Sometimes "Protecting Legacy Industries" is What Citizens Want

Economic disruption always is a tough problem for regulators and policymakers who must balance "protecting" important legacy industries while still encouraging or at least tolerating the emergence of new industries that pose the threat of attacking those important legacy interests.

And, as a growing backlash against lodging sharing shows, consumers might themselves constitute a new political force hampering unrestrained lodging sharing operations.

The point is that "protecting legacy" industries sometimes accords with citizen and voter preferences, while promoting innovation might actually be opposed by those voters.

A European Union  document on the “collaborative economy” that underpins ride sharing, room sharing shows an effort to allow innovation that might harm the interests of established economic interests, at least in principle.

“The success of collaborative platforms are at times challenging for existing market operators and practices,” the EU policy document says, acknowledging the potential for economic damage to existing businesses. 

At the same time, there is growing resistance to sharing platforms in the housing market, as the platforms are viewed as restricting the availability of housing for local residents, as well as driving up prices. So in this case, the interests of innovating suppliers might run counter to the interests of residents and voters, as well as counter to the challenged legacy providers.

Significantly, the suggested EU framework calls for what some would call a relative “light touch” to regulations. The sharing platforms obviously would prefer that. It is not so clear citizens will be so supportive.

"Light touch regulation" that allows innovators to grow their businesses has not always been the approach in Europe to new developments in the economy that are potentially disruptive. 

All too often, regulators have applied legacy rules to new technologies and business models that have the effect of protecting incumbents and harming challengers. 

Application of legacy common carrier rules to over the top voice or messaging services provide examples. 

But technology-led innovation sometimes is hard to stop. 

“The collaborative economy is part of the digital economy but also overlaps with other economic sectors, mainly those providing services,” a supporting document says. The point is that the new businesses are significant enough in potential size that banning the new business models is deemed unwise.

Collaborative platforms operating in five key sectors of the collaborative economy generated revenues of EUR 3.6 billion in 2015 in the EU.18 In terms of gross revenues flowing to providers and platforms, the EU says. 

it is estimated that collaborative platforms facilitated EUR 28 billion of transactions in 2015 in the EU.

The largest collaborative economy sector by revenue is the peer-to-peer transportation sector, which includes ridesharing and carsharing. 

The peer-to-peer accommodation sector is the largest on the basis of commerce generated. 

Whether the proposals will be adopted is the issue. Indeed, property owners in many localities already face political pressure from residents who argue that lodging sharing directly reduces resident access to affordable housing.