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Policies and Compliance Necessary to Make MidMarket Business Thrive

Midmarket companies like Airbnb are poised for growth, but not putting policies in place to protect customers and its business could stall expansion for good.

The sharing economy has spawned a host of midmarket companies. Among them: Task Rabbit, Lyft, Uber, and Airbnb. Yet as asset owners (like a skilled secretary or the owner of an apartment in a tourist destination) can capitalize on the digital platforms that make their skills or goods available to a variety of consumers, the businesses behind them are still catching up to the necessity of creating policies to protect themselves and their users.

Lyft –which just opened its Lyft Line carpooling for business in Los Angeles after months of regulatory challenges–  is currently fighting a battle to change the law in California. The California Public Utilities Commission states that it’s illegal for car services to charge individual fares to passengers when multiple people are being transported in the same car.

Airbnb, the popular apartment share booking platform, has been embroiled in similar legality issues in New York and San Francisco. In New York City, 828 inspections yielded 2,239 violations for short term rentals in 2012. Fines for repeat offenders went up to a maximum of $25,000 last year.

The challenge that comes along with such disruptive business practices is that companies are forced to be reactive when problems arise. When a 6-year-old girl was run over and killed by an UberX driver on New Year’s Eve in San Francisco, Uber was forced to take note of the limits of its insurance policies.

Uber’s drivers are independent contractors who own and operate their own vehicles. Which might have allowed Uber to wash its hands of responsibility in the girl’s death. Even though the company said that the driver was not on duty when the accident happened, the girl’s attorney said he was signed on to the Uber app, according to the San Francisco Business Times. Three months after the girl’s death, Uber added $1 million in coverage for uninsured or underinsured drivers, as well as insurance for driver liability up to $100,000 for drivers between pickups. When Lyft launched in Cleveland in April Ohio Lieutenant Governor and insurance director Mary Taylor issued a consumer alert that advised potential users of Uber or Lyft services to be aware of the insurance implications of their rides.

Airbnb could find itself in a similar reactive spot. The platform’s policy for Responsible Hosting doesn’t address the privacy of guests at all, according to a report by BetaBeat. The investigation was prompted by the news that the owner of a hostel in New Zealand was charged with assaulting guests and filming them without consent. Betabeat spoke to Airbnb’s Jakob Kerr about the potential for this kind of violation and what the company was doing to ensure the protection and privacy of its guests.

We have a zero tolerance policy and if we were made aware of something like this happening in a listing, we would immediately remove the host from Airbnb. All hosts must certify they will follow their local rules and regulations before listing their space. Additionally, we expect all hosts to provide and safe and comfortable environment, and we have a hosting responsibilities page with more information and reminders.

In other words, the responsibility is squarely on the shoulders of the host and that person’s knowledge (or lack thereof) of local leasing laws. The problem, as the report pointed out, is that recording a conversation without the consent of both parties is definitely illegal, but video recording is held to a different standard (think: nanny cams are within parental rights).   Though disruptive business practices do have the power to transform the economy as we know it, taking a page from the compliance playbooks of established companies might be worth a second thought.

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