December 28, 2012
Great story from the SJC Mercury News – the local newspaper of Silicon Valley. In this they describe the perils of the so called “Sharing Economy”.
The article has been widely syndicated.
The need to create alternatives is powering a lot of startup fever. There are compelling reasons to create social platforms for sharing. However many of those doing these type of projects are younger folks who have not had to deal with the regular real world infrastructure of regulatory and commercial frameworks that exist – for a good reason.
I have commented frequently that I am most concerned that AirBnB and others in the “Sharing Economy” are in fact breaking the law. I have provided detailed reasons why I believe that multiple laws are being broken. These laws are not just commercial framework laws. They exist in many cases for consumer protection. In many cases they also exist for taxation and recovery of social costs to the community. Thus the justification that it is a new model that can blow up an old one is fine when it is simply a commercial issue. For example Expedia et al when they launched against the conventional travel agencies. Ditto Zillow and its ilk. BUT when you are dealing with not even a loop hole in the law but a real flouting of a specific law, then you must accept the consequences.
The last part of the SJC MN article is telling:
“SideCar CEO Paul claims drivers for his startup “are not actually contractors” but “volunteers.”
It’s not likely, however, that regulatory agencies and the IRS will agree with that definition. ”
And this is the case. If it quacks like a duck and it walks like a duck, chances are that it is a duck. Sidecar’s drivers are not volunteers. That is complete BS.
But the rash of lawsuits is beginning to bite. Both AirBnB and its competitors are rushing out new terms to their “hosts” most of which will be ignored by the people who have been brought up to ignore the legal terms and conditions. These new terms are not changing the basic facts. AirBnB is breaking the law in multiple instances. That laws are not enforced is a problem for all. But just because they are not enforced does not mean they do not exist. Nor that evasion or the 11th Commandment (Thou Shalt Not Get Caught) insulate you as a Startup and Entrepreneur.
You have been warned.