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European Commission - Fact Sheet

A European agenda for the collaborative economy

Brussels, 2 June 2016

Questions and answers

See also IP/16/2001
 

I. A EUROPEAN AGENDA FOR THE COLLABORATIVE ECONOMY

What is the collaborative economy and what are the benefits linked to it?

The collaborative economy is a fast growing business trend including a varied range of activities and cutting across economic sectors, ranging from sharing houses and car journeys to domestic services. Sometimes also called "sharing economy", "peer-to-peer economy" or "demand economy", its contours are not precise. In its work, the Commission uses a broad concept, referring to all the business models, primarily based on transactions between peers, where activities are facilitated by collaborative platforms that create an open marketplace for the temporary use of products or services. Such transactions often do not involve a change of ownership, and can be carried out on a profit or non-profit basis.

The collaborative economy is small but growing rapidly, gaining important market shares in some sectors. Gross revenue in the EU from collaborative platforms and providers was estimated to be €28 billion in 2015. Revenues in the EU in five key sectors (short-term letting, passenger transport, household services, professional and technical services, collaborative finance) almost doubled compared with the previous year and are set to continue expanding robustly and there is a high potential for new businesses to capture these fast growing markets. Consumer interest is indeed strong, as confirmed by a recent public consultation and a Eurobarometer poll published today.

The collaborative economy creates new opportunities for consumers and entrepreneurs and can therefore make an important contribution to jobs and growth in the EU, if encouraged and developed in a responsible manner. The success of collaborative platforms can be challenging for existing market operators and practices, but driven by innovation, the collaborative economy enables individual citizens to offer services and can promote new employment opportunities, flexible working arrangements and new sources of income. For consumers, the collaborative economy can provide benefits through new services, an extended supply, and lower prices. It can also encourage more asset-sharing and more efficient use of resources, which can contribute to the EU’s sustainability agenda and to the transition to the circular economy.

The collaborative economy brings new opportunities that also traditional providers can seize to help them customise and improve the quality of their services thanks to customer reviews or other feedback mechanisms. The public consultation confirmed that traditional providers also use collaborative platforms.

Why do we need a European approach?

The collaborative economy often raises issues with regard to the application of existing law, blurring established lines between consumer and provider, employee and self-employed, or the professional and non-professional provision of services. This can result in uncertainty over applicable rules, especially when combined with uncoordinated and divergent regulatory actions at national or local level.

This fragmented approach to the collaborative economy creates uncertainty for traditional operators, new services providers and consumers alike and may hamper innovation, job creation and growth. A number of research papers, a legal mapping of existing legislation in selected Member States, a public consultation, stakeholder workshops, and a Eurobarometer poll highlight that the main issues are market access requirements, consumer protection, (direct and intermediary) liability, labour law and tax.

Therefore, as announced in its Single Market Strategy, the Commission is issuing guidance to Member States to help ensure the balanced development of the collaborative economy.

Today's guidance is complementary to the Commission's broader approach to online platforms that was presented on 25 May 2016 as part of the Digital Single Market strategy.The Commission concluded that a 'one-size-fits-all' approach was not appropriate for consumers to benefit from the opportunities and for the rules to meet the different challenges posed by the very diverse types of online platforms. Based on this approach, the Commission will look at each area where it can act, from telecoms to copyright rules, to address any specific problems in a future-proof way for all market players.

Different countries have different rules – what are good practices in this area?

A number of good practices on the collaborative economy have been identified across EU countries:

  • Establishing thresholds to differentiate between individual citizens providing services on an occasional basis and providers acting in a professional capacity;
  • Cooperating with collaborative economy platforms to record economic activity to facilitate and improve tax collection, while respecting data protection legislation;
  • Issuing guidance on the application of employment rules and market access requirements to new business models;
  • Not demanding prior authorisations for the short-term rental of primary residences;
  • Reviewing quantitative restrictions in transport sectors and facilitating market access for all operators.

Who takes part in the collaborative economy?

A variety of collaborative economy business models are rapidly emerging and growing across Europe, changing the way services are provided and consumed. Overall, they involve:

  • service providers who share assets, resources, time and skills - these can be private individuals offering services on an occasional basis ('peers') or service providers acting in a professional capacity;
  • users of these services;
  • collaborative economy platforms that connect providers with users and facilitate transactions between them.

Are all platforms part of the collaborative economy?

Not all platforms are running a collaborative economy business model. Collaborative platforms are internet-based tools that enable transactions between people providing and using a service generally without there being a transfer of ownership of an asset.

Can there be a "one-size-fits-all" approach to the collaborative economy?

The collaborative economy covers many sectors ranging from accommodation and tourism to passenger transport, car rental, catering services, retail and business services. A wide variety of business models can be considered part of the collaborative economy, including consumer-to-consumer transactions, consumer-to-business, business-to-consumers, and business-to-business. In some cases, individuals or service providers may not seek any profit, but just exchange products or skills (e.g. exchange of houses or tasks performance) or share costs. In other cases, the service providers or individuals do seek a profit. Issues related to one business model are not necessarily common to all sectors and activities, countries, or even regions and municipalities within a country. At the same time, the use of online platforms gives the possibility to collaborative providers to offer their services beyond the local level. Therefore, a fragmented and uncoordinated regulatory approach may deter people, users and providers alike, from taking advantage of the opportunities offered by the new business models. For these reasons, the Commission presents today general guidance on the application of existing EU laws to collaborative business models, and recommendations to EU countries on how to support a balanced development of the collaborative economy.

 

II. MARKET ACCESS

What type of market access requirements can be imposed in the collaborative economy?

Under EU law (the fundamental freedoms of the Treaty and the Services Directive), service providers can be subject to market access requirements, such as business authorisations or licensing obligations, only where these restrictions are non-discriminatory, justified and proportionate to meet clearly identified public policy objectives. Absolute bans and quantitative restrictions should only be used as a measure of last resort. This is the case for the regulation of both the collaborative economy and traditional services providers.

Under the e-Commerce Directive, market access requirements cannot be imposed on platforms unless in exceptional circumstances.

When applying market access requirements, EU countries need to take into account the specific features of the collaborative economy, without favouring one business model over another. They should seek to differentiate, in particular:

  • between collaborative platforms providing the underlying service and those only acting as an intermediary;
  • and between private individuals offering services occasionally and services providers acting in a professional capacity.

At what point does a person offering services on an occasional basis become a service provider acting in a professional capacity?

EU law does not establish at what point an individual providing services on an occasional basis (peer) becomes a professional in the collaborative economy. However, several EU countries have established thresholds to differentiate between a citizen providing services on an occasional basis and a services provider acting on a professional basis. These thresholds are often developed on a sector-specific basis taking into account how often the service is provided and how much income it generates.

For example, in the accommodation sector, some cities allow for short-term rentals and home-sharing services without prior authorisations or registration requirements when the services are provided up to specific number of days per year (e.g. 30 or 60 days). Other cities differentiate between a citizen's primary residence and other property, under the assumption that a citizen's primary residence can only ever be rented out on an occasional basis.

Based on these good practices, EU countries could consider:

  • establishing minimum thresholds under which an economic activity would be considered a non-professional peer-to-peer activity and would not need to comply with the same regulatory requirements applicable to a service provider acting on a professional basis;
  • assessing their existing legislation to see whether its objectives are still relevant and its content still justified, both for traditional and collaborative economy providers.

Should collaborative platforms be subject to sector-specific rules applicable to the underlying services?

This depends on the nature of the platform's activities. If the collaborative platform offers other services than mere information society services (e.g. matching service providers and users), and in particular if the platform provides the underlying service being offered (e.g. a transportation service), it could become subject to relevant sector-specific rules governing these services, provided they are justified and proportionate.

Whether the collaborative platform provides the underlying service being offered should be established on a case by case basis based on criteria such as the way the price and other key contractual terms concerning the provision of the service are fixed, or by looking at the ownership of key assets. Other criteria can also be taken into consideration (e.g. if an employment relationship exists). However, offering of services ancillary to the core activity of intermediating between a services provider and user (such as payment or rating services) is not automatically an indication that the collaborative platform is offering the underlying service as well.

 

III. LIABILITY

Can collaborative platforms be held liable for illegal user generated content or information stored on their platform? Do liability rules apply to collaborative economy?

National liability rules apply to the collaborative economy, for example in relation to the bad execution of contracts or for violation of contractual terms. At the same time, EU legislation (the e-Commerce Directive) foresees that online platforms can under certain circumstances be exempted from liability for the information they store. Whether a platform is liable or not has to be decided on a case-by-case basis, depending on the services provided by the platform. The collaborative platform may be exempted from intermediary liability for the information stored if:

  • the services provided are of a merely technical, automatic and passive nature, and
  • the platform has no knowledge of illegal information stored on its website or, once it becomes aware of it, it acts swiftly to remove it or disable access to this information.

EU countries cannot oblige platforms to generally monitor or to actively seek out illegal activity. Voluntary checks, such as on the identity of providers or the quality of the services provided can be carried out by collaborative platforms. They should not be seen automatically as indication of an active role assumed by the collaborative platform. The fact that a collaborative platform carries out certain voluntary checks of those offering services through their platform, or offers ancillary activities such as payment facilities or rating services does not automatically mean that the platform can no longer rely on the liability exemption for its hosting services.

Collaborative platforms are, however, not exempted from liability for any services they themselves offer, such as payment services. The Commission encourages collaborative platforms to continue taking voluntary action to fight illegal content online and to increase trust.

 

IV. CONSUMER PROTECTION

How does EU consumer and marketing legislation apply to the collaborative economy? What is the Commission proposing to increase consumer trust?

Member States should seek a balanced approach to ensure that consumers enjoy a high level of protection from unfair commercial practices, while not imposing disproportionate obligations on private individuals who are not traders but who provide services on an occasional basis.

EU consumer law applies when platforms and services providers act as traders (i.e. where they act for purposes relating to their business). Whether someone is considered a trader can only be established on a case-by-case basis taking into account factors such as frequency of the service provision, presence of a profit-seeking motive or level of turnover. Providers who offer their services merely on an occasional basis will be less likely to qualify as a trader. EU consumer and marketing legislation addresses business-to-consumer transactions between a consumer and a trader, excluding consumer-to-consumer transactions. However, the collaborative economy blurs the lines between consumers and traders. Many individuals are providing services as well. Traders must ensure that they do not mislead users of their services, provide the necessary information and respect transparency and professional diligence requirements. On 25 May 2016, the Commission presented revised Guidance on the Unfair Commercial Practices Directive.

The Commission further recommends the use of online trust mechanisms such as quality labels to increase consumer trust.

 

V. EMPLOYMENT

Who qualifies as a worker in the collaborative economy?

The EU definition of a worker, as established by the EU Court of Justice, applies three essential criteria to determine the existence of an employment relationship: whether they act 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. However, EU Member States decide who is to be considered a worker under their national rules and they remain free to extend the definition of a worker to situations which do not fall under the EU definition. The existence of an employment relationship needs to be established on a case-by-case basis, and the actual qualification of such status results from a comprehensive test of all three criteria. The Communication provides orientation that Member States may wish to consider when deciding when people providing services through collaborative platforms are to be considered employees of a platform (relation of subordination to the platform, nature of the work, remuneration).

How does labour law apply to the collaborative economy and what does the Commission propose?

EU labour law is applicable to people who are in an employment relationship. If a case-by-case assessment concludes that an employment relationship exists, EU labour and social law setting out minimum standards will apply. These standards include:

  • health and safety requirements, notably limits to working time;
  • the right to have annual leave and to daily and weekly rest;
  • protection in case of night work;
  • information on individual employment conditions;
  • prohibition of discrimination against workers in non-standard forms of employment (e.g. part-time, fixed-term or workers employed under temporary agencies);
  • protection in case of insolvency of employers, collective redundancies, transfer of undertakings or cross-border mergers.

The Commission encourages EU Member States to assess whether their national employment rules are adequate for the different needs of workers and self-employed persons in the collaborative economy, as well as the innovative nature of collaborative business models. They should also provide guidance on the national employment rules that apply to the collaborative economy providers. The Commission also invites stakeholders to submit their views to the ongoing consultation on the European Pillar of Social Rights.

 

VI. TAXATION

What tax rules apply to the collaborative economy and what does the Commission recommend?

Collaborative economy service providers and platforms have to pay taxes, just like other participants in the economy. Relevant taxes include tax on personal income, corporate income and value-added tax rules. Since tax collection is a national competence, public authorities should endeavour to provide clearer information on taxation of participants in the collaborative economy. The Commission considers that EU countries should apply functionally similar tax obligations to businesses providing comparable services within their territories and take further steps to reduce administrative burdens linked to tax collection. The Commission recommends that EU countries establish close cooperation between national authorities and collaborative platforms (e.g. to improve tax compliance and collection) as collaborative economy platforms can help ensuring the transparency of economic activities subject to taxation, while respecting data protection rules. It invites them to assess their tax rules to create a level playing field for businesses providing comparable services within their territories.

Should collaborative economy products and services be subject to VAT taxation?

There is no reason to treat the collaborative economy differently than traditional services from a VAT-perspective. However, in practice there may be difficulties in assessing the VAT obligations of participants in the collaborative economy. Moreover, many collaborative economy service providers will not be required to pay VAT because their turnover per year will be below the threshold for registration. The Commission is working on several initiatives to enhance the capacity of tax administrations and to facilitate cross-border activities.

 

VII. NEXT STEPS

Is the guidance binding for EU countries?

The Communication sets out guidance on how existing EU law should be applied to the collaborative economy. It is not a legally binding act, but will guide the Commission in its role as guardian of the Treaties, including in front of the Court of Justice of the European Union. It is without prejudice to initiatives that the Commission may take in this area in the future and to the prerogatives of the Court of Justice as regards the interpretation of EU law. The Commission also makes policy recommendations to EU Member States and invites them to review, and where appropriate, to reduce restrictions, including licencing and compliance requirements. The Commission will support EU countries and stakeholders in implementing this legal guidance and policy recommendations and will engage in a regular dialogue with them as well as with the European Parliament and the Council.

What are the next steps?

Given the rapid evolution of the collaborative economy, the European Commission will continue to monitor the economic development and the evolving regulatory environment of the collaborative economy and exchange good practices among EU countries. The Commission will monitor the developments through

This Communication will support the work of the Commission in ensuring existing EU law is consistently applied across the EU single market. On the basis of received complaints as well as own assessments of national measures, the Commission will assess the possible need for any further actions.

 

MEMO/16/2002

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