Providing clarity for the development of the collaborative economy

Unpublished

The collaborative economy is a new and fast-growing area of economic activity based on individual citizens and businesses sharing assets, services and skills via online platforms. It has the potential to increase the efficiency, transparency, range and convenience of services available in the EU, at the same time as reducing their costs for consumers.

The collaborative economy has blurred the lines between consumers and providers, businesses and individuals, and platforms and end-service providers. This has led to some uncertainty about which laws apply to it and how. EU countries have chosen different approaches: some decided to allow the provision of collaborative services without the need for prior authorisations, others require such authorisations, and yet others forbid them altogether. Approaches also differ between services sectors.

To address regulatory uncertainty, the European Commission is providing guidance to EU countries and market operators on how EU rules apply to the collaborative economy, along with policy recommendations on how to ensure a balanced development of the collaborative economy based on good practices. The aim is to prevent fragmentation of the Single Market and to realise the collaborative economy's potential to drive growth and competitiveness.

What benefits does the collaborative economy bring?

The collaborative economy enables citizens, fast-growing start-ups, and established companies to offer and use services and share assets via online platforms. From sharing houses or car journeys to offering cleaning or gardening services - collaborative services are widely offered via online platforms today. More than half of EU consumers are aware of collaborative economy services or have used or offered them.

Consumers can benefit from greater convenience and a wider range of services, often at lower prices. The collaborative economy also encourages more asset-sharing which can directly contribute to the EU's sustainability agenda and efficient use of resources. It also creates growth and provides job opportunities, including for those seeking flexible employment and for European entrepreneurs. Both citizens and entrepreneurs can benefit by offering services on an occasional basis - such as renting out a house or apartment - or professionally, as part of an ongoing business.

The collaborative economy is significant in terms of economic size, accounting for €28 billion in spending on goods and services in 2015. As well as the most well-known platforms, it also includes more specialised services, such as time banks, or individuals providing skills such as interior design and expertise. It is growing rapidly.

What is the challenge?

Collaborative economy models present new options to consumers in sectors that until now consisted of providers with traditional business-to-consumer models. Generally, EU countries have in place specific legislation applicable to the sectors where the collaborative economy providers are active (transport rules, tourism rules, etc.) which were adopted well before the start of the collaborative economy. Such rules may not fit the nature of services provided by the collaborative economy, taking into account that these are often provided by citizens who are not professionals.

Some public authorities have tried to accommodate the collaborative economy by, for instance, designing specific legislation. Others decided to ban or restrict certain collaborative economy business models. Such divergent approaches create a risk of regulatory fragmentation across the Single Market.

There are also concerns regarding regulatory uncertainty. For example on what rules apply to the collaborative economy when it comes to market access requirements, consumer protection, liability issues, or in relation to the employment relationship, if any, between services providers and platforms. This uncertainty discourages people from making use of the opportunities offered by the collaborative economy.

New business models in the collaborative economy can challenge existing businesses with whom they can compete for customers. Yet the collaborative economy can also be seen as complementing more traditional businesses models as the services they offer may differ. In addition, many traditional services providers are starting to use platforms to reach potential customers.

Traditional businesses sometimes complain about a higher perceived regulatory burden and a resulting comparative disadvantage compared to those offering services via the collaborative economy. The Commission Communication is clear in this regard: all businesses and citizens are obliged to comply with tax obligations, all consumers should be protected and all employees should enjoy their rights where there is an employment relationship – irrespective of the business model at hand. The challenge is to ensure that any rules put in place are actually necessary and proportionate to reach their policy objective. This is true for both the collaborative economy and traditional business models.

What solutions is the Commission putting in place?

Today's Communication aims to give legal clarity on EU rules relating to the collaborative economy and includes guidelines on how existing law, such as the Services Directive, E-Commerce Directive, Unfair Commercial Practices Directive and Consumer Rights Directive should be applied to this new economic model. This legal certainty will promote the balanced development of the collaborative economy in Europe.

Based on this guidance, and on examples of good practice, the Communication also makes policy recommendations to support EU countries in applying EU law consistently across the Single Market in relation to the following issues:

Market access requirements for collaborative services and collaborative platforms: EU countries should only impose market access requirements where these are justified and proportionate to reach a public interest objective; total bans of activity would normally not appear proportionate. New business models and individual citizens should be able to provide services either on a professional or occasional basis, and national rules need to be applied accordingly so that they are proportionate and just.
How EU consumer law protects users in their relationship with collaborative platforms and people offering services: all traders must ensure that they do not mislead users, provide the necessary information, and respect transparency and professional diligence requirements. Collaborative platforms often use rating and review mechanisms to increase consumer trust and improve the quality of services on offer. Guidance is also provided on determining when individual service provides may qualify as a 'trader' and thus need to comply with consumer laws vis-à-vis the end user.
On liability regimes: collaborative platforms can under certain conditions be exempted from liability for information they store on behalf of those offering a service. Liability for the bad execution of a contract or for violation of contractual terms is determined by national laws.
When a service provider should be considered an employee of the collaborative platform: while EU countries remain competent to define who is a worker, the guidance clarifies that several criteria apply. Namely whether the services provider acts under the direction of the platform (i.e. the platform determines the choice of activity, remuneration and working conditions), the nature of the work (e.g. is it genuine, effective and regular), and whether the work is remunerated.
On taxation: the Commission recommends that EU countries establish a close cooperation between national authorities and collaborative platforms and invites them to assess their tax rules to create a level playing field for businesses providing similar services.

Monitoring developments in the collaborative economy

Today's communication is a milestone for the collaborative economy which will pave the way for the Commission's future policy development. Given the rapidly changing landscape and growth of the collaborative economy across several sectors, the Commission is developing a monitoring system to keep track of both the evolving regulatory environment and economic and business developments. The aim is to follow price trends and quality of services, as well as identifying possible obstacles and problems which arise from divergent national rules or regulatory gaps.

The monitoring tools will include periodic surveys, ongoing mapping of regulatory developments, and regular stakeholder dialogue to assess developments and identify good practices.

New opportunities for consumers and entrepreneurs

EU countries should be open to embracing the opportunities offered by the modernisation of the economy which will allow Europe to be at the forefront of developing new collaborative services and business models in the global market. Businesses and citizens alike can benefit from the flexibility of these new types of working arrangements, not to mention the additional income they can provide.

Rather than being a threat to traditional businesses, the Commission believes that the collaborative economy is a way of bringing more choice into people's lives, creating more jobs, and bringing significant benefits to Europe, particularly to support innovation, competitiveness and growth.

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