A top European court is set to decide Thursday whether the house-sharing platform Airbnb is a technology or real-estate company, in a landmark ruling that will have knock-on effects for how digital firms are regulated across the bloc.
The ruling will crown a long-running battle between Airbnb and traditional hotel companies across Europe, which argue that the platform offers similar services to them without being subjected to the same regulations.
It follows a similar case involving ride-hailing app Uber, which the Court of Justice of the European Union (CJEU) defined in 2017 as a transport company rather than a technology firm, subjecting Uber to more stringent oversight across the bloc.
The court is set to decide whether the platform is an “information society service” or a real-estate firm, as the complainant, the French hotel lobby AhTop, argues.
If the Luxembourg-based court finds in AhTop’s favor, Airbnb is likely to face a range of new constraints in key capitals like Amsterdam, Paris and London, which have been pushing for tougher regulation, arguing that the platform distorts housing markets, unfairly competes with hotels and contributes to excessive tourism.
But if the court rules for Airbnb — as a favorable opinion from the court’s advocate general suggests it might do — the San Francisco-based company will have scored a major legal victory that will strengthen its hand in ongoing battles against those municipalities.
A favorable decision “will boost the confidence of Airbnb in their discussions with the cities on regulation,” said Kenneth Haar, a researcher at Corporate Europe Observatory, an NGO.
“It will be more difficult for cities to convince Airbnb that they should cooperate with them because Airbnb would have the backing of the European Court of Justice to decline any requests to work with them.”
If Airbnb is deemed to be an information society service, it will continue to be regulated under the European Union’s e-commerce directive, a set of rules established in the year 2000 that regulate internet-based companies and shield them from direct liability over hosted content.
In April, the EU court’s top lawyer, Advocate General Maciej Szpunar, said in a nonbinding opinion that he thought the company should be considered an information society service. In most cases, the court tends to agree with the opinion of the advocate general.
Who’s got the power
The ruling comes at the start of a new term for the European Commission, the bloc’s executive arm, whose president Ursula von der Leyen aims to revise the e-commerce directive as part of a broader push to regulate online businesses and bolster Europe’s digital sector.
The revision, which will be part of a new Digital Services Act, is set to reexamine the terms under which a range of platforms have operated for most of the past 20 years. The Commission aims to strike a balance between tougher oversight and incentives for innovation, having estimated collaborative platforms could bring €16 billion in the short term and €134 billion in the medium and long term in revenues to the EU.
A Commission spokesperson said the court’s decision would “constitute valuable input” and feed into the upcoming legislative work.
In 2016, the Commission issued a communication that aimed to define the so-called collaborative economy — and gave hints as to how Airbnb’s case will be decided.
According to the Commission, collaborative platforms can be regulated as the “underlying services” they provide, such as transport or real estate, if they decide on the final price of the service and the contractual relationship between users and service providers. Another criterion is whether the platform owns key assets to provide the service.
The court’s decision will put the Commission’s criteria to the test, as it was in 2017 when the court ruled on Uber.
Ultimately the crux of the debate is how much control Airbnb is deemed to exert over the services offered on its platform.
In 2017, the court ruled Uber should be regulated as a transport company because the company exercised “decisive influence” over how drivers used its technology and how rides were priced.
Airbnb is banking on the fact that home-sharing, in the form of bed and breakfasts, has existed for a long time. The company also says it does not decide which apartments guests choose, and only acts as an intermediary for the hosts, who offer the actual hosting service offline and set their own prices.
The court’s decision does not directly concern rules governing short-term rentals. But the ruling will influence regulation of short-term rentals because it will determine whether the firm has to hand over data on rented properties to local authorities for tax collection, among other purposes.
In early December, the Netherlands introduced a bill that obligates homeowners who rent properties out to tourists to register their properties with the local council. But if Airbnb is defined as an information service provider, it will not be forced to hand over rental data to councils for checking, making it difficult to enforce the new rule.
In June, 10 cities, including Amsterdam and London, wrote to the Commission and called for legal obligations for platforms to cooperate with cities in registration schemes and in supplying rental data.
The European Committee of the Regions, an EU body that represents local and regional representatives, gave an opinion in early December saying the same. “[E]nsuring proper enforcement of applicable local rules and safeguarding supervisory mechanisms is impossible without access to the relevant data from platforms operating in a given territory,” it said.
The committee also complained that the Commission’s failure to offer a comprehensive definition of information society services in its 2016 communication left “highly political decisions up to the courts rather than the European and regional legislators.”
Airbnb has pledged to work with cities to address their concerns.
”We also want to be good partners to cities and already we have worked with more than 500 governments around the world on measures to help hosts share their homes, follow the rules and pay their fair share of tax,” a spokesperson said in a statement after Advocate General Szpunar’s opinion in April.
But European capitals were not impressed with Airbnb’s pledge.
“Where platforms claim that they are willing to cooperate with the authorities, in practice they don’t or only do so on a voluntary basis. One thing must be clear: A carte blanche for holiday rental platforms is not the solution,” their June statement read.