​Japanese sharing-economy body looks to self-regulate to head off official intervention

26 May 2017. By Toko Sekiguchi.

As sharing-economy giants such as Uber and Airbnb struggle to make gains in Japan amid regulatory gridlock, smaller, locally-grown platform businesses are opting to create their own rules to pre-empt red tape in a technology-led sector in which legislative time lags can make or break businesses.

Japan's Sharing Economy Association is preparing to introduce a certification system for platform businesses that sets out common rules on issues such as user registration, user rating systems, customer service and information security.

It will be based on a checklist recommended by the Cabinet Secretariat's IT Strategic Headquarters, where panel experts, alongside government officials, have been discussing share economy policies for months. Several of those panel experts — academics, lawyers and leaders of industry — will be conducting hearings on companies who apply for certification and enforcing the rules.

Yohei Ishihara, an attorney for premises rental platform Space Market who is also in charge of the certification program, told MLex that although the system would operate without government interference, its de facto endorsement of the authorities, which came with its adoption of the government's recommended certification model, may make it easier for government agencies to refer newly accredited businesses to local governments.

Ishihara said that was important because the government sees the sharing economy as one of the last hopes for serving ageing villagers in rural locations where public transportation and other basic services are shutting down due to dwindling populations.

In addition, Ishihara said a thumbs-up from the government may give such venture operations much-needed credibility among Japanese consumers, who are generally distrustful of less traditional business models.

"The controversies surrounding Uber and Airbnb cemented the public image that sharing economy platforms are quasi-legal and exist in the grey zone of the law," Ishihara said.

Uber's car services have been restricted to a trial in a rural village and food delivery in downtown Tokyo due to an outcry from the taxi lobby. As for Airbnb, after years of clashing with the hotel industry, it has scored a small victory with the imminent likely passage of a home-sharing bill that caps the number of days owners can sublet at 180 annually.

Not only have slow processes caused Japan to lag leading platform pioneers such as the US and China, but negative portrayals of platform businesses by the media have not done much to endear them to risk-averse Japanese consumers.

According to a white paper on information and communications issued by the Ministry of Internal Affairs and Communications, around 30 percent of Japanese surveyed said they might use ride- or home-sharing services. In the US, the proportion was more than 50 percent, and in China it was over 80 percent.

The reasons given by Japanese respondents for their reluctance to use such services overwhelmingly concerned the possibility of inconsistent customer service in the case of an emergency.

Interest in using share platforms for unspecified items and services ran at 47 percent in China and 26 percent in the US, but just 5 percent in Japan.

The designers of the government-endorsed, industry-led "co-regulation" arrangements hope they will bring the benefits of government approval while allowing timely updates to rules as deemed necessary for changing technologies and unforeseen problems.

Ishihara said there would also be financial benefits for companies enrolling in the program, which will cost each firm between 100,000 and 250,000 yen ($895-$2,238). Certified companies may receive insurance discounts of as much as 60 percent, he said.

Japanese insurers, suffering stagnant growth due to prolonged low interest rates and unfavorable demographic trends, are eyeing the sharing economy as a potential growth sector. In return, platforms are recognizing the importance of anticipating problems and potential harm brought up by a consumer-to-consumer business model.

Ishihara said issues such as enforcement required continuous improvement, and that the system needed to be proven effective and publicized to have the impact that the association was hoping for.

However, Ishihara said, the key was to not get caught up in perfecting the new co-regulation system, but to roll it out and modify it as required.

He said that after the association closed off public comment on the system at the end of May, the first round of companies would be due for certification by the end of July.

	Eliot Gao