Regulating the Sharing Economy: Fostering Innovation and Safety

Steven Groschen, MJLST Managing Editor

The sharing economy is a marketplace for individuals to exchange goods and services directly with one another. In the past, sharing economy participants, whom wished to lend their property and time directly to others, had the challenge of finding a way to connect with individuals seeking to borrow property and services. The internet and other modern communication systems have provided opportunities for overcoming this barrier. Consequently, the cost of matching a particular individual’s demand with another individual’s supply (i.e. transaction costs) within the sharing economy has been greatly reduced. As a result, sharing is quickly becoming a cost-effective and environmentally friendly option for ordinary consumers.

Not everyone is fond of the sharing economy movement. Long-established institutions and industries are experiencing increased competition by competitors whom are not always required to play by the same rules. For instance, the increasingly popular ride sharing system, Uber, has received scrutiny from players in the current taxi system. They argue that Uber is unfairly competing because it is not subject to the same regulations as traditional taxi drivers.

Regulators are challenged to find the optimal method of regulating the emerging sharing economy. Enacting regulations that are too strict will impede the innovation generated by sharing economy startup companies. On the other hand, regulations that are too lenient may threaten another core value: protecting the safety of consumers. Unregulated and non-centrally controlled systems of transportation run the risk of having a wide variance in outcomes. One Uber taxi driver may be perfectly safe, whereas another creates a hazard on the streets. Some are concerned there should be more government oversight and regulation addressing these risky drivers.

Professor Sofia Ranchordás suggests “establishing, broader, principle-based regulation[s]” is the answer to the legal problems created by the sharing economy. The use of principles rather than specific regulations acknowledges that technology is constantly changing. Broad regulations are designed to be more adaptable to changes in technology. As a result, this method of regulation protects two of the important goals of the sharing economy. First, bottom-up innovation is not stifled by rigid regulations that prohibit experimentation. Startup companies in the sharing economy are free to experiment so long as they stay within the boundaries of the broad principles. Second, there is more flexibility to create regulations addressing concerns for safety and general consumer protection. Regulators are not restricted to a narrow definition of what is “safe,” thus technology changes affecting safety are more easily managed.


Awaiting an Important Decision on the Gulf of New Mexico “Dead Zone” Lawsuit

Allison Kvien, MJLST Managing Editor

In 2013, the U.S. Environmental Protection Agency was ordered to set limits on nitrogen and phosphorous levels in U.S. waterways. These nutrients contribute to the loss of oxygen and cause what is called hypoxia to occur in the water, killing marine life. This year, the “dead zone” in the Gulf is larger than Connecticut and Rhode Island combined. While this is larger than average, it is not a record. The oxygen levels are so low in this zone that it was reported that even starfish are suffocating.

An appeals court recently decided that the district court should determine, based on the Clean Water Act (CWA), whether the EPA gave adequate reasons for its refusal to set limits on the nutrients in U.S. waterways. Environmental groups, such as the NRDC, are optimistic that the original ruling requiring the EPA to set nutrient limits will be reaffirmed by the district court.

This CWA ruling is analogous to the 2007 Supreme Court Clean Air Act (CAA) case, Massachusetts v. EPA, which ruled that the EPA must have good reasons, based on the CAA, for refusing to regulate greenhouse gases (GHGs). The Supreme Court found that the EPA’s rationale for not regulating GHGs was inadequate and required the EPA to come back with a reasonable basis for not regulating GHGs in order to avoid being forced to regulate GHGs.

If the outcome of this CWA lawsuit is that the EPA is required to regulate nutrients causing the enormous hypoxia zone, the EPA will embark on a hugely collaborative journey to set appropriate limits for these nutrients all over the country. For instance, the NRDC reports that Chicago, over one thousand miles away from the Gulf, was found to be the single largest contributor to the “dead zone” in the Gulf.


Bitcoin Regulation: Lifeline or Kiss of Death?

Ethan Mobley, MJLST Articles Editor

Bitcoin’s ever-increasing popularity has sparked fierce debate over the extent to which the alternative currency should be regulated, if at all. Bitcoin, a “cryptocurrency,” is the leading digital currency used today. The cryptocurrency can be used to buy and sell goods online or in traditional brick-and-mortar stores but is also used for speculative currency trading. As Bitcoin is adopted by more and more users, numerous businesses have sprouted geared toward facilitating Bitcoin transactions. One such company is Coinbase, which serves as a currency exchange allowing users to buy and sell Bitcoin (XBT) for USD and other currencies. Coinbase also acts as a “wallet” for Bitcoin, allowing users purchase Bitcoin at the market exchange rate, store that Bitcoin on their phone, and then pay for items using their phone’s “wallet.”

Bitcoin proponents claim the cryptocurrency is superior to traditional fiat for several reasons: 1) Bitcoin supply is self-regulating, and hence not susceptible to changes in government policy; 2) Bitcoin eliminates transaction costs between the buyer and seller of goods, which is especially helpful for small merchants; and 3) buyers using Bitcoin are not vulnerable to identity theft if the merchant incurs a security breach. Bitcoin opponents argue the cryptocurrency is problematic because it can be used for illicit purposes (e.g. transactions on Silk Road) while protecting its users due to relative transaction anonymity. Whatever the advantages and disadvantages, Bitcoin’s success is ultimately dependent upon wide-spread use by buyers and sellers and government regulation that permits free-use of the currency.

Recently, California legislators introduced a bill to regulate digital currencies. California isn’t the first state to consider such legislation, but it is arguably the most important considering California is home to more Bitcoin users than any other US state. Specifically, California AB-1326 would establish a regulatory framework for entities engaged in the “virtual currency business,” which would impose licensure and fee requirements on those entities. As defined, a “virtual currency business” is one that maintains “full custody or control of virtual currency in this state on behalf of others.” Specifically excluded from the bill are entities primarily engaged in buying and selling goods or services. Thus AB-1236 would not impose any burden on retailers–only quasi-banking entities like Coinbase would be subject to the regulation. Such regulation would ideally reduce Bitcoin market risk and volatility, thereby making the cryptocurrency a more viable alternative to traditional fiat. Nevertheless, Bitcoin advocacy groups disagree over whether the bill will ultimately encourage or inhibit widespread adoption of Bitcoin. After all, Bitcoin’s government-independence is one of its most beloved features. Agree or disagree with policies advanced by AB-1236, but one thing is clear—Bitcoin’s ubiquitous influence makes widespread regulation inevitable, and early legislation such as AB-1236 will serve as a model for other states to follow.


Popular Perceptions May Hold Automated Vehicles Back

Alex Vilisides, MJLST Symposium Editor

Last October, when the Minnesota Journal of Law, Science and Technology (MJLST) co-sponsored a symposium entitled “Automated Vehicles: The Legal and Policy Road Ahead,” experts from a broad range of areas came together to discuss the challenges of self-driving cars. There was excitement that the technology was closer than ever, but also sober discussions of the many legal, ethical, and practical challenges that lay ahead. Recent media reaction to a new academic study emphasizes a very basic challenge: autonomous cars must overcome the challenge of being weird.

On April 9, 2015, University of Michigan announced in a press release the findings of a new study concluding that use of automated vehicles could increase the incidence of motion sickness. The study asked 3,200 adults what activities they would do in a car that drove itself. From the responses, such as reading, texting or watching television, the study concluded that “6-12 percent of Americans adults riding in fully self-driving vehicles” could expect to “suffer moderate or severe motion sickness.” Of course, the “frequency and severity of motion sickness is influenced” not by the inherent nature of an automated vehicle, but “by the activity that one would be involved in instead of driving.”

Outlets from NBC News to Popular Mechanics to The Guardian picked up the story. “Self-Driving Cars Might Make You Vomit,” declared a headline about the study on the Huffington Post. The cost-benefit imbalance is staggering. If people are able to implement technology that may be capable of making travel safer, cheaper, more accessible and less destructive to our environment it may come at a cost. That cost, these articles point out, is that if people choose to read or watch television in a self-driving car, some fraction of the population may be at greater risk to experience motion sickness. Despite this stark contrast, the dominant media narrative is served by focusing more on the weird, uncomfortable experience of riding in a self-driving car.

It is unlikely that any of the extraordinary articles published in MJLST’s upcoming symposium issue, focusing on automated vehicles, will receive this type of media attention. This is because an article about these vehicles making people vomit fits the dominant narrative: automated vehicles are weird. They a strange new technology and a harbinger of the robot-controlled dystopian future. Information that fits this narrative is far more affecting for an average reader than a rational cost-benefit analysis. And this weirdness has consequences. If the benefits are as great as advocates claim, the delay in adoption caused by social pressures and popularity has real consequences. The adoption of mass technologies is not pre-ordained. The weirdness battle is one that advocates of automated cars must fight if society is going to adopt this potentially transcendent technology.


USDA Heightened Country of Origin Labelling Laws: Good Start, Can Be Tightened

Vinita Banthia, MJLST Staff Member

The Country of Origin Labeling (COOL) laws have long been debated and amended in the Unites States. COOL regulation dictates the degree to which a product’s label must indicate which countries were involved in the production of the product. Currently, a product’s countries of origin must be labelled for the all of its ingredients, with the exception of where the product has been processed. These standards apply to food such as meat that had been born and raised in the United States but contains elements that have been produced in other countries like China. Hence, all raw foods and its ingredients must be labelled, including “raw muscle cuts, ground commingled meat, or live imported animals are not excluded.”

However, if meat has been born and raised in the United States, and then shipped to China for processing, then shipped back to the United States for consumption, it does not need to be labelled as being processed in China. Except for locations of processing, meat must be labelled for the countries where the animal lived during its life, and where it was subsequently “raised, slaughtered, butchered, and prepared for sale.” These laws have become increasingly strict since changes in the U.S. Department of Agriculture (USDA) consumer information policies in 2009 and 2013.

The recent Note, Country of Origin Labeling Revisited: Processed Chicken from China and the USDA Processed Foods Exception published in the Minnesota Journal of Law, Science, and Technology, by Daniel Schueppert highlights the stringent COOL requirements for raw and live foods. The Note discusses the recent change in the USDA funding and regulation policies that allowed the United States to export chicken to China for processing, and then import it back in to the US for commercialization without labelling the meat’s journey. The agricultural industry and grocery stores have been largely opposed to the laws as requiring excessive labelling for non-processed meats. Canada and Mexico have challenged the U.S. COOL laws at the WTO, stating that the COOL requirements for non-processed meat are overly burdensome on Canadian and Mexican beef exporters, thereby creating an unfair advantage for U.S. domestic beef. In October 2014, the WTO ruled in favor of Canada and Mexico. Canada has threatened retaliatory actions if the U.S. does not relax its COOL laws.

In contrast, Schueppert argues that some, limited COOL standards should also be applied to meat processed in China. This position supports greater restrictions not only for non-processed and raw foods, but also for processed meats. In addition, Schueppert argues that the current definition of processed foods is too broad and over-inclusive, leading to potential safety concerns in non-processed products. This argument holds more ground that the views of industries and countries unwilling to invest greater resources in ensuring the safety and disclosure of products. The USDA should continue to take measures to ensure that meat products are increasingly safe and well-labelled for consumers.


The FDA’s Role in Innovative Change

Paul Overbee, Articles Editor

In Volume Six, Issue Two of the Minnesota Journal of Law, Science and Technology, Susan B. Foote and Robert Berlin penned a piece titled “Can Regulation be as Innovative as Science and Technology? The FDA’s Regulation of Combination Products.” Published in 2005, this piece set out to explore whether an agency as slow as the FDA could keep pace with ongoing technological innovations and respond in an appropriate and timely manner. Ultimately the authors concluded that the FDA is an agency that progresses in an iterative and incremental manner, and that both politics and administrative law were likely to prevent the FDA from being a force for innovation. The authors tried to justify the potential block to innovation by arguing that innovators and manufacturers benefit from the predictability and certainty and that a slow regulatory is the essential cost of these benefits. As such, the authors offered that regulation would come after innovations occurred rather than predicting upcoming innovation and issuing preliminary regulation.

Since the time of the author’s predictions, they have been proven correct in many ways. For instance, nanotechnology is an emerging technology with many predicting how it will be implemented in the future, and it has already has appeared in products such as sunscreens and spray paints. Despite its current presence in society, the FDA has failed to issue a formal definition of what nanotechnology is and what it is not. As such the predictability and certainty that is desired by innovators is lacking. One of the most recent developments that continue to show that the FDA is ill-equipped to deal with fast paced innovation is their recent draft guidance on combination products. A full 10 years after Foote and Berlin criticized the FDA’s ability to act swiftly, the FDA has finally issued a draft guidance to clarify and explain the current good manufacturing practices for combination products. This guidance has been made available by the FDA

The FDA defines a combination product as any combination of a drug, device, or biological products, taken individually as constituent parts of the combination product. Additionally, a combination may be two or more separate products that have been packaged together in a single package such as pre-filled syringes. The new FDA guidance gives multiple options for combination products to meet current good manufacturing practices. First, the producer may demonstrate compliance under the current drug manufacturing practices or by meeting qualify system regulations; this option is available where the combination is both a drug and device. The other option is that the manufacturer may demonstrate compliance will all good manufacturing practices that are applicable to each constituent part that makes up the whole combination product.

Both Berlin and Foote justified the slow moving nature of the FDA by stating that it may provide the type of predictability and certainty that is desired by innovators. Since that date, actions by the FDA have put that predictability and certainty in question. Instead of having a clear practice in place, the FDA may leave manufacturers guessing for years before the agency comments on their appropriateness. Berlin and Foote both agreed that perhaps the FDA wasn’t properly tooled to deal with ongoing innovation, but ongoing developments continue to drive that point home.


The Development of Autonomous Vehicles

Kirsten Johanson, MJLST Staff Member

On a glorious Halloween day last fall, the Minnesota Journal of Law, Science and Technology (MJLST) co-sponsored its annual symposium entitled “Automated Vehicles: The Legal and Policy Road Ahead.” As the title implies, this symposium focused on one of the more exciting and innovative areas of the automotive industry–self-driving cars. Numerous academics, researchers, and innovators in the industry presented on the major issues that impact this industry’s future, specifically in terms of safety and other regulatory standards. Ensuring that proper standards are in place before these vehicles take to the roads is necessary to protect the pubic against everything from the cars’ operations in bad weather conditions to irresponsible human operators. Many of these standards require legislative involvement to craft state and national policy that strikes the delicate balance between safety and integration of new technology.

These issues are hugely important in the future development and integration of autonomous vehicle technology. In recognition of that importance, MJLST’s upcoming publication (Volume 16.2) is expected to include four articles written by experts and scholars in the autonomous vehicle field that address a number of major issues that arise in conjunction with the development of autonomous vehicle technology. Each of these articles expands on a particular idea presented at the symposium but, despite the differences in article topics, one recurring theme is the radical change that will develop upon a workable regulatory scheme and publicly available vehicles.

While numerous regulatory concerns require further development before these so-called self-driving cars are ready to hit the road with the general pubic at the wheel (or, in Google’s case, lack thereof . . .), none of the major car companies are missing the opportunity to participate in the development of autonomous technology. Every major car manufacturer in the world from Volkswagen to Audi as well as the ever technologically savvy Google is trying its hand at autonomous development (see depictions below). Not only does this competitive push for technological creativity result in a dynamic array of vehicle characteristics and (most importantly) awesome looking cars, it also indicates that, given the proper regulatory structure, the autonomous vehicle industry is poised to explode.

That being said, this is an area of the law that must continue to adapt with the changing technology. Regulators need to understand the impacts autonomous cars will have on the public from both convenience and safety perspectives and draft legislation accordingly. The symposium articles published in MJLST Volume 16.2 recognize this regulatory need and address specific issues that provide helpful insight to any interested party.

Self-driving cars might be one of the more futuristic ideas of the next generation and all of the decisions of today will impact the ultimate success of such vehicles. A basic Internet search for “autonomous vehicles” shows the potential is there and growing every day–even companies like Uber are getting involved! The wave of the future is sneaking upon on us and what that wave looks like is up to the initial responsive decisions made in the next five years. Check out MJLST Volume 16.2 for an in-depth analysis of what those decisions might look like and how they will impact various aspects of your life.

In the meantime, take a look at the following examples of autonomous vehicles, Volkswagen Autonomous Car; Autonomous Audi; Google’s Self-Driving Vehicle Prototype


The Shift Toward Data Privacy: Workplace, Evidence, and Death

<Ryan Pesch, MJLST Staff Member

I’m sure I am not alone in remembering the constant urgings to be careful what I post online. I was told not to send anything in an email I wouldn’t want made public, and I guess it made some sense that the internet was commonly viewed as a sort of public forum. It was the place teens went to be relieve their angst, to post pictures, and to exchange messages. But the demographic of people that use the internet is constantly growing. My mom and sister communicate their garden interests using Pinterest (despite the fact that my mom needs help to download her new podcasts), and as yesterday’s teens become today’s adults, what people are comfortable putting online continues to expand. For example, the advent of online finances illustrate that the online world is about so much more than frivolity. The truth of the matter is that the internet shapes the way we think about ourselves. And as Lisa Durham Taylor observed in her article for MJLST in the spring of 2014, the courts are taking notice.

The article concerns the role of internet privacy in the employment context, noting that where once a company could monitor its employee’s computer activity with impunity (after all, it was being done on the company time and with company resources), courts have recently realized that the internet stands for more than dalliance. In it, Taylor notes that the connectedness of employees brings with it both advantages and disadvantages to the corporation. It both helps and hinders productivity, offering a more efficient way of accomplishing a task, but providing the material for procrastination in an accompanying hand. When the line blurs, and people start using company time for personal acts, the line-drawing can get tricky. Companies have an important interest in preserving the confidentiality of their work, but courts have recently been drawing the lines to favor the employee over the employer. This is in stark contrast to the early decisions, which gave companies a broad right to discharge an “at-will” employee and found that there was no expectation of privacy in the workplace. Luckily, courts are beginning to recognize that the nature of a person’s online interactions make the company’s snooping more analogous to going through an employee’s personal possessions than it is to monitoring an employee’s efficiency.

I would add into the picture the recently-decided Supreme Court case of Riley v. California, where the Court held that a police needed a warrant to search a suspect’s phone. The Court said that there was not reasonable cause to search a cell phone because the nature of the technology means that the police would be violating more than necessary to conduct normal business. They likened it to previous restrictions which prevented police from searching locked possessions incident to arrest, and sarcastically observed that cell phones have become “such a pervasive and insistent part of daily life that the proverbial visitor from Mars might conclude they were an important feature of human anatomy.” The “vast quantities of personal information” and the fact that the phone itself is not a weapon make its taking unjustified in the course of a normal search.

This respect for the data of individuals seems to be signaling a new and incredibly complicated age of law. When does a person have the right to protect their data? When can that protection be broken? As discussed in a recent post on this blog, there is an ongoing debate about what to do with the data of decedents. To me, a conservative approach makes the most sense, especially in context with the cases discussed by Lisa Taylor and the decision in Riley v. California. However, courts have sided with those seeking access because the nature of a will grants the property of the deceased to the heirs, which has been extended to online “property.” What Rebecca Cummings points out to help swing the balance back in favor of privacy, is that it is not just the property of the deceased to which you are granting access. The nature of email means that a person’s inbox has copies of letters from others which may have never been intended for the eyes of someone else.

I can only imagine the number of people who, had they the presence of mind to consider this eventuality, would act differently either in the writing of their will or their management of their communications. I am sure that this is already something lawyers advise their clients about when discussing their plans for their estate, but for many, death comes before they have the chance to fully consider these things. As generations who have grown up on the internet start to encounter the issue in earnest, I have no doubt that the message will spread, but I can’t help but feel it should be spreading already. So: what would your heirs find tucked away in the back of your online closet? And if the answer to that is something you’d rather not think about, perhaps we should support the shift to privacy in more aspects of the digital world.


Tesla’s Autonomous Vehicle Update Is the First Step Toward Bright and Automated Future

Ian Blodger, MJLST Staff Member

Tesla Motors recently announced a software update to its Model S that will allow the vehicle to drive autonomously on highways. This development may be the first step toward an almost entirely autonomous vehicle fleet. This change to transportation could have profound implications on everything from city density to traffic safety.

Autonomous vehicles may eventually increase urban density by reducing the requirement for parking spaces in cities. Tesla’s update will give its vehicles the ability to drive completely autonomously from a parking spot to pick up the vehicle owner. While Tesla states that this feature should currently be used only on private property, the programming opens up the possibility of radical changes to the current cityscape. Under the current transportation model, people who commute to work in larger cities must also find a place to park their car during the day. Additionally, this location must be relatively close to the person’s place of work. With autonomous vehicles, however, commuters could be dropped off by their vehicle, which would then find parking outside the city. At the end of the day, the commuter would call their car to pick them up and drive home. This would allow developers to maximize the function of valuable real estate inside cities, currently being used only to park cars. Additionally, parking outside the city center could reduce costs for vehicle owners, since parking structures would have less financial overhead to account for in pricing. Essentially, the currently available technology will eventually allow for increased efficiency of valuable city real estate.

Moreover, autonomous vehicles could provide improved efficiency for commuters on their way to work. Since commuters will not need to concentrate on driving, they could pay attention to other tasks, like preparing for the workday. While Tesla’s updates may not quite allow the vehicle owner to divert their full attention from the road, it gets close. As the quality of autonomous vehicle programming improves and the number of autonomous vehicles increases, commuters will be able to invest their full attention in things other than driving.

Besides these general efficiency improvements, autonomous vehicles may have the added benefit of decreasing motorist deaths. According to the Association for Safe International Road Travel, the United States has more than more than 37,000 traffic deaths each year. Since many of these deaths are caused by driver error, allowing vehicles to take the wheel could save thousands of lives each year. Tesla’s updates are just the first step to improving the safety and efficiency of our roadways.

The Minnesota Journal of Law Science and Technology recently held a symposium on the legal and social implications of autonomous vehicle technology, and will be publishing a number of articles adapted from speaker’s presentations in the upcoming Spring 2015 issue of Volume 16. The articles vary widely in their analyses of the social and legal implications of autonomous vehicles, and will be a great resource for anyone interested in learning more about the subject.


A Story to Warm Your Iron-Rich Hemoglobin

Becky Huting, MJLST Articles Editor

While recently home in Chicago on spring break, I offered to make my dad a spinach-packed smoothie. My dad (a good sport) agreed, but asked me to make it light on the spinach as he understood men at his age (60) should be taking it easy on the iron intake. I had heard this principle before, and knew that men’s and women’s vitamin supplements were different in part due to the additional iron needs of women. My dad was right about one thing: he needs a lot less iron than me. His recommended dietary allowance for iron is 8 mg/day whereas mine is a lofty 18 mg/day. In actuality, men rarely suffer from iron deficiency so supplements are usually unnecessary, and in fact too much iron can indeed be harmful. There are possible links with excessive iron consumption to diabetes as well as neurodegenerative disease.

But where his concerns are unfounded are in the nutritional numbers. One cup of uncooked spinach contains only .8 mg of iron. That is only one-tenth of his daily iron needs. Three ounces of ground beef containing 15% fat contains 2.2 mg of iron. What about his daily serving of canned, drained clams, you ask? Fine, you have me there: if my father actually consumed such item, he’d have gone over at 23.8 mg of iron. It is very hard though for a human to overdose on iron from food, because an adult body has systems in place to regulate the amount of iron it absorbs. In short, my dad need not be concerned about spinach in his smoothie, except for reasons of palatability.

So given the different nutritional needs of men, women, and also children, what entity is telling consumers whether a vitamin is for them by way of labels? The Food and Drug Administration (FDA) relinquished that duty back in October of 1994, when the Dietary Supplement Health and Education Act (DSHEA) was passed. This law created a new regulatory framework for the safety and labeling of dietary supplement that places the responsibility on the product manufacturers rather than the FDA. The DSHEA was a response to lobbying by health food companies to vote down several bills that would have had the effect of increasing the FDA’s powers over supplement labeling. Celebrities even got involved. In one commercial, Mel Gibson portrayed a citizen being raided and arrested by FDA agents for possessing a bottle of Vitamin C.

This mentality that too much government oversight is a bad thing is a popular ideal. After all, it’s only a vitamin. Perhaps a label signifying use by pregnant and nursing moms is enough, but consider the 60-year-old guy grabbing this supplement in haste. He is now getting 27 mg iron per day from the vitamin alone, perfect for a pregnant woman, but over 3X his nutritional needs. Are a few words on a label enough to signify safety to a consumer? Certainly there is an argument that too much information will lead to a cluttered, confused label. So where do you come down, bring the FDA back in or leave it to the companies? And do you feel like a green smoothie? I promise you the banana masks the spinach flavor.