The European Commission gives the green light to the collaborative economy, by Ignacio González Royo.

1. Some facts and figures

Creating new opportunities for consumers and entrepreneurs, gross revenue from collaborative platforms in the European Union (“EU”) represented in 2015 nearly € 25 billion and its growth is expected to rise from € 160 to 572 billion in the next years, according to recent data offered by the European Commission (“EC”). In addition, consumers are increasingly interested in participating in this business models.
 
Consequently, both national and European authorities have to provide an answer in order to ensure new business models can flourish. The case, however, is not that simple regarding regulators as in most European countries highly-regulated sectors, such as local transportation, fiercely oppose to the sharing economy.
 

2. Definition of “collaborative economy”

The EC provides its own definition of “collaborative economy”:
 
“For the purposes of this Communication, the term “collaborative economy” refers to business models where activities are facilitated by collaborative platforms that create an open marketplace for the temporary usage of goods and services often provided by private individuals. The collaborative economy involves three categories of actors: (i) service providers who share assets, resources, time and/or skills – these can be private individuals offering services on an occasional basis (“peers”) or service providers acting in their professional capacity (“professional services providers”); (ii) users of these; (iii) intermediaries that connect – via an online platform - providers with users and that facilitate transactions between them (“collaborative platforms”). Collaborative economy transactions generally do not involve a change of ownership and can be carried out for profit or not-for-profit”.
 

3. Market access requirements

A key question for authorities and market operators alike is whether and if so to what extent, under existing EU law, collaborative platforms and service providers can be subject to market access requirements. These can include business authorizations, licensing obligations, or minimum quality standard requirements (e.g. the size of rooms, the type of cars, insurance or deposit obligations etc.).
 
First of all, the EC makes it very clear that absolute bans and quantitative restrictions of an activity should constitute a measure of last resort. They should only be applied if and where no less restrictive requirements to attain the same legitimate public interest objective can be used. Secondly, the EC reminds that, under the Services Directive (1) and the EU Law, “service providers are not to be subject to market access or other requirements, such as authorization schemes and licensing requirements, unless they are non-discriminatory, necessary to attain a clearly identified public interest objective and proportionate to achieving this interest. This also applies to the regulation of professions”.
 
Therefore, the EC invites Member States to review whether the objectives pursued in existing legislation remain valid, both in relation to the collaborative economy and to traditionally operating service providers.
 

4. How to regulate “Collaborative Economy”?

In order to regulate collaborative economies, Member States should keep the previous criteria in mind (non-discrimination, necessity, public interest, and proportionality), as well as considering the specific features of these new business models. And where service providers are legitimately required to obtain authorizations or licenses, Member States should ensure that relevant administrative procedures and formalities are clear, transparent and not unduly complicated.
 
Another issue is whether people participating in the platforms on a peer-to-peer and occasional basis are to be deemed professionals and, therefore, whether they have to comply with the relevant obligations applying to professionals. The EC encourages Member States to set certain limits in order to distinguish a professional from a merely private individual offering an occasional service. This should be done by setting thresholds such as, for example, a limit to the rental of private houses (90 days) or a minimum annual turnover for service providers.
 

5. Liability regimes

The EC reckons that the collaborative platforms can benefit, if their conduct is neutral, automatic and passive, from the hosting services exemption of liability (regulated by the E-Commerce Directive), provided that they do not have knowledge of the illegal content and, where that knowledge or awareness is gained, they act expeditiously to remove it. Furthermore, the EC encourages the platforms to implement voluntary reviewing systems, which should not be automatically considered as a way of control that might let the platform out or the liability exemption.
 
However, the EC knows that in some cases the platforms organize and offer directly the services or the goods and, therefore, may not always be deemed “intermediaries” but “providers of the service”. In order to decide whether a platform is an intermediary or a provider of the underlying service, an assessment should be made on a case-by-case basis, looking at how much control the platform exercises over the underlying service (e.g. by considering a number of factors such as who sets the price, who owns the key assets, the contractual terms, the employment relationship, amongst other criteria).
 

6. Protection of users

Another important concern about sharing economy is consumer protection. Inside the collaborative economy marketplaces it is difficult to set out who is a consumer and who is a trader (in this connection the EC states that useful criteria to identify a trader are the frequency of the services, the profit-seeking motive or the level of turnover, among others, considered on a case-by-case level).
 
All traders (including collaborative platforms qualifying as traders) must comply with professional diligence duties and not mislead consumers. In addition, collaborative platforms and providers of underlying services may be required to comply with other applicable information obligations under EU law, including transparency requirements of the relevant sector-specific legislation. Moreover, like any other controllers collecting and further processing personal data in the EU, collaborative platforms must comply with the applicable legal framework on the protection of personal data.
 
In any case, the EC encourages Member States to seek a balanced approach to ensure that consumers enjoy a high level of protection in particular from unfair commercial practices, while not imposing disproportionate information obligations and other administrative burdens on private individuals who are not traders but who provide services on an occasional basis.
 

7. Employment

The distinction between self-employed and workers in the sharing economy has been a hot topic lately in the U.S. and the EU. The Commission insists on the common notion of a “worker” and encourages the Member States to assess the adequacy of their national employment rules considering the new context. Indeed, the Court of Justice of the European Union (“CJEU”) provided a definition of worker for the purpose of applying EU Law: “the essential feature of an employment relationship is that for a certain period of time a person performs services for and under the direction of another person in return for which he receives remuneration”.
 
Whether an employment relationship exists or not has to be established considering three aspects: (i) the subordination link, that exists when the service provider acts under the direction of the collaborative platform, that is to say, he is not free to choose which services provide and/or when; (ii) the nature of the work, meaning the service provider has to perform a truly economic activity that generates value, excluding marginal, small-scale services, and (iii) the remuneration: if the service provider does not receive a salary or it is merely a compensation for the cost there is not a remuneration, according to the EC.
 

8. Taxation

The EC’s aim is to avoid fraud and ensure everyone complies with their taxation obligations over personal income, corporate income and Value Added Taxes (“VAT”). The EC encourages the Member States to implement systems to exchange information and collect taxes from the platforms. A model to be followed is that of Estonia, which has implemented a partnership between the Tax Administration and the ride-sharing drivers.
 
Regarding VAT, the EC announces its purpose of reforming the tax, implementing a VAT one-stop shop for electronic services.
 
Finally, it calls for the “level playing field” principle for business providing the same service, meaning that any agent performing the same economic activity (whether a collaborative platform or a common company) has to be treated equally regarding tax payment.
 
***
In summary, this Communication provides useful guidance on some of the hottest topics in connection with the collaborative economy and deals with some of the concerns that we (as lawyers) had previously raised and discussed.

 
Ignacio González Royo is a senior associate at Garrigues in the Intellectual Property practice in the Telecommunications & Media and Sports & Entertainment industries. Member of the Academic Council of Fide

_________________________________________________________________________________________________________________________________________________
(1) Articles 9 and 16 of Directive 2006/123/EC (the “Services Directive”)