Regulating on-demand economy

On-demand services such as online retail, cab/ride sharing, short-term lodging, and handyman services can help bring in productivity, innovation, quality, and in the process, new jobs and a degree of allocative efficiency to the economy. But recent instances in Pakistans digital economy spotlight the need for a legal framework that can set the stage for transparency and accountability in a growing sector.

(For a background, read this columns view in Kaymu: Under a cloud, published on February 13, and Careem and Uber: Stopped in their tracks? published on February 1)

Some folks make the argument that it will be unwise to push regulations on the promising and growing sector of on-demand economy, when adequate jobs and consumer surplus have not been created in traditional sectors in recent years. So, they argue, let the service providers regulate themselves.

Well, this column is also against burdening business with unnecessary regulations. But we find the argument for self-regulation in the digital space not so convincing. Right now, workers in the sharing economy especially cab drivers, couriers, manual labor, etc are on their own, without job security. Sure, these workers can choose to be available for work when they want. But does that alone absolve the app-based platforms from their responsibilities concerning labor rights and worker safety?

It has been observed that drivers on cab-hailing apps do not have any formal partnership contracts with their app-based platforms, leave alone an employment contract. There is no dispute resolution mechanism, or a process for determining legal liability, if some intended or unintended harm comes to users from anonymous service providers both online and offline.

Then, there is the broader issue of ensuring consumer protection. Consumers have to have rights, not only while making the purchase (e.g. specific product and pricing information, prominent disclosure of terms & conditions, etc.), but they must also be protected after the purchase of goods and services (e.g. efficient facilitation for claims/returns/warranty cases). And it doesnt stop at that. The digital platforms have to ensure that customer data is used ethically and their privacy is respected.

Amid a cacophony of pro-market and pro-business slogans in a gradually rising economy, the Competition Commission of Pakistan (CCP) seems like the lone wolf acting as the custodian of consumer interest. Folks may question the impact of CCPs activism, given that it has been rendered toothless by prolonged legal stays on its major competition decisions. But there is still value in CCP highlighting consumer issues and in its refusing to resign to a meek existence.

After the Punjab governments short-lasting order on Uber/Careem ban few weeks ago, the question that needs to be answered is: Are the likes of Daraz and Kaymu offering a digital service or a retail service? Similarly, are the likes of Uber and Careem offering a digital service or a taxi service?

We feel that such service providers are placed in the middle: They are digital intermediaries. The segments these intermediaries operate in cut across regulatory domains of telecoms (overseen by Ministry of IT & telecoms), payments and duties (overseen by the Ministry of Finance), and domestic trade (Ministry of Commerce).

Reportedly, an e-commerce policy framework is in the works, under the umbrella of an e-commerce policy board headed by ministers of finance, IT and commerce. One hopes that the framework is issued soon, it addresses the issues identified above, and is focused on both consumer protection and growth of the digital space. Whether they are a marketer, a vendor or an intermediary, the digital service providers must engage constructively. It is in their core interest to build and maintain credibility and consumer trust.