EU guidance addresses new economic models including ride-sharing and crowdfunding.

On 2 June 2016, the European Commission issued a communication on the EU agenda for the collaborative economy (the Communication). The aim of the Communication is to support consumers, businesses and EU Member States to engage confidently in the collaborative economy and to ensure consistent application of EU law, by providing guidance on how the current legal framework applies to the collaborative economy.

What is the collaborative economy?

The collaborative economy (or ‘sharing economy’) refers to collaborative online platforms that create or facilitate an open marketplace for the usage of goods or services often provided by private individuals (Platforms). It operates across 5 key sectors:

• peer-to-peer accommodation (e.g. AirBnB).
• peer-to-peer transport (e.g. Uber).
• on demand household services, such as cleaning.
• on demand professional and technical services.
• collaborative finance, such as crowdfunding.

The key participants in the collaborative economy are (i) private individuals or service providers who share or provide assets, resources, time and/or skills, (ii) users of these services, and (iii) Platforms.

The Communication recognises the clear benefits of the collaborative economy, such as creating new opportunities for consumers and entrepreneurs, increased competitiveness, and more efficient use of resources through asset-sharing. Gross revenue in the EU from collaborative economy was estimated to be €28 billion in 2015. Therefore there is a great deal of interest both from new businesses looking to enter the market, and for individuals looking for more convenient and innovative ways to consume services.

Legal framework

The Communication considers to what extent existing EU laws, which are largely designed to apply to traditional businesses, extend to activities in the collaborative economy. In summary, the Communication looks at the following key issues:

• Market access requirements: To avoid unnecessary barriers to trade, current EU laws provide that service providers should only be obliged to obtain business authorisations or licences where justified and proportionate. An absolute ban of a certain service should normally be a measure of last resort. In deciding whether to place restrictions on participants in the collaborative economy, Member States should take into account the specific features of each type of business. In particular:
• Restrictions on service providers:  Member States should differentiate between individual citizens providing services on an occasional basis, and providers acting in a professional capacity. The Communication suggests the use of thresholds so that small-scale business activities are subject to less restrictive requirements. For example, by allowing short-term accommodation rentals and home-sharing without prior authorisation.
• Restrictions on Platforms: This will depend on whether the Platform is purely an ‘information society service’ (and therefore protected from business restrictions to some extent under the EU e-Commerce Directive 200/31/EC), or whether it also provides the underlying service. A Platform will be considered to provide the underlying service if it exerts significant control over the individual service provider (such as on pricing), and in which case could be subject to sector-specific regulation. For example, a short-term rental Platform may be considered to only provide information society services and not the underlying service itself if the individual service provider sets their own prices and owns (or otherwise has control over) the accommodation.
• Liability for information stored on Platforms: Platforms that merely act as an intermediary and passively ‘host’ information on the Platform are usually exempted from liability for such information. However, Platforms should not be exempted from liability for any services they themselves offer (such as payment services). Platforms are encouraged to take voluntary action to increase trust online, for example by helping to tackle illegal content and misleading reviews.
• Consumer protection: The collaborative economy blurs the lines between traditional concepts of ‘traders’ and ‘consumers’, and may result in a large number transactions falling outside of scope of EU and Member State consumer protection laws. The Communication encourages Member States to adopt a balanced approach to ensure that consumers enjoy a high level of protection, while not imposing disproportionate administrative burdens on individuals who provide ad hoc services. One way to improve trust could be through the use of online ratings and quality labels.
• Employment status of service providers: In creating jobs through innovative business models, the collaborative economy blurs the lines between employment and self-employment status. A person’s employment status (and whether they are afforded protection by employment law) is fact based, therefore the Communication only comments at a high-level on how existing laws may apply to the collaborative economy. Member States should assess the adequacy of their employment laws from the perspective of the digital world and the collaborative economy.
• Tax: The Communication recognises that adapting to the collaborative economy may create challenges for tax collection, such as the identification of tax payers and income. However, it also provides opportunities, especially in working with Platforms to make it easier for tax payers to meet their obligations effectively with minimum effort. Platforms are encouraged to take a proactive stance in cooperating with tax authorities (whilst complying with the obligations under the data protection regime).

WAB comment

The European Commission does not set out specific legislative changes, but instead encourages Member States to review their existing laws in relevant areas and take a neutral approach to the collaborative economy to ensure that there is a level playing field between businesses, whether they operate with a ‘traditional’ or ‘collaborative’ business model. This approach could potentially lead to less regulation for both traditional and collaborative businesses as Member States consider whether certain restrictions are still valid, rather than imposing additional rules on the collaborative economy.

However, this is easier said than done, since it is clear that some ‘disruptive’ and innovative business models, powered by the digital world, do not always fit squarely within existing business and regulatory frameworks. This causes tensions with traditional businesses and headaches for regulators, as shown in the wide press coverage in Europe of protests against ride-sharing apps and the calls for restrictions on accommodation sharing.

From a UK perspective, one area which warrants particular consideration is the European Commission’s recommendation that Platforms should be encouraged to voluntarily assist in tackling illegal user content. The general position under English law is that operators of social network services (SNS) and websites are often afforded a defence against liability for infringing or defamatory content placed on their SNS or website if the operator was not aware that such content existed on the relevant SNS or website. It is likely that Platform operators will want seek clarification on what impact voluntary action to monitor infringing content in accordance with the European Commission’s recommendation may have on any defences potentially available to them under English law, rather than risk unwittingly jeopardising such a defence.

Although the Communication provides helpful guidance at a high level, participants in the collaborative economy will need to consider national laws in the countries in which they operate and keep watch for any guidance issued by Member States in response to the Communication.

Click here for a link to the Communication and a helpful factsheet.