Online platforms

Why the European Court saved AirBnB and not Uber


Despite a European political climate suggesting a restrictive interventions over online platforms, the European Court of Justice has issued an important decision on AirBnB, the popular online platform for short-term rentals, which goes instead to another direction, giving more confidence to the digital economy.

In a proceeding concerning a complaint by French hoteliers, claiming AirBnB’s duty to get a real estate agent license, the European judges ruled that this kind of platform does not operate a real estate service, but a simple Internet service. It may seem a trivial recognition, but had the second interpretation (that of the real estate service) prevailed, for AirBnB it would have been a blow, forcing the platform to comply with national (hoteling) legislations and related limitations: in practice, this is what happened a few years ago to Uber which, once it was declared to be a transport service by the European Court, had to profoundly adapt its business model, by closing UberPop (ie the intermediation of transport between private individuals) and concentrating on regularly authorized taxis. If the European Court had chosen this same approach for AirBnB, in practice by imposing the obligation for a license (for real estate agency), then the impact for the platform and competitors would have been considerable.

Why was AirBnB treated differently from Uber? Legally speaking, the court noted that Airbnb’s business model is not merely ancillary to an overall accommodation service and that such a service is not indispensable to the provision of accommodation services, as customers can use a number of alternative channels in that respect. Therefore, the Court defined the company as an “information society service”. More practically, the difference seems to lie in the lower pervasiveness of the AirBnB functions (compared to Uber): in particular, AirBnB does not set the contractual conditions of accommodation and the rates. Instead, those who use an Uber’s taxi service are subject to rules and prices set by Uber itself, not by the taxi driver.

But, beyond legal dissertations, is this a good sentence? The digital revolution has taught us that technological transformations disrupt established systems with winners and losers: with the advent of Uber, innovative entrepreneurship has won together with citizens dissatisfied with the traditional urban transport service, while the organizations of traditional taxi drivers have lost. The traditional licensing taxi system was not distroyed, however the emergence of new technologies and apps encouraged the modernization of the sector. This process has worked well, given that Uber, despite having failed in its European judgment, continues to operate and is not alone either, having to confront various competing platforms, some of which are even run by “converted” taxi drivers. The role of the European court was to set some limits to protect a series of interests, both for workers and users. In fact Uber, like its competitors, must move in the bridles of the various national legislations, with results that are not always consistent. This is why a new European intervention appears ineluctable, but this time a legislative one, rather than judicial.

Will the same happen also to AirBnB or will the current system of short-term online rentals, given the positive outcome of the sentence, be further consolidated? It is difficult to say because the European Court has focused on the specific object of the French judgment, avoiding instead to express itself on other general issues that the AirBnB model raises, such as: lessors using AirBnB should adapt to hotel regulations, and up to at what point? The municipalities could impose “quantitative” rules to contain the number of B&Bs hosted in city centers, in order not to perturb the social print of the  place? In the absence of ad hoc regulations from Brussels, probably these new cases will arrive, sooner or later, to analysis of the European judges.

Categories: Online platforms

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