Regulation of disruptive models
In terms of planning, it is important to conceptualize that “disruptive”, according to Michaelis’ dictionary, is related to the act of interrupting the normal course of the process. Therefore, applying the aforementioned concept to the business world, being disruptive means creating other types of markets, which can often end up with ideas and businesses that were previously consolidated.
Disruptive models, therefore, have the power to inaugurate new markets and business models, with simpler and more efficient solutions than previous ones, reconfiguring structures and practices that break with what was practiced, thus introducing new ways of making information available. provision of services.
Indeed, there is currently a replacement of old technologies, old ways of production, with new ways of production.
In relation to this topic, it is worth highlighting an excerpt from the vote of the eminent minister Roberto Barros, especially in the judgment RE 1.054.110/SP, which includes the activity carried out by the startup Uber, at which point the way it develops innovations in the current scenario is weighed:
“I begin, President, with innovation and social influences on the inevitability of change. In a book that has become a classic, Israeli historian Yuval Noah Harari identifies the emergence of three great revolutions that have driven human history: the cognitive revolution, the agricultural revolution, and the scientific revolution.
And now we live in this fourth digital revolution, in which mechanical and analog technology has been replaced by digital technology, which has enabled – and here to get to our specific topic – the mass use of computers, the mass use of mobile phones and the world of people through the worldwide network, the Internet.
I make this introduction to contextualize a world that has completely changed in the last few decades.
Technology, knowledge and intellectual property have replaced the material goods that constituted the wealth of another age. And in this way, there is no chance of not affecting the old economy, which is why everyone is looking for new business models.
We have a cycle of capitalist development, in which old technologies, old ways of production are replaced by new forms of production, in a new terminology often called disruptive innovation, denoting ideas that can weaken or replace industries, companies or products established in the market. This is not the only dispute taking place between new technologies and traditional markets: (i) WhatsApp and telephone concessionaires have their own litigation; (ii) Netflix and cable television companies; (iii) Airbnb and hotel chains; and, as shown in this outstanding feature, (iv) between individual app-based transportation services and taxis.
President, I think we have to accept as the inexorability of social progress the fact that there are new technologies that compete in the market with traditional ways of providing certain services. I think it is harmless to try to ban innovation or preserve the status quo, as in the case of the early 19th century destruction of loom machines by English workers or, not long after, in France, when black clothing began to be sold. à-porter, in which tailors also took over large stores, it was not possible to stop the industrial revolution. The challenge for the state lies in how to match innovation with already existing markets and I think banning activity in an attempt to curb the process of change is clearly not the right way because I think that would be like trying to stop the wind with your hands. Concluding the first part of my vote, I say that there are a number of emerging technologies that deserve relevant societal demand. Obviously, the best way for the state to deal with these innovations and, ultimately, with the creative destruction of the old order is not to prevent progress, but to try to create possible reconciliation paths.
I think we are also experiencing, in Brazil, an important process of reducing one of the great national debates, which is officialdom – this belief that everything that is relevant depends on the state, its blessings and/or funding”.
Undoubtedly, disruptive models (Uber, WhatsApp, Spotify, AirBnb, etc.) eventually reach the “typical” economic models that were once active, and it is certain that in this scenario, the most appropriate way for the state to deal with such innovations is to promote a feasible conciliatory way with the already existing market. In reality, between full freedom and an absolute ban, a way must be sought to, on the one hand, preserve free enterprise and encourage innovation, and on the other hand, guarantee the rights of service users and free market competition.
After all, it should be noted that the new models, once they enter the market, will represent a competitive threat to the businesses that existed there, given that, as it was said, new technologies interrupt the way of providing and offering goods or services, so that they have put pressure on competition.
In this context, previously established models see their markets, often practiced under a monopoly regime, threatened by companies exploiting regulatory loopholes in new activities to gain competitive advantages, either regulatory or tax.
For example, the case of Uber is mentioned, whose service corresponds to the offer of private individual transportation, so it inevitably caused a big conflict with taxi drivers who, until then, were the only ones offering this passenger transportation services. It is true that, while taxi drivers are regulated by the Government and pay fees for the use of records (in addition to the associated taxes), the activity carried out by Uber was not regulated and taxed until recently.
As everything happens very quickly, disruptive models end up causing legal problems and will have to face “conventional” sectors, which is why the law will have to override these changes to ensure that the fundamental rights and guarantees provided by the Federal Constitution are preserved.
It should be noted that disruptive models arise in an environment where, for logical reasons, there is no regulation, since this trading practice was not even seen until then, so the legislator cannot regulate a non-existent situation. .
Therefore, such models exploit regulatory gaps in new activities to gain competitive (regulatory or tax) advantages.
It should also be noted that the absence of regulatory discipline over a certain business activity, especially in a regime based on economic freedom, legally encourages its free introduction and exploitation on the market by the private sector, even if it is in a regime of coexistence with similar services.
In fact, there is an almost inseparable path from the way in which this new technology will later be regulated, it should be noted that the law, in the beginning, tries to solve new issues within its own institutes, a circumstance that, however, will not always allow a perfect fit with these innovative models.
In any case, it must not be forgotten that, even if the regulation of disruptive models is considered, at the same time the need to preserve and promote the innovation they bring should be observed. Now it is up to the state to establish clear regulatory frameworks, preserve market competition and encourage entrepreneurship, as well as innovation, and its role is not to protect dominant economic entities from natural threats that bearers of innovation. This is the primary guideline drawn from the constitutional regime of free enterprise.
Disruptive models aim at legislative production in order to be properly regulated, specifically by defining the scope and limitations of the developed activities, especially due to the progressive increase in their use and the unquestionable uncertainty arising from the legislative vacuum.
Now the aforementioned regulation is necessary, and it is important to point out, for example, that to this day Uber is being sued before labor courts because of employees who continue to defend the thesis of the alleged existence of an employment relationship with the aforementioned platform (despite the fact that the impossibility of an employment relationship between the parties must be recognized, mainly because not all the requirements imposed by Articles 2 and 3 of the CLT have been met).
What must be kept in mind is that the natural consequence of technological progress requires the state to review traditional models of service provision and regulation of economic activities, in order to monitor market dynamics and maintain incentives for competition and innovation, which promote progress and improvement of society’s living conditions.
As delivered by Bruno Feigelson1“The state will have to be structured to serve new generations, based on new aspirations, which are reflected in new disruptive models. Therefore, individuals with greater access to information and a higher critical level are looking for new ways of experiencing the state and the law. Legal sciences should reflect this new world, which is no longer a futuristic science fiction movie, but a reality“.
The guarantee of innovation should be seen as the central goal of regulatory interventions in dealing with disruptive models, given that regulation, in this perspective, must act as a catalyst for innovation, and not the opposite.
Competition creates incentives for agents in a particular market to increase their output, set competitive prices, and qualify their goods and services. This scenario provides benefits for society, in particular by expanding the right of consumers to choose.
It is true that the interference of public authorities in the regulation of private activity must be guided by relevant constitutional values, which must always be based on the collective interest involved, materializing the exercise of administrative police authority.
Indeed, it will be up to regulation to enable technological progress, development and the provision of better services to its users, while at the same time protecting market competition, allowing new entities and preventing anti-market action by the economic entities involved, whether they are old or new.
In this way, it is clear that regulation, in addition to recognition, brings security so that disruptive models can be developed under the protection of the law. The challenge of harmonizing traditional law with dynamic economic parameters, a consequence of global technological progress, requires a legal position that takes into account all the complexity relevant to disruptive phenomena.