Céline Wattecamps, Anne-Grace Kleczewski and I have just published an overview of the “Challenges related to law for the platform economy” and we propose to have a fresh look at some important legal dichotomies currently blurred by the platforms.
You can find the full text of the article here or on cairn.info (https://www.cairn.info/load_pdf.php?ID_ARTICLE=RPVE_563_0057)
The EU Commission has just published the results of the study on transparency in online platforms.
The research has confirmed with empirical evidences that transparency is a precious value in today’s online transactions:
“70% said that the information about criteria for presenting search results was important in their decision and made them more confident and trusting;
67.9% and 69.9% respectively agreed that the information about contractual identity and its implications was important in their decision and made them more confident and trusting;
83.9% and 85.9% respectively reported that the information about who is included in user reviews was important in their decision and made them more confident and trusting”
Transparency is a key factor not only to consumers, but to platforms as well: to provide information users need in a clear way increases the trust in the platform and, as a consequence, attracts more potential clients.
The empirical study underlined the importance of raising consumers’ awareness about the identity of the counterparty and its legal implications in terms of available remedies. The study called for the need of a “design-based regulation to build regulatory standards into the design of the system being regulated”.
Judgment: Tribunal d’instance, 6ème arrondissement de Paris, 06 feb. 2018, n°RG11-17-000190.
Context: The Digital Republic law (Law n°2016-1321, 6 October 2016) has created rules concerning platforms. Some of these rules are general, such as the obligation to provide loyal information to users (Consumption Code, art. L. 111-7), and others are more specific, such as the rules which apply to platforms that offer short-term rentals of furnished housings. These rules impose obligations on both persons who offer furnished housing on these platforms (declaration obligation, administrative authorisation in certain cases, written contracts…), but also on the platforms themselves, targeting in particular Air BnB (Tourism Code, art. L. 324-2-1).
The platforms must thus inform the lessor of the obligations of declaration or authorisation, and must obtain from him a declaration on the honour of the respect of these obligations, specifying whether the dwelling is his principle residence or not. They must also have the declaration number, which will have to be mentioned in the advertisement. They must also count the number of nights rented through the platform, and monitor that the number does not exceed 120 nights per year for a principle residence. This number can be communicated to the housing city. The platform cannot offer housing once the 120 night are exceeded.
These obligations of the platform must be the subject of an application decree, which must specify the methods of control and the sanctions. This decree is pending, while the decree relating to the obligation of the lessors was published in April 2017, and those, more general, relating to the obligations of loyalty had been published in September 2017 (on those decree, view the legifrance website).
This does not preclude justice from ensuring compliance with the new obligations since they came into force. This is what was done in a judgment of the Court of Instance of Paris, on 6 February 2018, in which Air BnB platform was condemned for the non-compliance with its obligations under the Digital Republic law.
Solution: The tenant of a Parisian apartment has published an announcement on the Air BnB platform offering accommodation for short stays. The sublease authorisation, requested one year after having started this activity, was refused by the owner. It was therefore forbidden for the tenant to offer this accommodation on the platform. The housing has often been rented, exceeding the number of 120 days per year, beyond which it can no longer be considered as a principal residence, and must, in Paris, to be rented as furnished accommodation for short stays, to be the object of an administrative authorisation. The owner of the housing has assigned the Air BnB platform, considering that it has committed errors incurring its liability, and that it must be condemned to the refund of the sums received at the occasion of the illicit leases carried out on its site.
The Tribunal notes that the platform has committed mistakes within the meaning of the Article . 324-2-1 of the tourism Code. Thus, it should have checked the authorisation of the lessor, obtain the certificate on honour, inform the lessor of its obligation of authorisation, check that the threshold of 120 nights was not exceeded, even for the period before 9 of October 2016 (enter into force of th Digital Republic Law). For 2017, the threshold was exceeded on June, 20, but his account was not suspended. The Tribunal deduces from the non-respect of those obligations negligence and abstentions of Air BnB that allow the lessor not to comply with the law.
In defence, Air BnB assures that it is only a “support” platform, and that it has not committed any fault, since nothing oblige it to ask for an authorisation or to verify it. It therefore considers itself to be a networking platform and not responsible for non-respect of a residential lease. It also states that the Digital Republic lax cannot be applied to it for facts took place before it came into force.
The Tribunal recalls the obligations provided for the platform by the Tourism Code. Although it is not essential to verify the existence of the authorisation, the platform must obtain a declaration on honour, and ensure compliance with the rule about 120 days of rental per year. Air BnB has not informed its user of these obligations, it cannot prove to have given this information, and has not received the declaration on honour. Similarly, housing was offered beyond the 120 days allowed for a principal residence. The standby obligation imposed on Air BnB since October, 9, 2016 must force the platform to make a count for 2016 and 2017. Finally, Air BnB was alerted as of May, the 2nd, 2017, but the account continued to operate.
The Tribunal therefore considers that the platform failed to comply with the means to not respect its contractual obligations. If the latter remains responsible, the platform is also responsible.
Air BnB is thus ordered to pay the owner of the dwelling the sum she has collected for unlawfully renting the housing. The Tribunal finds that this is an unlawful exploitation of the property belonging to the owner, and that the fruits derived from it must be returned to the owner. It must also compensate the owner for moral damage, and reimburse the expenses incurred.
Comments: Although it is likely that Air BnB is appealing this judgment, it has significant interests and goes further than the Digital Republic law in the obligations of the platforms.
Beyond the application of a sanction to the obligations of the platform resulting from the Digital Republic law, the judgment interprets these obligations extensively, by creating an additional one in the case of the short-term lease. The judgment is also surprising by the transfer of the burden of proof of the information obligation of the platform: this proof is requested from the platform itself even though it is her user who claimed to have not been informed. The jurisprudential interpretation makes it possible to go beyond the vision of the role of the platform as limited to linking. Its role goes further and includes special obligations.
Extensive interpretation of the legal obligations of the platform. The first interest of the judgment lies in the assertion of the platform’s obligations in the particular sector of seasonal rental. The judgment make a list of the obligations stemming from the law of 2016. It is possible to underline an extensive application of those obligations, expressly seen as applicable since October 2016. This is interesting as regards the counting of the days of rent, which was to be realised for the year 2016, and should lead to the suspension of the user account if the 120 days were exceeded. One of the contributions of this judgment is therefore the temporal application of the law, and invites to consider the obligations to be applied for the period from January to October 2016 in the same way as for October to December 2016. Moreover, despite the lack of details concerning the penalties for these obligations, the court also indicates the possibility of sanctioning them on the basis of civil liability, applying a classic rule of French law which allows, in the absence of specific text, the sanction of any legal obligation on the basis of this civil liability.
Creation of an obligation not provided for by the law: the obligation to verify that the user who offers accommodation on the platform does not do so in contradiction with his own rental contract. In addition to the legal obligations, the judgment could also apply an obligation not provided for by the 2016 law, but sometimes encountered in case law: that of verifying the contract binding the debtor. Here, it is necessary to return to the structure of the contractual relationships to explain how the owner of a house proposed on Air BnB by his tenant can act against the platform. The platform is third party to this lease, and is in contractile relationship only with the tenant. The Tribunal admits the action of the owner against the platform on the basis of civil liability, because the platforms allowed the breach of contractual obligations of the tenant. That is for sure interesting for all the short-term rental platforms, or even for all platforms, yet the judgment is silent on the basis that allows it to achieve this solution.
The user of Air BnB is in this case the tenant of his dwelling and not the owner. The lease contract prohibits subletting (law n°89-462, 07/06/1989, art. 8) which can only be possible with the express permission of the owner. The platform is not party to the lease but must, according to article 1200 of the civil Code, respect this contract and not compromise the proper execution. This principle of opposability of the contract to third parties gives rise in general case to any obligation for them. Sometimes, however, the case law has admitted the existence of a verification obligation to the third party. This obligation exists in specific situations, and most often concerns non-competition clauses. In that domain, is responsible for negligence the company which does not check the non-competition clause binding one of its employees with a former competing employer (Cour de cassation, Chambre commerciale, 7/02/1995, n°93-14.569; 11/07/2000, n°95-21.888). Undoubtedly, one of the contribution of the judgment is the extension of this solution in lease contracts, concerning the subletting: it tends to impose on the platform an obligation of verification concerning the contract under which its user holds the dwelling, and in the case of a tenant, the obligation of verification extends to the authorisation of the lessor, only possibility to can sublease the housing. Such an obligation does not seem to have already been imposed by case-law in an equivalent situation. It could also make any appeal against the decision very interesting. The breach of this obligation allows in this case the owner to act against the platform, while there is no contractual relationships between them due to the fact that the actions of the platform which admitted an advertisement on its website and was paid for rentals carried out infringe the owner’s rights. The consequence will be very concrete and will require the platforms to request a copy of the authorisation of the lessor to practice subletting in a rented housing, and thus to have questioned their members on their quality of tenant or owner of the housing concerned. In this case, the court considers that this has allowed the tenant to violate its contractual obligations, and will condemn the platform to return the fruits it has collected on the apartment, since these fruits must, according to the law about property, return to the owner.
Inversion of the burden of proof of the good information of the users of a platform. Another interesting aspect of this judgment is the reversal of the burden of proof of the information obligation of the platform (Tourism Code, art. L. 324-2-1, I). This text provides that the platform must inform its users who provide housing of declaration or prior authorisation obligation. But, it does not provide that the platform must prove the proper performance of this obligation. The reversal of the burden of proof is common in consumer law, where the professional must be able to prove that he has provided the legal information to the consumer. However, the dispute did not concern a consumer and such an obligation is not expressly provided for by the Tourism Code. In the absence of any provision, the general rule should have applied: the person who allege a fact must prove it in justice (Civil Procedure Code, art. 9). This text is even quoted in the decision. The Tribunal, finding that the user claimed not to have received the information in fact specifies that the platform has failed to fulfil its obligation because of the fact that it cannot justify having correctly respected. The solution may surprise, and even if this obligation of information dates from before the Digital Republic law, and was therefore applicable when registering the user on the platform in early 2016, will encourage the platform to keep track of the transmission of information to each user.
As a result of the application of the obligation to the platform: the impossibility for it to consider itself as simple intermediary for connecting people. Another interesting aspect of this judgement, which comes as one of the first done one the basis of the Digital Republic law for an online platform is the rejection of a limitation of the role of the platform to a simple intermediation. In its claims, the platforms insists on this point which must, according to der, dispense with any control over the ads. Although it might have been interesting, the Tribunal does not describe the role of the platform, but not seems to limit it to simply connecting short-term tenants with owners of dwellings, since it states that the platform has obligations that apply both when placing an ad online, but also over rentals. The argument of minimising its liability is not admitted by the tribunal, which reminds it of its legal obligations. The platform must therefore have an active role and ensure compliance with the rules, even if their non-compliance is not yet penalised.
Conclusion: extensive interpretation of the platform’s obligations by the Tribunal. The judgment applies the requirements of the law of 2016, and imposes their compliance as soon as the law is promulgated, requesting a booking of rentals for the year 2016, despite the fact that the law was passed in October. In the same way, this judgment passed to impose on platform an obligation of verification of the authorisation of subletting of its members, when they are tenant of their houses, under penalty of having refund the commission perceived to the owner. Finally, the judgment reverses the burden of proof of the obligation of information provided by the Tourism Code, and asks the platform to prove that this obligation is respected. On these three points, the judgment could have made extensions to the legal rules concerning online platforms. Therefore, the analysis of possible appeal against this decision will appear interesting.
Today, the Court of Justice of the European Union held that internet platform Uber does not merely provide an App: it offers a full transport service. Uber exercises a decisive influence over the conditions under which drivers provide their service: the price, the minimum safety conditions, the conduct of drivers and their exclusion from the platform (C-434/15).
This decision addresses the very core of several highly debated questions on the legal status of online intermediaries (e.g. Uber, Airbnb & TaskRabbit). Does the emerging Platform Economy necessitate regulatory intervention? To what extent can platforms be held liable? Does national regulation impose disproportionate market restrictions on innovators? Do platforms qualify as employers? Is the potential loss of social protection of workers detrimental? Do platforms evade tax obligations and other regulations?
Experts in contract law, E.U. law, social law and tax law will discuss these questions during a conference at KU Leuven on Monday 19 February 2018. Deputy prime minister Kris Peeters will open the session. This conference is relevant for all legal professionals who will be increasingly confronted with online intermediary platforms.
Register online before 12 February 2018 (fee: 150 euro, incl. participation to the conference, documentation, lunch, coffee break and the hard cover book with a market value of 95 euro).
- 12h15 Registration & Lunch
- 13h00 Introduction – A political perspective
Kris Peeters, Deputy Prime Minister and Minister of Employment, Economy and Consumer Affairs
I. KEY LEGAL CHALLENGES
- 13h15 Platforms: To Regulate or Not To Regulate?
Prof. dr. Alain Strowel, Université Saint-Louis & UCLouvain
- 13h35 Liability of Platforms
Drs. Bram Devolder, KU Leuven
- 13h55 Law Evasion in the Platform Economy
Drs. Nicolas Van Damme, KU Leuven
II. CHALLENGES FOR E.U. LAW
- 14h20 A Common Market in the Platform Economy
Prof. dr. Wouter Devroe & drs. Friso Bostoen, KU Leuven
- 14h40 Platforms and Consumer Protection
Prof. dr. Denis Voinot & dr. Aurélien Fortunato, Université Lille 2
- 15h00 Model Rules on Online Intermediary Platforms
Prof. dr. Christoph Busch, Universität Osnabrück
- 15h20 Coffee break
III. CHALLENGES FOR SOCIAL LAW
- 15h50 Labor Protection in the Platform Economy
Prof. dr. Valerio De Stefano, KU Leuven
- 16h10 Social Protection of Non-Standard Workers
Prof. dr. Paul Schoukens, KU Leuven & Tilburg University & drs. Alberto Barrio, Tilburg University
- 16h30 Social Security and the Sharing Economy: Dilemma and Paradox
Prof. dr. Yves Stevens, KU Leuven
- 16h50 Alternative Methods of Protection
Prof. dr. Wouter Verheyen, Erasmus University Rotterdam
IV. CHALLENGES FOR TAXATION
- 17h15 Direct Taxation of Platforms
Prof. dr. Luc De Broe & drs. Dina Scornos, KU Leuven
- 17h35 VAT in the Platform Economy
Prof. dr. Edoardo Traversa,UCLouvain & prof. dr. Kenneth Vyncke, KU Leuven
- 17h55 Closing Remarks – An Academic Perspective
Dean Bernard Tilleman, KU Leuven
- 18h15 Questions & Answers