Highlights from the new EU guidelines on the Collaborative Economy

European Commission Vice-President Jyrki Katainen, during the Press Conference (from the website)

Yesterday the EU released “Guidance and policy recommendations for the collaborative economy” with a press conference featuring no less than Jyrki Katainen, European Commission Vice-President for Jobs, Growth, Investment and Competitiveness. Official documents are available here.

I’m working on a longer analysis piece that will put this guidelines in relation to what’s happening in Europe — at least from my point of view and privileged position in the Ecosystem as OuiShare Connector and Program Co-Chair or OuiShare Fest — but I’ll share here some highlights for those who might have no time to read the documents and watch the half an hour long conference.

A Liberal guideline, driven by Markets

In general, this guidelines show a strongly market oriented approach, which essentially looks at regulations as ways to improve market performances, make the European Digital Single Market an environment capable of attracting and incubating new digital businesses and let them possibly grow.

According to Jyrki Katainen, there’s now a global competition for regulations (translation: for the most laissez-faire) and Europe “can’t have fragmented regulations”. He said that European DSM is essential for startups to scale up and avoid that “these businesses will grow somewhere else”. Adopting a widely discussed lexicon he said that “Europe’s next Unicorn should stem from the collaborative economy”.

Katainen stressed the point that “we can’t send businesses away because we protect existing business models and several time put the old and new business models on the same plate: clear message EU won’t protect existing models just for the sake of saving jobs (eg: Taxi and Hotel business models).

“Regulating the past is easy, regulating the future is hard”

Overall it seemed a presentation really in line with the heritage of Neelie Kroes that, as some of you may know, it’s now Uber policy advisor.

In the following minutes Elżbieta Bieńkowska, the Commissioner for Internal Market, Industry, Entrepreneurship and SMEs that apparently lead the working group, reinforced the message with a few statements.

Elżbieta Bieńkowska, the Commissioner for Internal Market, Industry, Entrepreneurship and SMEs

She highlighted how two elements would undermine EU growth (still firmly the North Star) in the Collaborative Economy: uncertainty of the rules and a the emergence of regulatory fragmentation (at national, local and regional level).

Bieńkowska confirmed also that, according to the guidelines:

  • absolute bans are measures of last resort
  • applying the same rules to occasional providers and full time professionals is not appropriate

She also told the audience that a primary objective of the guidelines is to help understand when a platform is a service provider and when it’s just an intermediary (“Q: is Uber a transport company?”) and to clarify whether a person is an independent professional or employee (“Q: should Uber Drivers be considered employees?”).

Finally, Bieńkowska confirmed that EU will enforce the application of EU laws in the member states on this matter.

A few Highlights from the Guidelines Document

Document available here: http://ec.europa.eu/growth/single-market/strategy/collaborative-economy/index_en.htm

A first important consideration to make is that most of the Guideline document works on characterizing the Collaborative Economy platforms most likely as intermediaries or, like EU bureaucracy calls them, digital Information Society Services. These entities are generally lighter regulated than traditional Service Providers (eg: the difference in regulation due to being considered a Taxi hailing app vs being considered a Transport Provider is huge).

On being an Information Society Service vs being a Service Provider

Three key mechanism are indicated to help member state differentiate Information Society Services (intermediaries) and Service Providers:

1 — The platform sets the price mandatorily
2 —The platform sets other key contractual terms such as mandatory instructions on how the underlying service, should be provisioned (including the obligation to provide the service)
3 — The platform owns the key assets used to provide the underlying service

In case these three are true there’s a strong possibility that the platform is to be considered a Service Provider and therefore be regulated by existing rules. (Hint: Uber has 1 and 2 but not 3. So the thing is still open.)

“More generally speaking, the more collaborative platforms manages and organise the selection of the providers […] and the manner in which those 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 a service provider]”

On Professionalism vs non-professionalism

The framing on understanding who’s a professional vs who’s only an occasional peer to peer provider is still very confused: there’s also the acknowledgment that member state are regulating this aspect non consistently.

“For the purposes of regulating the activities in question, private individuals offering services via collaborative platforms on a peer-to-peer and occasional basis should not be automatically treated as professional service providers. Establishing (possibly sector specific) thresholds under which an economic activity would be considered a nonprofessional peer-to-peer activity may be a suitable way forward.”

Three key mechanism are set to differentiate professional behavior (subject to specific requirements such as KYC, Safety, etc…) from non-professional one:

1 — The frequency of the activity on the platform by the peer
2 — The turnover generated by the peer 
3 — The fact she’s seeking for profit

Also platforms need to make possible for the consumer to distinguish and clarify whether or not the other entity is a professional trader or not. As an example, an Airbnb Superhost that is renting his second home all the time would definitely qualify as a trader (since all 3 aspects are present) and may soon need to have an official permit, a safety equipped house, register documents of guest and her profile should soon be labeled on the platform as such (professional). On the other hand, a Blablacar driver is not going to be considered a trader (only having number 1 possibly). In a few words as platforms help a person to “professionalize” (a trait that is peculiar of successful platforms) she should need to comply with existing regulations for professional traders at some point.

On a wider point of view the directive seeks to look at the typology of work relationship existing on collaborative economy platforms in the following way:

  • non professional / voluntary
  • independent professional
  • employee status

Essentially, within the existing EU framework an employment relationship should be considered in place when:

  • there’s a subordination link with the trader acting under the direction of the platform, the latter “determining the choice of the activity, remuneration and working conditions”
  • if there’s a real remuneration (not merely a compensation of costs incurred) and the activity is of economic value that is effective and genuine “excluding services on such a small scale as to be regarded as purely marginal and accessory”.

On Taxation and Liabilities

The document generally explains that the collaborative economy taxation schemes should comply with existing taxation schemes. The document praises the approach of estonian government that receives data from the platforms and use it to pre-compile tax declarations. 
Unnecessary burdens placed on economic player are pointed out as dangerous: for example, the new italian Sharing Economy Act which implies a strong integration between platforms and governmental systems for tax collection and even makes platforms tax withholding entities, may be seen as an unnecessary burden for new platforms entering the market. Data exchanges are definitely more encouraged.

Also, essentially, platforms are seen as not responsible for illicit activities carried on the platform itself and don’t need to actively seek for illegal behaviour. They remain liable for the ancillary services they provide directly (for example they would be liable for a security breach in a payment system).

“Collaborative platforms should take a proactive stance in cooperating with national tax authorities to establish the parameters for an exchange of information about tax obligations”

Monitoring and the future of regulations

Finally, it’s a very good news that EU is starting a monitoring activity and will produce a continuously updated Single Market Scoreboard. This activity will feature:

  • a periodic survey of consumers and businesses on the use of the collaborative economy
  • an ongoing mapping of regulatory developments in Member States
  • a dialogue with all stakeholders in the framework of the Single Market Forum (twice yearly forums to assess sector development on the ground and to identify good practices)

Every effort in grounding regulations in data is to be appreciated and welcome.

Brief Conclusions

It will be interesting to see how this EU guideline plays out in the wild of European Member State regulations. At a first sight, it seems that Italian Sharing Economy Act (which is by far the most advanced national collaborative economy regulatory framework in Europe) is fairly overlapped with the EU suggestions — sharing at least the permissive approach — but is still way too bureaucratic and should be likely simplified.

In general the EU guideline looks conflicting with the bulk of the regulations and visions spurred in the last few months in Europe, mostly to protect local communities and existing stakeholders from the disruption of the platform’s age.

Stay tuned for deeper thoughts.