First Tutors Edunation Ltd—Written evidence (OPL0020)
1. Do you agree with the Commission’s definition of online platforms? What are the key common features of online platforms and how they operate? What are the main types of online platform? Are there significant differences between them?
There are broadly two types of online platform:
The difference matters because the latter commonly argue that as technology businesses they should not be subject to the same regulation as their ‘real world’ counterparts. My experience lies in leading a successful ‘sharing economy’ businesses and navigating the associated red tape, so I will mostly restrict my comments to this category.
2. How and to what extent do online platforms shape and control the online environment and the experience of those using them?
Online businesses are ruthlessly competitive and there is a wide range of choice in smaller markets (such as tuition). So it is generally unfair to say of the many smaller businesses operating in smaller markets that any one player has control and policy makers should be mindful of inadvertently suffocating SMEs whilst attempting to regulate the largely non-EU headquartered monster corporations.
That quite often multi-billion pound markets give way to a winner-takes-all scenario is reflective of a) the vast sums of cash raised in a typical round in the US, permitting extensive marketing to achieve precisely that goal, and b) the great advantage non-EU headquartered companies have in knowing they can trade in Europe and that so long as they have a substantial war chest, they can effectively override EU laws whilst they gain traction. Whilst the regulation may often be there already, in case law it is often untested and EU states seemingly lack the appetite or resource to actually enforce on large online businesses.
If and when that enforcement does occur, it is usually long after the company has gained dominance in the market and annihilated its smaller, regulation-strangled competitors who are in no position to challenge the state. I wonder in this respect, whether this exercise will ultimately be counter-productive; resulting in more burden for most European businesses and effecting no change for our global competitors or those with the chutzpah to ‘lawyer up’ against the enforcement authorities.
That point aside, it would be disingenuous of me to pretend that running a platform such as FirstTutors.com does not entail ethical responsibilites as there is a limited degree of power associated with running a platform: for example, though our tutors are self-employed and can set their own rates we have coded in a minimum fee of £9.00 per hour for the UK market (applicable since our launch in 2005) to preclude a race to the bottom. However, I know of no regulatory reason why we should have done so and accordingly the sharing economy is crowded with online platforms where the self-employed are working for very, very little in terms of ‘take home’.
Likewise, we have a responsibility to both consumers and suppliers in determining a fair policy with regard to which suppliers are able to use our platform on a continued basis and which are barred permanently. For example, we are mindful of considering the basis for negative reviews to ensure they are based on the tutor’s quality of service and nothing else - in this respect we are more transparent than our offline equivalents. In markets such as ours, the supplier can always go and sign up on another platform (so actually our power is effectively checked by competition), but for example, I’m not sure an eBay trader would have such an easy time making a living elsewhere (not to suggest anything awry with eBay’s practices, merely to illustrate a business of vast, dominant scale).
These issues of large companies being able to dictate to small suppliers are common in plenty of other industries (e.g. supermarkets) and I don’t know why online platforms should not covered by existing legislation designed to counter monopolisation of markets.
3. What benefits have online platforms brought consumers and businesses that rely on platforms to sell their goods and services, as well as the wider economy?
When we get it right, we are market makers. Prior to FirstTutors.com, finding a tutor was a very expensive, opaque affair for consumers and for tutors a closed job market unless they met the arbitrary, discretionary requirements of the agency with which they were seeking to register. As a result of FirstTutors.com, in any given month we’ll help thousands of families to find more affordably priced, better quality tuition (with client reviews) and assist thousands more in finding highly-skilled, rewarding and well paid work.
The sharing economy businesses are particularly good for those in need of flexible work or who wish to work remotely and anything which makes it easier for consumers to find good quality services or products is usually a good thing in terms of raising industry standards and driving competition in the right direction.
4. What problems, if any, do online platforms cause for you or others, and how can these be addressed? If you wish to describe a particular experience, please do so here.
I think there is an issue with consumer expectations and:
- ascertaining with whom the burden of responsibility for providing a good quality product or service lies (the platform or the end supplier)
- determining where the line lies for shared economy businesses in terms of employment v. self-employment
With the first matter, we effectively have to act as a trading standards mediator to try and seek resolution between tutors and clients on occasion, There is a lot of policing in running a shared economy platform and we accept that as part of our role. Ultimately businesses such as ours have an obvious incentive to take on some responsibility for ensuring services we introduce run smoothly because it directly affects our reputation, so I don’t suggest there is need for regulation here.
With the employment issue, one has to be careful that there is genuinely no mutuality of obligation between the platform and the supplier. Our tutors are free to turn down work or accept if they see fit, we ask only that they are courteous enough to respond to client enquiries. But I wonder about whether such freedom truly exists in relation to other platforms, particularly those using low or unskilled suppliers. Is a freelance cleaner dependent on a platform for regular work and unable to easily turn it down without risk of losing out on further opportunities really ‘free’ or not? Of course, that same issue could well be raised in regard to large cleaning agencies, ergo the technology question is besides the point.
5. In addition to concerns for consumers and businesses, do online platforms raise wider social and political concerns?
Shared economy businesses do a lot to drag shadow economy sectors out into the open and to professionalise them by demanding higher standards of their suppliers.
Policy makers should be wary of killing the golden goose by seeing such platforms as easy tax/data collecting opportunities - the reward for using a platform to facilitate earning a living where otherwise you might have traded cash-in-hand off the radar should not be the stress of a tax investigation. It would be particularly unfair to EU based businesses if government agencies used their jurisdiction to demand data from online platforms for various purposes (e.g. tax, welfare assessments, etc), yet shied away from approaching non-EU headquartered competitors - what message would that send to consumers and suppliers? That they should only trade through non-EU platforms or on a cash-in-hand basis? The EU must be sure not to see online platforms as a data-gathering mine for their own purposes because it will destroy the digital economy quickly and drive freelance industries back into the shadows - or to our overseas competitors.
The other respect in which EU policy makers must be clear and fair to EU shared economy businesses is employment agency law. In 2009, my business was advised by BIS that due to a change in legislation a platform such as ours which introduces self-employed suppliers to clients is now classed as an employment agency (“"For the purposes of this Act "employment agency" means the business (whether or not carried on with a view to profit and whether or not carried on in conjunction with any other business) of providing services (whether by the provision of information or otherwise) for the purpose of finding workers employment with employers or of supplying employers with workers for employment by them."-).
Accordingly, we changed our business model. The key clause of concern to BIS in enforcing this legislation remains Section 6 of the Employment Agencies Act which makes it illegal for an agency to charge work seekers for finding them work. As such, it is free for our tutors to advertise their services and we undertake a number of checks on identity, etc as best we can without physically meeting the tutors. Yet some of our online platform competitors only charge tutors to advertise and escape the regulations by arguing they are a publication. This is absurd.
We had originally intended to roll the online platform out across other industries, but refrained from doing so following BIS’s decision because we felt a model where the client pays for introduction to the worker would not work for the market in sectors such as tradesmen or freelance professional services where users could easily find a supplier for free or that the regulatory burden was too high in sectors such as childcare. We have therefore watched with considerable irritation as other platforms have set up and not faced the same regulatory burden even though to the layman’s eye they would appear to fall under the same definitions. None of these are apparently employment agencies but rather ‘platforms’ yet they look an awful lot like “business[es]... providing services (whether by the provision of information or otherwise) for the purpose of finding workers employment with employers or of supplying employers with workers for employment by them.”
The same kind of gap between unclear regulation and enforcement practice on the ground exists throughout Europe, with every country’s government seemingly having its own definitions of ‘workers’ and ‘employees’ and own views on whether an online platform is in fact an employment agency. The reality of doing business in Europe is therefore a barrister’s opinion for every territory.
In practice, many websites just ignore said rules and trade as they see fit - in Spain, for example, the biggest tutoring website competes by making its tutors bid for the top advertising position with no promise of work at all and charges nothing to clients.
We must decide whether are either happy to be a freelance economy in which people pay to advertise for work, or we are protective of workers’ rights and want to push platforms to take on additional social responsibility - and we must decide what a ‘worker’ is. At the moment we endure a hodge-podge of ideology without pragmatism, the result of which is it is very difficult to run a business in an unevenly regulated market, and confusing for consumers and suppliers trying to navigate their way through the myriad of models. We receive complaints every day from clients and tutors demanding to know why we are charging them not the supplier (the former seeing it as unjust that the trader is not paying to advertise, the latter as a barrier to reaching clients). What is needed is equal enforcement.
Whatever we decide, it must be applied to all businesses trading in Europe (or at least the UK), irrespective of their jurisdiction and enforced promptly.
7. Is there evidence that some online platforms have excessive market power? Do they abuse this power? If so, how does this happen and how does it affect you or others?
Competition is a very effective counterbalance to potential abuse and where it exists, it works.
9. What role do data play in the business model of online platforms? How are data gathered, stored and used by online platforms and what control and access do consumers have to data concerning them?
On our site, users can see 99% of their data by logging into their member’s area. It is a common request so I think most platforms will have something in place to fulfil this.
However as a case study of how badly data handling can go, we have in the past used a well known Danish reviews business to collect verified reviews from both tutors and clients. These reviews are essential to reassure both parties that we are a good business and collecting and displaying them was what we paid them for. We would push our clients/tutors the invitation via email and they would kindly create reviews for us on this independent third party website which were publicly viewable.
One day without warning, this company removed all reviews written by our tutors and then wrote to them to advise they had done so citing a breach of terms. They did not notify us. When we asked for a copy of the reviews we were advised that, “We will not provide a list of the reviews removed from our website relating to firsttutors.com or the user details of these reviewers. It follows from our agreement with our users that we will not be disclosing our users' personal data, such as their emails, with third parties including the reviewed company, and we take this commitment and the responsibility relating to the protection of our users' personal information very seriously. We also note that Danish data protection legislation prevents us from disclosing our users personal information.”
This was ridiculous as we’d provided them with the users’ information in the first place (with consent of course!) and until the day before had been able to login and see all such information.
Actually, what happened here was a gross abuse of power by one large business towards another smaller one - this company wrote to our stakeholders without consultation and then deleted reviews which we had paid for as part of our contract with them. This left us unable to communicate with the affected parties because we could not identify them, and further they would not even hand over the reviews in anonymised form claiming they had been deleted and were irretrievable. So we had no control or access to our data whatsoever and I wonder the extent to which such sudden deletions occur on other platforms.
10. Is consumer and government understanding and oversight of the collection and use of data by online platforms sufficient? If not, why not? Will the proposed General Data Protection Regulation adequately address these concerns? Are further changes required and what should they be?
I think more could be done to ensure businesses actually register with ICO or equivalent. It remains unclear to me as a small business owner whether I will be expected to fund a part-time Data Protection Officer role as part of the new regulations so as to do the government’s job for them. Certainly for start-ups this would pose a significant barrier. I suspect that small businesses will be punished in the EU’s pursuit of global corporations; the suggested threshold for employing a DPO (5,000 records) captures plenty of small businesses.
11. Should online platforms have to explain the inferences of their data-driven algorithms, and should they be made accountable for them? If so, how?
No, the algorithms are at the heart of our businesses and there is already no real IP protection for European software firms, not even a copyright registry. Making them open leaves us all open to copycats and is a deterrent to innovation. More practically, in our experience, with rare exception, suppliers only ever ask for a detailed explanation of our algorithms if it is their intention to ‘game’ them. Whilst I would love to know how Google’s search algorithm works, I fully appreciate that if such knowledge became open the search engine would be rendered useless overnight. If users don’t like the way an algorithm works, they’ll go and use a site which they feel handles data better.
13. How are online platforms regulated at present? What are the main barriers to their growth in the UK and EU, compared to other countries?
See previous comments on regulation. Red tape aside, the key barrier to growth remains a lack of skills, particularly in software development but also in basic literacy and numeracy, which makes hiring arduous.
14. Should online platforms be more transparent about how they work? If so, how?
Big online platforms are transparent in how they work because they know it is good marketing to explain the proposition to the consumer. However, at the smaller end of the market there is shabby practice. If simple laws were enforced (such as the EU Ecommerce directive demanding that all websites provide some contact details) we’d see greater transparency. As it is there are countless sites where the definition of who XX.com is, is listed only as “the website” in the terms. Some of our competitors don’t list their prices up front at all (claiming to be free until they’ve grabbed the user’s personal details). So policy makers must either scale up enforcement activities or accept lawlessness on the web.
15. What regulatory changes, if any, do you suggest in relation to online platforms? Why are they required and how would they work in practice? What would be the risks and benefits of these changes? Would the changes apply equally to all online platforms, regardless of type or size?
Continuity is the key. For those businesses using technology to disrupt sectors new legislation is not needed, merely the application of the tools at your disposal should you see fit, or the tearing up of the rule book if policy makers feel it should not apply any longer (e.g. if the government believes it is fine for a taxi firm to use unlicensed taxis, that rule should apply to all taxi businesses and not just those using a platform, likewise if the government is content that accommodation providers need not pay business rates, etc. that principle should be applied evenly across the sector).
What is not reasonable is the current climate in which offline businesses generally face significant regulatory burden, small online businesses either face the same or trade in anonymity to avoid regulation and large online businesses are effectively above the law and trade with terms which at best honour the letter but not the spirit of the law.
So, in the shared economy space it really ought to be the case that either we’re all employment agencies and have to abide by the same rules irrespective of our scale or where we’re based, or none of us are and our offline equivalents ought also to be free of regulatory burden to ensure fair competition. Currently, all online platforms are equal, but some are more equal than others.
16. Are these issues best dealt with at EU or member state level?
What is needed is execution rather than debate; evenly applied on-the-ground enforcement is the key.
16 October 2015