing economy. It is crucial because technological advance occurs at a different speed that is not the same as the state-operated normative change.
This last dimension is the greatest challenge of regulation in the 21st century, in an era in which society will increasingly use technologies. These technologies are reproducible, generating new ones, new products, new services, in a unique evolutionary cycle of its use to respond to the new needs of society and the productive sector. In addition to the emergence of new demands, other ones will be invented to put in market new products and services that did not exist before.
As mentioned above, disruptive technological innovations defy the law, especially those formulated by the governments at different nations and levels into the national state, which still drafts the legislation looking for the most appropriate solution ways. They exercise their regulatory power remaining in the shape of the legal culture of the past without adapting to current challenges. This tension configuration is given to future problems created by new technologies that break with a resistant mindset. Such disruptive technological movement has generated the need into the Law community of scholars of making the same shift as well. If the law is to provide effective answers to the challenges created and imposed by disruptive technologies, it must also make its disruptive evolution. Otherwise, it seems that it will be more a generator of negative externalities than an instrument that can be used to promote the development and socioeconomic sustainability of a nation.
The entire regulatory environment generated from stable, clear assumptions that can adapt to technological developments is a necessary condition for the feasibility of the sharing economy business.
The term feasibility is used here as the quality of what is viable due to the existence of a normative ambiance capable of generating legal certainty but also safety for businesses. The business owner must be assured that the rules that regulate his or her business have a reasonable length of time, that it meets the requirements of an entire generation of trend market development instead of being made to please reluctant groups tied to the values of the past. It must not be altered according to the wishes of the ruler of the moment, as well as there must be certainty regarding law enforcement by administrative agents and judicial interpreters. It requires some consistency according to the jurisprudence on the regulated subject.
The current reality of state legal regulation of the sharing economy is not business-friendly as it is not capable of generating lasting viability for business as it creates huge risks that can result in its total unfeasibility given the way it is designed.
Conclusion
The research problem addressed in this study was as follows: does the economic regulation undertaken by the government have direct impacts on the feasibility of the sharing economy business, or is the impact secondary as a reflective reaction of little relevancy?
The impact of the regulatory environment on the feasibility of business in the collaborative economy was analyzed taking into account the Paraiba state in correlation to the House of Representatives of the Federal Republic of Brazil. This relevant topic today has a direct impact on the economy. State legal regulation can be the differential for the consolidation of a viable sharing economy with wealth generation for the country. Otherwise, it can be the state and lobbying instrument that will stifle initiatives from the sharing economy, alienating the nation from the opportunity of creating innovative products. These products meet the needs of their users and thus generate wealth for the whole society, and bring the benefit of increased tax collection to the public coffers.
It was found that the disruption in the traditional mindset of consumption throughout the twentieth century occurred because of the following changes, the technological innovation, the popularization of the use of the Internet along with the emergence of mass use of computing devices, especially mobile equipment. It allowed people and businesses to be connected anytime and anywhere at a lower cost, thereby lowering the transaction cost and enabling the creation of new business formats that previously would not have been possible due to the high cost of the transaction. Technological innovation, therefore, has opened previously unimaginable possibilities in the business world. The insertion of innovative companies intensified, such as startups in some markets previously dominated by large corporations, such as fintechs in the financial market.
The analysis undertaken confirmed the hypothesis here presented. State economic regulation is a compelling law whose obedience is mandatory to whoever is subject to state authority in a given territory. It has a direct impact on the feasibility of businesses in the sharing economy and, depending on their formatting, may even hinder the development of any business model in the sector.
This research confirmed the hypothesis and was carried out according to the following main objective: verifying how the economic regulation of the sharing economy has directly impacted the feasibility of its business models.
As for the specific objectives, the following were proposed. First off, it established the conceptual delimitation of the main categories employed in the study on the economic regulation of the sharing economy. It analyzed the interaction between technology and the collaborative economy as a substrate for disruptive innovations. It verified the first reactions of the governmental regulator concerning the sector. It asked about the need for a regulatory disruption to face the challenging reality of the sharing economy. The article also analyzed state legal regulation as an impact factor on business feasibility.
From the analyzes carried out throughout here, it gives as lines of a conclusion that all the normative and empirical evidence studied point up to the fact that state legal regulation is a crucial assumption for the feasibility of the business inserted in the sector of this new branch of online services. Indeed, the format of regulation will determine whether the success or failure of the business in the ambiance of the sharing economy.
The efforts of the sectorial entrepreneurs to develop and market new products and services designed for the sharing economy will not succeed if the regulatory environment is highly hostile. This failure will occur under some precise circumstances like if:
- State regulation is designed to create market reserves for certain traditional economic groups;
- There are stipulations of highly restrictive conditions that hinder or even prevent new players from entering the market;
- Criteria are created that burden new business to such an extent that competitive advantage is taken over traditional and established business.
The above conclusions are further enhanced by the need for regulation to be designed and implemented in a stable, clear, and capable way to absorb in its frame the concept of new technologies. It means new products and new services conceived in the ambiance of the sharing economy. Feasibility presupposes stability of the rules and their interpretation over time by the administrative agents involved and the Judiciary, as well as clarity of content, so as not to create hermeneutic problems that affect the legal certainty that the market needs to attract and maintain investments.
The great challenge for any national regulatory law is to draw up a regulation that could be synchronized with the evolvement of technological disruptions. For this, a regulatory disruption is essential, as traditional legal categories no longer provide satisfactory answers to the challenges introduced by the sharing economy.
To this end, the legal professional must understand the dynamics of disruptive business, which can accurately typify new products and services, especially given the difficulty of classification resulting from the emulsification of private and commercial uses in the sharing economy.
Only after the proper classification of products and services will it be possible to think of a regulatory framework that encourages the business environment of the sharing economy, generating the potential of continuous investment in new businesses. This reality will provide a viable long-term environment for businesses. Regarding companies, it is positive for the society that regulation does not hinder the entry of companies of all sizes, from a small startup to a large company.
As for the aspect of the effectiveness of the sharing economy regulation over time, the regulatory model must be able to keep up with technological changes. Given the high capacity for innovation inherent in this model of economy that intensively uses new technologies, it must not lose effectiveness with technological development.
This design is the regulatory challenge that nations need. They must deal with the crisis with careful and well-designed laws and rules. It is necessary to find the appropriate regulatory format that allows the socio-economic development of society because the sharing economy plays an important role in the economy of the country. In addition to bringing innovative products and services to the market that are user-friendly, it can help with other contemporary issues. It can reduce emissions of polluting gases, help in the improvement of traffic in big cities by removing cars from the streets, such as in the case of the car-sharing, among other varied possibilities of the inventions from the human mind.
The worst posture of the public power is to prohibit, through regulation, the businesses of the sharing economy. This initial conduct has been adopted not solely in Brazil but in various parts of the planet and continues to be in others. The absence of state regulation is only better than prohibitive regulation. Still, experience has shown that the market is not as efficient in promoting self-regulation accompanied by the minimization of negative externalities. The alternative that best fits with regulatory feasibility is the establishment of state regulation along the lines set out above, i.e., stable, clear, and capable of absorbing in its frame the concept of new technologies, new products and services conceived in the sharing economy as a whole over time.
It was found that public authorities, solely by their own motivation, seem to have no incentive to change their regulatory mindset. This inertia occurs especially through the dynamics of lobby groups that represent the interests of opposing firms and economic sectors already established in the market. This latter sees the sharing economy as a threat. Thus, in a democratic rule of law, it is imperative that people and companies in the sharing economy also adopt the lobbying strategy to press the lawmakers and governmental sectors in favor of interests politically connected to the majority. Society should seek to influence the elaboration of regulation so that it is thought and elaborated to foster the business of the sharing economy.
The more room for the development of the technology-intensive sharing economy is present in the society, the better for the economy of the country and people. There will be more income generation options as it will boost new business to provide the flowing dynamics of economic and social interactions. The construction of a friendly regulatory framework is crucially important for the feasibility of the business inserted in the sharing economy.
References
BCB. Fintechs. Disponível em: <<https://www.bcb.gov.br/estabilidadefinanceira/fintechs>>. Acesso em: 19 de novembro de 2019.
CÂMARA DOS DEPUTADOS. Projeto de Lei nº5.587-A de 2016. Disponível em: <<http://www.camara.gov.br/proposicoesWeb/fichadetramitacao?idProposicao=2088280>>. Acesso em: 14 de novembro de 2019.
CÂMARA MUNICIPAL DE JOÃO PESSOA. Lei ordinária nº 13.105, de 30 de novembro de 2015. Disponível em: <<http://177.200.32.195:9673/sapl/sapl_documentos/norma_juridica/16865_texto_integral>>. Acesso em 08 de novembro de 2019.
CORTEZ, Nathan. Regulating Disruptive Innovation. In: Berkeley Technology Law Journal, California, vol. 29, Number 1, 2014.
FUNDAÇÃO GETÚLIO VARGAS. Compartilhamento e uso intensivo do viário urbano em São Paulo. Relatório de acompanhamento do seminário realizado em conjunto com a Câmara Municipal de São Paulo. São Paulo: Centro de Estudos de Política e Economia do Setor Público da Fundação Getúlio Vargas, 2016. Disponível em: <<https://bibliotecadigital.fgv.br/dspace/handle/10438/19431>>. Acesso em: 20 novembro 2019.
KATZ, Vanessa. Regulation the sharing economy. Berkely: Berkely Technology Law Journal, 2015.
KHUN, Thomas S. A estrutura das revoluções científicas. 5ª ed. São Paulo: Editora Perspectiva S.A., 1997.
LEGISWEB. Lei nº 1866 de 09/03/2017. Disponível em: <<https://www.legisweb.com.br/legislacao/?id=350888>>. Acesso em: 19 de novembro de 2019.
LUZ NETO, Luiz Guedes da. A Economia Compartilhada e seus Desafios no Brasil. In MIRANDA GONÇALVES, R., VEIGA, F. S., MAGALHÃES, M. M. (Eds.). Derecho, gobernanza e innnovación: Dilemas jurídicos de la contemporaneidad em perspectiva transdisciplinar.Porto : Universidade Portucalense, 2017, ISBN 978-972-9354-46-5. doi: http://dx.doi.org/10.21788/isbn.978-972-9354465
_______2. Agências Reguladoras: uma Promessa não Realizada contra o Risco da Captura. João Pessoa : UFPB, 2016.
_______3. Economia Compartilhada: Aproximações Regulatórias entre Brasil e Portugal. In: O Direito Actual e as Novas Fronteiras Jurídicas no Limiar de uma Nova Era. Porto: Universidade Católica Editora, 2017, ISBN 978-989-8835-33-8
ROCKCONTENT. Plataformas digitais: o que é e como as grandes empresas do mundo utilizam? Disponível em: << https://inteligencia.rockcontent.com/plataformas-digitais/>>. Acesso em: 18 de novembro de 2019.
SADDY, André. Regulação da Prestação Direta de Serviços Públicos: Divergências Decorrentes do Marco Regulatório para o Saneamento Básico. Publicações CEDIPRE Online-17, http://www.cedipre.fd.uc.pt, Coimbra, 2014.
[1] Absolute legal certainty will never be achieved for every norm must be interpreted and the process of interpretation depends on the interpreter. Therefore the interpretive result tends to vary to some degree according to the interpreter. However, as much as the rule is clear, less substantial variation in the content of the norm is found, therefor it increases the degree of security.
P.S.: original published on the website https://www.igi-global.com/chapter/changes-in-regulatory-laws-over-the-sharing-economy-business-on-the-example-of-brazil/258200
P.S2: Neto, Luiz Guedes da Luz. “Changes in Regulatory Laws Over the Sharing Economy Business on the Example of Brazil: A Crucial Point for Its Feasibility.” Strategies for Business Sustainability in a Collaborative Economy, edited by Ramona-Diana Leon, IGI Global, 2020, pp. 1-16. http://doi:10.4018/978-1-7998-4543-0.ch001