EU guidance warns against the banning or over-regulation of platforms

The European Commission has issued new guidance on the sharing economy after raising concern that "a patchwork of different regulatory actions" across Europe could "hamper innovation, job creation and growth" that it said could arise if sharing economy business models are "encouraged and developed in a responsible manner".

The sharing, or collaborative, economy is a term used to describe operations where ordinary people trade the use of their assets with consumers who have a temporary need for them, usually over digital platforms.

The Commission said that any "market access requirements" imposed on platforms and service providers in a sharing economy environment "need to be justified and proportionate" and take "account of the specificities of the business model and innovative services concerned, while not favouring one business model over the other".

"When reassessing the justification and proportionality of legislation applicable to the collaborative economy, national authorities should generally take into consideration the specific features of collaborative economy business models and the tools they may put in place to address public policy concerns, for instance in relation to access, quality or safety," the Commission said. "For example, rating and reputational systems or other mechanisms to discourage harmful behaviour by market participants may in some cases reduce risks for consumers stemming from information asymmetries."

"Absolute bans and quantitative restrictions of an activity normally constitute a measure of last resort. They should in general only be applied if and where no less restrictive requirements to attain a legitimate public interest objective can be used. For example, banning short-term letting of apartments appears generally difficult to justify when the short-term rental use of properties can for example be limited to a maximum number of days per year. This would allow citizens to share their properties on an occasional basis without withdrawing the property from the long-term rental market," it said.

The Commission said that where platforms "provide a service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services" then they "cannot be subjected to prior authorisations or any equivalent requirements that are specifically and exclusively targeting those services" under EU law.

However, it said in some cases platforms may be considered to be providers of the services they otherwise facilitate access to. In those cases the platforms can legitimately be placed subject to regulatory requirements that apply to the provision of such services.

"In such a case, collaborative platforms could be subject to the relevant sector-specific regulation, including business authorisation and licensing requirements generally applied to service providers," the Commission said. "Whether a collaborative platform also provides the underlying service will normally have to be established on a case-by-case basis. Several factual and legal criteria can play a role in this regard. The level of control or influence that the collaborative platform exerts over the provider of such services will generally be of significant importance."

The influence platforms exert over the price of services they facilitate access to and over the terms and conditions that apply between service providers and service users are factors which can help determine whether platforms should be regulated as service providers too, as well as whether they "own the key assets used to provide the underlying service", it said. Other factors, including where a platform "incurs the costs and assumes all the risks related to the provision of the underlying service" or is involved in an "employment relationship" with the service provider could also be relevant to that assessment, it said.

The Commission explained, however, that it may not necessarily be justified to regulator platforms as service providers if they merely assist service providers by carrying out "ancillary" activities, such as facilitating payments or providing insurance coverage, or if they offer systems of user ratings or reviews.

"Generally speaking, the more collaborative platforms manage and organise the selection of the providers of the underlying services and the manner in which those underlying services are carried out – for example, by directly verifying and managing the quality of such services – the more apparent it becomes that the collaborative platform may have to be considered as also providing the underlying services itself," the Commission said.

"Therefore, a collaborative platform providing services in the short-term rental sector may only provide information society services and not also the accommodation service itself if, for example, the provider of the accommodation service sets its own prices and the platform does not own any of the assets used for that service provision. The fact that the collaborative platform may also offer insurance and rating services to their users need not alter that conclusion," it said.