The capitalistic economy of the 20th century was characterized by mass production and consumption. Therefore, at the time, consumption was focused on individual material possessions. In the 21st century, a contrasting and distinctive economic concept known as the “sharing economy” emerged. In a sharing economy, people are given the opportunity to use goods without having to directly own them. concept of the sharing economy has spread around the world, resulting in many forms of collaborative consumption, from shared houses to cars to clothing. Korea has not been an exception to the sharing economy boom, but its drawbacks seem to require various institutional changes.
The term “sharing economy” was first used by Professor Lawrence Lessig of Harvard Law School in 2008. According to the Cambridge Dictionary, the sharing economy is an economic system that is based on people sharing possessions and services, either for free or for payment, usually using the internet as a means of organization. The sharing economy has attracted considerable attention as a possible answer to economic recessions and environmental pollution. According to a Korean policy briefing, the size of the sharing economy market is expected to reach 40.2 billion United States (U.S.) dollars in 2022. With the market anticipated to grow to over twice its size in 2017, it is an undeniable fact that the sharing economy is a worldwide trend.
Nonetheless, as with any novel concept, the sharing economy has created issues. On February 6, a man took an elementary school child to his residence using a car from the car-sharing company Socar and committed sexual assault. After the parents reported the child missing, the police tracked the registration number of the car and found it parked in Socar's garage located in Gyeonggi-do. The police then requested Socar to provide the suspect’s personal information. However, Socar rejected the request in the name of protecting its users’ personal information and demanded a warrant. Due to Socar’s failure to immediately provide the suspect's information, the police missed the golden time to prevent the crime.
The incident enraged the public; in response, the Chief Executive Officer (CEO) of Socar, Park Jae-Wook, made a formal apology stating that Socar was responsible for the failure to assist in a criminal investigation and that it will take a zero-tolerance policy towards its vehicles being used for criminal activity. The case of Socar is one example demonstrating the lack of legal regulations for the sharing economy in Korea. The reality is, there are multiple issues that need to be addressed.
The Present State of the Sharing Economy in Korea
According to an interview with Seoul Economy Daily, Jo San-Ku, President of the Sharing Economy Association of Korea (SEAK), stated, “With the increasing significance of the sharing economy, it has become possible to estimate a nation’s economic standards based on its sharing economy level.” Until 2019, four companies among the five most-valued start-up companies in the world were sharing economy companies. While the market size of the worldwide sharing economy increases daily, Korean sharing economy companies are stuck in a mess of regulations.
According to the Foreigner’s Urban Homestay Act introduced in 2011, shared accommodation services provided by shared accommodation companies — represented by Airbnb, the most widespread online marketplace platform for lodging — are legal for foreigners but illegal for Korean citizens to utilize those non-authorized lodgings. Unlike Korean companies, which have to follow domestic laws, foreign companies such as Airbnb have been able to grow remarkably in the domestic market.
Despite the prospect of the sharing economy one day accounting for half of the accommodation market, domestic companies fail to make up even a small proportion of Korea’s sharing economy accommodation market. While Koreans have already embraced the sharing economy as part of 21st-century living, Korea’s regulations are still stuck in the 20th century — before the emergence of the sharing economy. Conflict between traditional business operators and new operators has reinforced the regulations that hold back the sharing economy.
While many other countries have a legal foundation that encourages the sharing economy, the Korean government has not yet established a legal basis for the foundation of sharing economy companies. Professor Park Sangin (Graduate School of Public Administration, Seoul National University) argued that “While the government regarded the absence of a legal basis or restriction for the sharing economy to be an effective way to invigorate the sharing economy market, the absence of a legal basis has aggravated social controversy regarding unfair competition, consumer protection, and the exploitation of labor.”
Legal Regulations Needed
TADA, a fast-growing Korean service that connects consumers needing a ride with those willing to provide one, was restricted from operating due to pushback from taxi drivers and the resulting “Anti-TADA Act,” which was proposed on October 24, 2019. As the case of TADA shows, disapproval from existing competitors can snuff out a growing sharing economy company. In order to pursue true innovation while minimizing conflicts of interest, Professor Park insisted that the establishment of law and regulations based on fundamental rules is necessary.
Other countries have already experienced Korea’s current situation. The licensing of car-sharing companies such as Uber and Lyft has been restricted in New York of the United States (U.S.) to pacify resistance from traditional taxi drivers. In France, the drivers of car-sharing companies must return to their own garage, unlike taxi drivers. Through those methods, other foreign countries have endeavored to intervene in conflicts of interest between traditional operators and sharing economy companies. In other words, many other countries have sought compromise with traditional operators after allowing the sharing economy companies to expand their market size.
Regarding the situation in overseas countries, Professor Park stated that a legislative response that addresses the blind spots in regulating the sharing economy is needed for genuine innovation to be achieved. Therefore, rather than incrementally expanding the existing legal system to accommodate the sharing economy, a specific legal system should be newly established to consider the exceptional case of the sharing economy. To allow for the expansion of the sharing economy in the future, the introduction of a legal foundation is crucial.
