1099 as antitrust
I have no idea what legal, regulatory, or policy process might achieve this outcome. But maybe it would be a good thing if it happened.
Suppose the criteria for 1099 status really emphasized having multiple customers. For example, if you make money by offering people rides, the fact that you get to set your own schedule doesn’t cut it, if substantially all of your business comes from Uber. To qualify as an independent contractor, if you do substantial business with a regular, repeat customer, you must have multiple customers in that line of business for whom you do substantial work. Otherwise, there is a strong presumption that you should be considered an employee of your customer.
Right now, the greatest danger to to the rest of us from “sharing economy” platforms like Uber is that these platforms benefit from network effects that render them “winner-take-all”. Today’s apparent innovators are really contesting a tournament to become tomorrow’s monopolists. The outcome we should be hoping to achieve is neither to strangle these products in their cribs (they are often great products that create real efficiencies), nor to permit wannabe monopolists to win their prize. We should want competitive marketplaces in the products these platforms provide.
Much of the network effect that might render Uber-like platforms anticompetitive derives from density of suppliers. Customers flock to the platform that has the densest, richest set of offerings. When suppliers pick just one, they prefer to work for the platform that has the most customers. So once one platform pulls ahead, a cycle may kick in, virtual or vicious depending on your perspective, leading to a single dominant platform. But if suppliers “multihome”, if pretty much all of them sell through pretty much all of the networks, this “market cramp” can be interrupted and multiple platforms might survive. I’ve recommended before, in a vague way, that policy should be geared to encouraging multihoming. But that was going to be hard work, because platforms’ incentives are to make it hard as possible for suppliers to be promiscuous.
But if 1099 status required that suppliers multihome — and in a substantive, not mere token way — platforms’ incentives would reverse. They would face a choice of bearing much higher per-supplier costs (as “suppliers” become employees), or of insisting that suppliers also do business elsewhere. All of a sudden Uber would need Lyft and Lyft would need Uber (and maybe my former favorite, Sidecar, would de-pivot back into this market). Reclassification of suppliers as employees would serve as an antitrust doomsday device for sharing economy platforms. That might be a pretty good outcome.
There is of course a huge, serious problem with this idea. The people who hope to benefit from employee rather than contractor status are not customers, but workers. This suggestion basically sells out benefits and protections for workers in order to secure competition on behalf of customers. Silicon Valley titans may not realize it, but everything they hope to do depends upon finding less intrusive ways than traditional employment regulation and collective bargaining to give workers the negotiating power they need to secure a decent living. An economy that defines “efficiency” as throwing the majority of workers into a competitive race to the bottom so that a relative few at the top can enjoy cheap services is neither desirable nor stable. We can prevent that the old fashioned way, by having labor form cartels (via unionization or regulation), or we can try something new. Silicon Valley types hate the old way. Any sort of cartel is a thing they want to disrupt, except when they are operating it. Great. But then it’s time to go beyond libertarian bromides and the rhetoric of plutocratic self-regard and actively support better ways to ensure that humans in the technoutopia to come have the leverage they need to negotiate good lives for themselves. I have suggestions.
Encouraging competition via the threat of reclassifying contractors as employees is, at best, a kludge. It would be better if we had laws explicitly designed to push back against winner-take-all dynamics and ensure a competitive marketplace. But even traditional antitrust doctrines are now rarely and weakly enforced. Addressing more directly the threats to competition posed by technological network effects would require creative, controversial, new legal doctrines. Until we work those out, and work up the courage to pass laws to give them force, maybe a kludge wouldn’t be a bad thing.