Biggest threats to the on-demand economy in 2016

Biggest threats to the on-demand economy in 2016
© Getty Images

2015 was the year that federal regulators, lawmakers, and presidential candidates finally took close notice of the growing on-demand economy, scrutiny that will only intensify in the new year.

A growing number of companies are making money by delivering services to customers at just the tap of a smartphone screen, raising new questions about the way they are changing the economy.

ADVERTISEMENT
The industry is no stranger to policy fights, with Uber perpetually battling taxi regulators and drivers, and Airbnb at loggerheads with established hoteliers, but the companies face challenges ahead.

Here’s your cheat sheet to the threats the on-demand economy faces in 2016:

 

Class-action lawsuits:

Uber and other on-demand companies have faced criticism for building a workforce of independent contractors, who don’t get the benefits and protections afforded to many employees. Now those companies are being sued over those labor practices.

A group of Uber drivers won an early victory when a federal judge in California gave them class-action status, allowing them to go forward with a lawsuit.

The judge, Edward M. Chen, has since expanded the number of drivers who would be covered by a judgment in the case — but a recent ruling could put that on hold.

A judgment in favor of the drivers could have a real effect on Uber. It claims that its drivers have flexibility and control over their hours and other details of their work, making them contractors. A ruling against Uber in the class action case would be a significant rebuke of that idea.

The case is currently scheduled to go before a jury next June. Lyft, Uber’s main ride-hail service rival, is facing a similar lawsuit.

The Labor Department is also expected to become more involved in issues over on-demand economy workers, with officials planning to visit Silicon Valley next year for talks.

 

Federal guidelines:

The first federal regulator to weigh in on the on-demand economy is likely to be the Federal Trade Commission.

The agency is expected to issue a report touching on the consumer protection and competition questions raised by the rise of on-demand services. Because labor issues are outside of the agency’s purview, they are not expected to address the contractor-versus-employee battle.

But it also seems unlikely that their guidelines will be particularly harsh. Edith Ramirez, the commission’s chairwoman, said recently that the on-demand economy might need “targeted regulatory measures” but shouldn’t be over-regulated.

Still, the commission’s report will represent the first federal guidepost on how on-demand economy companies should act in the marketplace.

They aren’t binding, but FTC guidance gives new industries a sense of what they have to do to be treated as a good actor by the enforcement agency.

The report will be based, in part, on comments submitted as part of a June workshop on the on-demand economy — which included companies, outside experts and users both critical and supportive of the services.

 

Campaign trail scrutiny:

The companies — particularly those like Uber that have become household names — risk becoming political footballs in the 2016 presidential election.

Earlier this year, it seemed as if every presidential candidate wanted to show their support for the innovation symbolized by Uber and others.

Democratic front-runner Hillary ClintonHillary Rodham ClintonFederal, state courts at odds on Michigan recount Denzel Washington blasts media for selling 'BS' Trump opening act questions Clinton's popular vote lead MORE in July said that although the companies were “raising hard questions about workplace protection” they were also “creating exciting opportunities and unleashing innovation.”

Around the same time, former Florida Gov. Jeb Bush’s (R) presidential campaign organized a photo-op around an Uber ride.

Republicans argue that the on-demand economy is better left unregulated. Sen. Marco RubioMarco RubioHaley to meet with senators during Washington trip Senate GOP to Obama: Stop issuing new rules Juan Williams: McConnell won big by blocking Obama MORE (R-Fla.), another 2016 contender, titled a chapter “Making America Safe For Uber” in his recent book.

Democrats praise the services but are more willing to entertain the idea of more protections for workers.

Though the chatter ultimately died down, Uber has proven a potent symbol for both Silicon Valley innovation and changing conditions for workers.

On-demand economy firms could be in the spotlight in a presidential election where income inequality is a hot topic.

 

State and global regulations:

The most aggressive challenges to on-demand businesses have always come from state and municipal regulators tasked with overseeing the industries, like transportation and lodging, that the platforms claim to disrupt.

Those battles are likely to continue in the next year, as the companies look to expand into new markets.

The policy debates come with political brawls.

Uber famously adopted a scorched-earth strategy this year when New York City Mayor Bill de Blasio (D) came out in support of legislation that would have curtailed the company’s growth in a pivotal market. The mayor’s administration ultimately backed away from the measure.

Airbnb also recently hired veteran political operative Chris Lehane and says it plans to form clubs around the country to rally its supporters.

As the companies — particularly Uber — look to expand rapidly abroad, they could also face challenges from regulatory agencies, lawmakers and incumbent players in other countries.