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29/07/2016

Spanish regulator urges scrapping of ‘unjustified’ restrictions on sharing economy

Innovation & Industry

Spanish regulator urges scrapping of ‘unjustified’ restrictions on sharing economy

Taxi drivers in Spain and France have been the biggest protesters against companies like Uber.

[Edgar Jiménez/Flickr]

Uber, Airbnb and BlaBlaCar could score an important victory soon as the Spanish regulator is set to recommend lifting all the “unjustified barriers” limiting the sharing economy in the country, which is seen as the most restrictive member state for this new business model.

Judges, and local and regional authorities in Spain, have significantly limited the spread of these newcomers, who represent the collaborative economy.

Uber has been hit with a nationwide ban, numerous cities have imposed strict requirements on Airbnb and BlaBlaCar was taken to court, although a judge decided in the end not to ban the French company.

But the Spanish regulator (CNMC) will publish a report in which it recommends the Spanish authorities make a U-turn in their approach.

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The preliminary results were published on Monday (14 March). The board of the CNMC will give its final approval once a public consultation on the document takes place.

The CNMC recommended applying the principle of efficient economic regulation and “it is possible that the efficient response is the absence of regulation in cases where there is no market failure”.

Moreover, the body argued that, in case of doubt, the authorities should facilitate innovation.

“In very dynamic markets where uncertainty is common, judges usually rule in favour of in dubio pro libertate principle”.

The recommendations came against the backdrop of the European Commission’s efforts to come up with a European approach to the sharing economy.

Given that this is the first major report on sharing economy drafted by a national regulator, CNMC representatives expect an impact to be made on the regulatory efforts ongoing in other parts of the world.

The Commission is expected to publish in March the responses of its own public consultation on this issue.

This exercise will be the basis for the executive’s guidelines, expected in June, on how to apply the existing EU legislation on sharing economy.

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Focus on taxis and apartments

Given that the sharing economy is having the largest impact on urban transport, where Uber is the major disruptive player, and on the lodging sector, where Airbnb is the most active company, the CNMC focused its recommendations on these two sectors.

In regards to urban transport, the Spanish regulator recommended scrapping “unnecessary restrictions to access the taxi and the hire car with driver markets”.

The CNMC called for the elimination of regulated prices for taxis, in order to allow prices to adapt to market conditions. The regulator wants to get rid of one of the long-standing features of the taxi sector to embrace the Uber model, in which prices vary according to the number of vehicles available and the demand.

The body also wants to eliminate limits on the total number of vehicles, restrictions on the territory covered by the licenses, the introduction of “disproportionate” amounts of compulsory insurance coverage and the obligation of having to have a minimum number of vehicles to operate in the hire car with driver market.

The list continues with the elimination of other “unjustified restrictions”, such as “unnecessary or disproportionate quality and security requirements”, compulsory working hours, limited numbers of licenses per person, a ban on having different drivers per license, the need for an administrative authorisation for hired car with driver activities, and prohibitions for looking for clients in the streets.

In regards to intercity transport, where BlaBlaCar is the best-known company in Europe, the draft document recommended changing the existing model in order to introduce more competitors to the market, so consumers could benefit from greater quality, innovation and sustained coverage of the territory.

More flexibility for vacation rental

Among the “unnecessary restrictions” affecting the vacation rental sector, the regulator listed the prohibition on renting permanent residences or single rooms, the use of a moratorium to postpone the introduction of new apartments, the obligation to include the apartments in a registry, a minimum and a maximum number of days for renting, and limits according to the type and location of the apartment.

Meanwhile, the draft document also included recommendations for the sharing economy players. The paper urged the newcomers to adopt “appropriate mechanisms” to facilitate the portability of the users’ reputation between platforms.

As the document pointed out, a users’ reputation is crucial in the collaborative economy ecosystem, since it is the element that significantly reduces the asymmetric information situation between the company and the customer; the very same reason why heavy regulations for taxis and hotels are no longer needed.

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Background

The sharing economy allows citizens to provide on-demand services to other citizens. This disruptive business model is taking root in a wide range of businesses. However, its emergence has infuriated market incumbents such as taxi drivers and hotel providers.

These traditional service providers believe that Uber, Airbnb, and other firms of this kind, do not play by the same rules affecting ride-hailing cars or the hotel sector.

In particular, critics point out that these new companies raise doubts in regards to the tax compliance of their self-employed workforce, as well as social and consumer protection.

They called for a new set of rules to address the shortcomings of this new business model.

The European Commission will provide guidance on how to apply the Services Directive and the E-Commerce Directive, as well as consumer legislation, such as the Unfair Commercial Practices Directive, Unfair Contract Terms Directive and the Consumer Rights Directive.

Timeline

  • March 2016: Final results of the consultation on sharing economy
  • June 2016:  communication on the role of online platforms in the Digital Single Market.
  • Summer 2016: European Commission will announce a European agenda on collaborative economy, including guidance on how to apply existing EU law.

Further Reading