Products Liability in the Sharing Economy, by David Berke*

by Guest Blogger — Monday, Dec. 26, 2016

As 2016 staggers to a close, a regulatory kerfuffle in California underscores two things about the sharing economy. First, the sharing economy – companies that provide digitally intermediated, peer-to-peer rental of goods and purchase of services – is not just a tech-bubble fad, but an increasingly integral and innovative part of the mainstream economy. Second, how to regulate the sharing economy remains unsettled.

 

Over the past several days, Uber introduced (and then was forced to summarily withdraw) autonomous vehicles to its San Francisco ridesharing network. This autonomous vehicle experimentation represents a potential quantum leap in the ride-sharing business model, not to mention American transportation in general. However, the problems that Uber encountered in SF were not technological, but regulatory. Uber and the California DMV had what could be kindly termed a gentlemen’s disagreement over state registration requirements for autonomous vehicles. In response, Arizona Governor Doug Ducey offered to be a more accommodating regulator, and so Uber shipped its self-driving cars to the Grand Canyon State.

 

This episode implicated issues of ex ante regulation, but as I argue in my Note in the most recent issue of the Yale Journal on Regulation, ex post questions of tort law in the sharing economy also need to be addressed. Specifically, the Note considers how products liability currently could and normatively should operate in the sharing economy context. Even though some have pointed to tort law as an optimal regulatory tool for the sharing economy, the Note argues that, under prevailing doctrine, a products liability claim is difficult, if not impossible, to bring. The Note then proposes and defends a doctrinal framework that facilitates products liability claims in the sharing economy, but with protections to avoid stifling of innovation.

 

Specifically, the Note argues that strict products liability should apply to the product leasing activity of established sharing economy companies. Conduct-based negligence should be the standard of liability for truly non-commercial lessors on sharing economy platforms. This framework only assigns strict products liability to “established” sharing economy companies, so strict liability does not attach to early-stage sharing startups. As the Note argues, the rationales for products liability in the sharing economy do not fit such young companies. As for lessors on these sharing platforms, the term “truly non-commercial” excludes lessors who are effectively running a full-on business under the guise of peer-to-peer operation.

 

Like other tort law problems, products liability in the sharing economy will inevitably become a live issue in the future. If we contend with doctrinal problems now, we can avoid the tort-equivalent of regulatory problems like those recent events in California.

 

*J.D. Candidate, Yale Law School Class of 2017; Executive Editor, Yale Journal on Regulation.

 

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