EUGH Aktenzeichen C-390/18 – The CJEU Finally Clears the Air(bnb) Regarding Information Society Services

Case Note to CJEU, EUGH Aktenzeichen C-390/18 Airbnb Ireland

Liesbet Van Acker ^{zur Fussnote *}

I. Introduction

“Yes to the sharing economy. Yes to Parisians who rent their apartment a few days a year to have a small additional income. No to those who make money preying, destroying residential housing and risking making Paris a museum city.” – Anne Hidalgo, mayor of Paris, takes a stance on Airbnb. ^{zur Fussnote 1}

This summer, reportedly 8,5 million French citizens used Airbnb between the 1st of June and the 31st of August. 5 million of those guests stayed at accommodation in France. ^{zur Fussnote 2} Although Airbnb is popular amongst travelers, the French government installed, under pressure from the hotel lobby, a range of measures to limit the market growth of Airbnb, including a tourist tax ^{zur Fussnote 3} and a limit of the duration of rentals ^{zur Fussnote 4}. ^{zur Fussnote 5} Besides these measures, the Association pour un hébergement et un tourisme professionnels (‘AHTOP’) lodged a complaint concerning the classification of Airbnb as a real estate agent. If classified as such, Airbnb would need a license for its activities. The dispute following the complaint resulted in a preliminary reference to the Court of Justice of the European Union ^{zur Fussnote 6} (‘CJEU’) on the applicability of Directive 2000/31 ^{zur Fussnote 7} and the compatibility of the relevant French measures with this Directive. Put simply, the CJEU had to decide whether Airbnb provides an information society service or an accommodation service. A link is quickly established between the Airbnb case and the controversial Uber cases ^{zur Fussnote 8} decided previously. Consequently, the Airbnb case provided the CJEU with the opportunity to clarify or further cement the conclusions drawn in previous cases with regard to the concept of ‘information society services’.

II. Summary of the facts

Airbnb Ireland UC, as part of the Airbnb Group, is a platform established to connect hosts, who would like to rent out their property short-term, with renters looking for a place to stay. ^{zur Fussnote 9} For the present analysis, it is important to know that Airbnb Ireland UC (‘Airbnb’) also provides services to further support the intermediary service and facilitate trust in the platform. Among other things, it provides a photography service, an option for civil liability insurance, a format for the layout of the offer and an evaluation tool. Besides this, it also provides the hosts with a tool to estimate the rental price. However, this is merely a suggestion and the hosts ultimately determine the rental price. ^{zur Fussnote 10}

France, one of the EU Member States where Airbnb is active, passed the Hoguet Law in 1970. Under this act, all real estate agents are required to hold a professional license under penalty of 6 months imprisonment and a fine of 7500 euros. ^{zur Fussnote 11} In 2017, the AHTOP launched a complaint against Airbnb claiming that Airbnb violated the provisions of the Hoguet Law. ^{zur Fussnote 12} Following the complaint of AHTOP, the Public Prosecutor of the Tribunal de grande instance de Paris initiated criminal proceedings. ^{zur Fussnote 13} It is this tribunal that asked the following questions to the CJEU.

III. Questions referred

The first question asked whether the services provided by Airbnb are information society services within the scope of Directive 2000/31. ^{zur Fussnote 14} Secondly, if the CJEU decides that Airbnb falls within the scope of the Directive, the question arises whether the Hoguet law can be enforced against Airbnb. ^{zur Fussnote 15} Or, worded differently, it must be asked whether the measures taken on the basis of the Hoguet law are compatible with the rules laid down by Directive 2000/31.

It is important to note that the CJEU was not asked to assess whether Airbnb is a real estate agent under Hoguet Law. This is a matter of national law and therefore outside the jurisdiction of the CJEU. ^{zur Fussnote 16}

IV. Judgment of the CJEU

In short, the AHTOP argued that Airbnb’s services are accommodation services and fall under the definition of services in the Services Directive ^{zur Fussnote 17} that set forth the free movement of services in the broad sense. Additionally, they argued that Airbnb’s services do not qualify as information society services in the sense of Directive 2000/31. The AHTOP argued in subordinate order that the platform services form an integral part of an overall accommodation service.

By contrast, Airbnb denied being a real estate agent and hinged its argumentation on the alleged incompatibility of the Hoguet Law with Directive 2000/31. ^{zur Fussnote 18} This Directive guarantees the free movement of information society services by forbidding Member States to introduce barriers to the free movement of information society services provided by a company that is established in another Member State. In that regard, an information society service is defined as ‘any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services’. ^{zur Fussnote 19} Directive 2000/31, however, allows Member States to derogate from the general rule and to adopt measures restricting the freedom to provide information society services if they are necessary for extraordinary objectives, such as public health or public security, and they are taken against a company violating or risking to violate those objectives. ^{zur Fussnote 20} But, the Member State in question is obliged to first ask the Member State of the place of establishment of the offending company to take measures and it has to notify the European Commission. ^{zur Fussnote 21} Only in case of urgency, a Member State is allowed to take measures without notifying the European Commission and the Member State of the place of establishment. ^{zur Fussnote 22} None of the parties has argued that there was an urgency in this given case scenario.

First, the CJEU assessed whether the services provided by Airbnb are information society services. The CJEU described the Airbnb’s services as follows: ‘an intermediation service which, by means of an electronic platform, is intended to connect, for remuneration, potential guests with professional or non-professional hosts offering short-term accommodation services, while also providing a certain number of other services.’ ^{zur Fussnote 23}

The CJEU emphasized that the services provided by Airbnb, either way, fall within the definition provided by article 57 TFEU and the Services Directive. ^{zur Fussnote 24} However, article 3 of the Services Directive determines that other, more specific directives take precedence in case of a conflict with the provisions of the Services Directive. ^{zur Fussnote 25} This called for an analysis of whether Airbnb’s services fall within the scope of Directive 2000/31 and are thus information society services. Several cumulative conditions need to be fulfilled in this regard. ^{zur Fussnote 26} First, the CJEU decided that the Airbnb services are provided for remuneration, even though this remuneration is only paid by the guest. ^{zur Fussnote 27} Second, the services are supplied electronically and at a distance, because Airbnb and the host or guest exchange information only on the platform. ^{zur Fussnote 28} Lastly, the service is granted at the individual request of the recipients. ^{zur Fussnote 29} The CJEU thus, preliminary, concluded that the Airbnb services are information society services, and fall within the scope of Directive 2000/31. ^{zur Fussnote 30}

The analysis of the CJEU did not stop here. It recalled the conclusion reached in the Asociacion Profesional Elite Taxi case (‘Uber Spain’), where the CJEU concluded that if the service ‘forms an integral part of an overall service whose main component is a service coming under another legal classification’ this service cannot be classified as an information society service differing from the overall service to which it is linked. ^{zur Fussnote 31} Somewhat confusingly, the CJEU had previously decided that the service of Airbnb was provided electronically and at a distance, while the argumentation about mixed services is triggered by the fact that the service is not provided fully electronically or at a distance, as was the case in the Ker-Optika and Uber cases. ^{zur Fussnote 32} If the CJEU wanted to be fully consistent with the line of argumentation in previous cases, it could have stopped its analysis after this conclusion.

Nonetheless, the CJEU analyzed whether the platform services form an integral part of an overall service, more specifically an accommodation service. The CJEU decided that the essential element of the service of Airbnb is the listing of the accommodations and, thus, that the intermediary service cannot be seen as ancillary to another service. In his opinion dated 30 April 2019, Advocate-General Szpunar deduced two conditions from the Uber cases for the conclusion of an inseparable link between the accommodation service and the intermediary service: (i) the services create a new market and (ii) the provider exerts decisive influence. ^{zur Fussnote 33} If the CJEU finds an inseparable link, the intermediary services would be an integral part of the accommodation service and thus be judged as such.

The CJEU followed this line of argumentation and emphasized, first, that Airbnb did not create the market for accommodation services. In that regard, the CJEU mentioned estate agents, classified advertisements and property letting websites, who created this market long before Airbnb was founded. With regards to the creation of a market, the Advocate-General rightly pointed out that Airbnb, contrary to Uber, also allows professional hosts, for whom there was already a market, on its platform. ^{zur Fussnote 34} The CJEU did, however, not include this argument in its judgment. Second, the CJEU highlighted the free choice of hosts in determining the renting price, which shows a lack of decisive influence on Airbnb’s part. Taking all this into account, the CJEU concluded, in line with the opinion of the Advocate-General, that the platform services are not an integral part of an overall accommodation service, and are thus information society services. ^{zur Fussnote 35}

The CJEU then further analyzed whether the ancillary services, such as the photography service, change the classification of the services. In this regard, the CJEU emphasized again that the host sets the price and points out the paradoxical nature of ancillary services changing the classification of the intermediation service. Thus, it concluded that the ancillary services do not substantially modify the nature of the intermediation service. ^{zur Fussnote 36}

The CJEU continued by explaining why a different conclusion is drawn for Airbnb than in the two Uber cases. The crux of the argumentation in the Uber cases was whether Uber exercised decisive influence, which was held to be the case. Contrary to Uber, Airbnb does not exercise such decisive influence in the CJEU’s opinion, because it does not decide the rental price and it does not, to a large extent, select the host or the accommodation allowed on the platform. ^{zur Fussnote 37}

Because the CJEU answered the first question affirmatively, it proceeded to analyze whether the Hoguet Law is enforceable against Airbnb and thus compatible with Directive 2000/31. The CJEU first confirmed the restrictiveness of the Hoguet Law. ^{zur Fussnote 38} The measure violates the free movement of services because it restricts access to an activity through the requirement to hold a license. However, Member States are allowed to derogate from the free movement of services if they fulfill the requirements of article 3(4) of Directive 2000/31. Contrary to the Advocate-General, ^{zur Fussnote 39} the CJEU did not analyze the first prong of the derogation, i. e. whether the measures are necessary and proportionate. The second prong of the derogation requires the deviating Member State to request the Member State where the undertaking is established to undertake steps. In this case, the French government, as the deviating Member State, refrained from doing so. The question then remains whether this has an impact on the enforceability of the Hoguet Law. The CJEU first pointed out that the Directive is ‘sufficiently clear, precise and unconditional to confer on it direct effect’. ^{zur Fussnote 40} Secondly, the CJEU confirmed that the requirement to contact the Commission and the other Member State is an essential procedural requirement. ^{zur Fussnote 41} Lastly, the CJEU emphasized that the requirements in the Directive are there to stop Member States from acting beyond the competences laid down by European Union law. ^{zur Fussnote 42} In conclusion, the CJEU deemed the Hoguet Law unenforceable against individuals based on its incompatibility with Directive 2000/31. ^{zur Fussnote 43}

V. Analysis

The Airbnb case cannot be read without referring to its predecessors, the Ker-Optika case and the Uber cases. In Ker-Optika, the CJEU addressed the concept of ‘mixed services’ for the first time. ^{zur Fussnote 44} This concept includes services where the service is partly provided online and partly offline. ^{zur Fussnote 45} In the Ker-Optika case, the CJEU decided that the two services, namely the online service (i. e. the sale of contact lenses) and the offline service (i. e. the delivery of the contact lenses) should be characterized differently. Respectively, the online service is an information society service while the offline service is not. ^{zur Fussnote 46} The CJEU then further refined these findings in the Uber Spain ^{zur Fussnote 47} case and confirmed it in the Uber France case ^{zur Fussnote 48}. The CJEU, quite controversially, decided that the intermediation service was an information society service. However, because the intermediation service was an integral part of the transport service, the overall service needed to be classified as a transport service and thus not as an information society service. ^{zur Fussnote 49} The CJEU relied on two main arguments to show that the intermediation service was an integral part of the transport service. First, Uber created the market and second, Uber exercised decisive influence by, for example, setting the price and exercising control over the quality of the cars and the conduct of the drivers. ^{zur Fussnote 50}

At first glance, it seems that the CJEU followed the same structure of analysis for the Airbnb case. As discussed, it decided that the intermediation service is an information society service and then studied whether it was an integral part of an accommodation service. It decided against the ‘integral part’ argument based on the prior existence of a market and the fact that Airbnb does not exercise decisive influence because it does not set the price.

However, the question arises whether the CJEU applied the theory or whether it rather reverse engineered the facts to make them fit within the theory. The first discrepancy can be found when analyzing the argumentation of the CJEU concerning the market creation argument. Although it seems reasonable to state that Uber created a market, it seems less convincing that Airbnb did not create a market. While it is true that several tools were already available to let accommodation short-term, Airbnb opened up the market for normal house owners and renters to (sub)let their property.

In that sense, it is important to note that Airbnb allows, and encourages, professional hosts to advertise on their platform. ^{zur Fussnote 51} In short, a B2B market for short-term letting already existed, but Airbnb created, as a new aspect, a B2C market in addition to the B2B market. However, it seems that the CJEU did not made a division between the B2B and B2C market and thus decided that Airbnb, in its entirety, falls within the market for short-term letting, that already existed. The exact ratio of how many hosts are consumers and how many are professional is unknown. This knowledge-gap may be linked with the fact that the division between consumer and professional becomes blurry when hosting on Airbnb becomes a regular activity for the consumer. ^{zur Fussnote 52} This is a recurring problem in the ‘collaborative economy’ ^{zur Fussnote 53}, where peers and professionals act side by side. ^{zur Fussnote 54} This also creates complicated problems with regard to labor law provisions. ^{zur Fussnote 55} Nonetheless, considering that at least part of the

market in which Airbnb operates, namely the B2B market for short-term letting, already existed, we can conclude that, on a moving scale, Uber did create more of a novel market than Airbnb.

Less problematic is the ‘decisive influence’ argument. Although Airbnb has the power to suspend or fine a host, cancel a reservation or deny access to the platform, the host decides when he would like to welcome guests, the house rules and the reservation criteria. ^{zur Fussnote 56} Most importantly, the host decides the price on the platform. This was the decisive argument mentioned by the CJEU. In the Uber France case, the CJEU mentioned several arguments regarding the question of decisive influence. ^{zur Fussnote 57} Closely resembling the subordination criterion in employment law, ^{zur Fussnote 58} decisive influence in the Uber cases resulted from the determination of, amongst others, a maximum fare and the control over the quality of the vehicles, drivers and conduct of the drivers. ^{zur Fussnote 59} In Airbnb, the CJEU seems to narrow it down to who sets the price. ^{zur Fussnote 60} This interpretation also connects to a larger question on the definition of the online intermediaries in the collaborative economy. While Uber, Airbnb and others are often mentioned in one breath, this decision, as several authors already suggested, ^{zur Fussnote 61} shows that we must not tar all platforms with the same brush. Rachel Botsman defines Uber as an on demand-service, i. e. “platforms that directly match customer needs with providers to immediately deliver goods and services” and Airbnb as a part of the sharing economy, i. e. “an economic system based on sharing underused assets or services, for free or for a fee, directly from individuals”. ^{zur Fussnote 62} Although these definitions might not be completely accurate, they show that different online intermediaries exist and the same legal test can thus be applied with different results.

This theory has a lot of potential to be repeatedly used and further developed in the near future. BlablaCar may be a future case. BlablaCar ^{zur Fussnote 63} is a platform that connects travelers driving in the same direction. A person with empty seats in its car posts the details about their travels on the platform and carpools with anyone driving in the same direction. If the current interpretation is followed, the CJEU will need to check whether BlablaCar has decisive influence, and thus decides the prices of the trips. Interestingly, in practice, BlablaCar suggests a price and the driver has to set his price within a certain range of the suggested price. The question arises whether this constitutes decisive influence or whether the CJEU will have to look at other aspects of the intermediation service. If we look at the issue of market creation, it seems like BlablaCar did create a market for carpooling. Another thought-provoking difference between, on the one side, Airbnb and Uber, and, on the other, BlablaCar is that the costs in the latter system are shared, while for Airbnb and Uber they are one-sidedly paid. ^{zur Fussnote 64} Interesting discussions will undoubtedly follow as to whether the intermediary services of BlablaCar are an information society service, or whether they are part of the larger category of transport services. Another example of a possible intermediary service, which could qualify as an information society service, could be a delivery platform Deliveroo. ^{zur Fussnote 65}

To conclude, two lessons can be drawn from the Airbnb-case. First, it seems that the CJEU is settled on how to deal with intermediary services of platforms in the sense of Directive 2000/31. It started with the Ker-Optika case, where the CJEU introduced mixed services. Then the CJEU continued the analysis for cases where the intermediary services are part of an overall service, establishing the market creation and decisive influence argument. For now, this discussion finishes with the Airbnb case crystalizing the arguments from previous Uber cases. Second, the CJEU focusses on who sets the price when determining whether a platform had a decisive influence. These conclusions are important to create legal certainty for several companies in the collaborative economy.

This legal certainty could also be achieved if the legislator creates a legislative framework regarding the services provided by platforms. It has generally been accepted that “two of the most significant obstacles to the development of the digital economy have been the existence of outdated national legislation and regulation which was enacted decades ago and the regulatory uncertainty regarding the rules, rights and obligations applicable to digital platforms” ^{zur Fussnote 66} The most efficient way to regulate online intermediaries would be to adopt legislation at the European level. However, up until this point, the European Union has mainly implemented a ‘wait and see’ policy with regards to legislation out of fear to repress innovation. ^{zur Fussnote 67} Nevertheless, the European Commission has recently instigated a debate about a possible, new Digital Services Act. Commission president von der Leyen has mentioned this Act in her political guidelines ^{zur Fussnote 68} and the Act was also presented as part of the “A Europe fit for the digital age” plan unveiled in February 2020. ^{zur Fussnote 69} The Digital Services Act would be specifically aimed at regulating the platform economy, including new rules on competition law, content moderation, and e-commerce. Thus, pending legislation, it is the CJEU who clears the air to allow this sector to further grow and develop.