EU backs light-touch regulation for on-demand companies like Uber and Airbnb

On-demand companies like Uber and Airbnb may be coming under scrutiny in some European countries for allegedly contravening local laws, but today the European Commission threw them a line of support.

The EC today published guidance that favors light-touch regulation of companies like these, noting that they should not require licenses to operate; that they do not necessarily have to classify workers as employees (it’s a national, not EC, question); and that they are liable for services that they provide, such as payments, but not for the services directly provided by others through their platform.

More specific questions, the EC said, should be decided at the state level, and companies themselves are being encouraged to self-regulate themselves more.

The results are a victory for startups in the on-demand space, some of whom have been facing bans or threats of bans in some cities, often in the wake of struggles with incumbent competitors and claims from local authorities that groups are not operating with the right permits. It will be interesting to see how and if states in turn regulate more loosely or dig in deeper with their more restrictive measures.

“Absolute bans should be only a measure of last resort,” Commissioner Elżbieta Bieńkowska, who heads up Internal Market, Industry, Entrepreneurship and SMEs, said in a press conference today. “Such restrictions can’t favor one business over another.”

The EC believes that this could help lay the groundwork for creating more startups in Europe. “A competitive European economy requires innovation, be it in the area of products or services. Europe’s next unicorn could stem from the collaborative economy,” wrote Commission Vice-President Jyrki Katainen, responsible for Jobs, Growth, Investment and Competitiveness. “Our role is to encourage a regulatory environment that allows new business models to develop while protecting consumers and ensuring fair taxation and employment conditions.”

(Ironically, the biggest and most high profile companies that will be impacted by this guidance are not European but outsized startups from the U.S., who operate in Europe as part of their wider international expansion.)

The EC has been making murmurs in support of businesses like these for some time now — and it has been in support companies like Uber for some time now (coincidentally Neelie Kroes, the influential former VP of the EC, is now on Uber’s board). But this is the first formal guidance published by the government and will potentially have a strong impact on how local cases get decided.

“It is here to stay and grow. We can close our eyes and ears and lose energy trying to prevent this but we chose not to,” said Commissioner Bieńkowska said in reference to collaborative economy companies. She added that the EC decided to introduce “no new law but how to read and use the existing ones. Our single market must help… this is about new jobs and new growth and new possibilities.”

The guidance published today comes after the Commission began an investigation into regulation for on-demand services as part of its bigger task of updating regulation to support a single market across the EU, and the basics, as outlined by the EC, are as follows (we’re underlining some of the most important parts of the text, which is directly taken from an EC publication):

What type of market access requirements can be imposed? Service providers should only be obliged to obtain business authorisations or licenses where strictly necessary to meet relevant public interest objectives. Absolute bans of an activity should only be a measure of last resort. Platforms should not be subject to authorisations or licenses where they only act as intermediaries between consumers and those offering the actual service (e.g. transport or accommodation service). Member States should also differentiate between individual citizens providing services on an occasional basis and providers acting in a professional capacity, for example by establishing thresholds based on the level of activity.

Who is liable if a problem arises? Collaborative platforms can be exempted from being held liable for information they store on behalf of those offering a service. They should not be exempted from liability for any services they themselves offer, such as payment services. The Commission encourages collaborative platforms to continue taking voluntary action to fight illegal content online and to increase trust.

How does EU consumer law protect users? Member States should ensure that consumers enjoy a high level of protection from unfair commercial practices, while not imposing disproportionate obligations on private individuals who only provide services on an occasional basis.

When does an employment relationship exist? Labour law mostly falls under national competence, complemented by minimum EU social standards and jurisprudence. Member States may wish to consider criteria such as the relation of subordination to the platform, the nature of the work and remuneration when deciding whether someone can be considered as an employee of a platform.

Which tax rules apply? Collaborative economy service providers and platforms have to pay taxes, just like other participants in the economy. Relevant taxes include tax on personal income, corporate income and Value Added Tax. Member States are encouraged to continue simplifying and clarifying the application of tax rules to the collaborative economy. Collaborative economy platforms should fully cooperate with national authorities to record economic activity and facilitate tax collection.

Unsurprisingly, the on-demand companies that we’ve contacted for their response have been universally happy with the result. For now at least. ”Uber helps connect millions of people across Europe with a simple way to move around cities quickly and safely,” an Uber spokesperson told us. “Regulations are developing all across the world for drivers, riders and cities to fully benefit from this. Today, the European Commission makes clear that EU laws protect collaborative economy services against undue restrictions, and calls on Member States to review regulations undermining their developments.”

“We’re pleased to see a positive approach from the Commission, which has today given a strong message to Europe’s collaborative economy companies,” said Fabienne Weibel, head of public policy at BlaBlaCar. “Today’s guidelines clearly lay out the need for a varied approach to different sharing economy business models. This is particularly useful for cost-splitting communities like ours, where users are not professionals and do not make a profit – a ‘one-size-fits-all’ approach to regulation just isn’t the right way forward.”

“The sharing economy is already bringing tremendous benefits to Europe and is making new experiences and economic opportunities available to countless regular people. We know many rely on this additional income and are proud to have worked with cities, like London and Amsterdam, on progressive rules to support them. In some other cities, we see that complex, burdensome and disproportionate regulations often hit working people and families who need this income the most,” said Patrick Robinson, Head of Public Policy for Airbnb in EMEA. “We agree that benefits of the sharing economy should be available widely. Europe has the potential to be the world leader for the sharing economy and the guidance issued by the Commission is a valuable tool to ensure a clear, stable and consistent regulatory environment for sharing economy users across Europe.”

These companies, some of which are valued in the tens of billions of dollars (Uber, at a valuation of well over $60 billion, is the biggest of all), have found a lot of popularity with consumers and providers in their marketplace model, so they have been throwing a lot of weight into the regulatory issue, since it has been in many cases be the crucial piece to deciding whether they can continue to grow or retreat.

That has resulted in some moves ahead. For example, Lithuanian capital Vilnius formed its first ridesharing partnership in October 2015, and Estonia is now working out how to regulate ridesharing on a country level. In Spain, where Uber has faced a lot of problems, it’s managed to find support with the competition authority, which has filed an appeal against regulations imposing private hire restrictions.