Of Algorithms and Employment Status

How do these platforms work?

Platforms connect the consumer with a good or service and receive a fee on the transaction. The fluctuating nature of bookings and orders in line with peak traffic hours makes changing prices a natural response.

Often seen as the middle man, the recent gig economy litigation cases have changed how we see organisations like Uber. The courts have determined their drivers to be workers despite their claims that they are a tech intermediary only.

Legal context

Article 101 of TFEU prohibits agreements, whether written or in a gentlemen’s agreement that has the effect of restricting or distorting competition. Price-fixing forms under an agreement to reduce competition and can occur between competitors (what we know as a cartel) or between suppliers and buyers. Most jurisdictions mirror this rule for their competition laws.

Almost always, any agreement falling under Article 101 triggers Article 102 of the TFEU where an entity has abused their dominant position due to their high market share.

Price-algorithms and competition law

Platforms often argue the participants are independent contractors and not workers. To agree otherwise would mean that there is a subordination relationship between the parties and therefore, a single economic entity exists to trigger the application of competition law. Workers/employees do not share the commercial risk that the employer has to undertake. There is further subordination where there is no participant input in the price.

Uber risks creating a price agreement that is wholly beneficial to its functioning, given how Uber does not offer a mechanism where the drivers can reduce the price of a ride. This type of gig economy platform is different from other platforms such as TaskRabbit, where people set their rates.

The term ‘network effect’ (coined by Shapiro and Varian) equates to a platform requiring the participant to obtain more consumers. As the number of users increases, the more valuable the app becomes. The network would then create a cycle where the winner earns more as more consumers use the app. The platform obtains stronger market power, and once the market tips in favour of that platform, the organisation can use this power to discriminate against competitors to the detriment of consumers.

What does worker status have to do with it?

The worker status debate may have a snowball effect where the lack of protection towards gig economy participants that would create a monopoly-based system.

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