Collaborative Economy: European Parliament Calls for Clear And Balanced Guidelines

The collaborative economy (also known as the sharing economy) is a rapidly emerging and highly innovative segment of the European economy that provides the opportunity for citizens to become entrepreneurs. It therefore has the potential to make the labour market more flexible and inclusive, as well as to lower prices and enhance consumer choice. At the same time, it is an area that is very difficult to legislate due to its fast-changing and diverse nature, which can lead to regulatory “grey areas” in terms of workers’ rights, taxation or consumers’ rights, as well as problems with transparency or data protection.

Therefore, in the last few years, discussions about whether and how to legislate the collaborative economy have intensified, with the aim of assessing the need and EU-added value of creating a harmonised legal regime whereby start-ups and SMEs can flourish while consumers and workers remain well-protected. The importance and the complexity of this endeavour have been highlighted in much-publicised recent CJEU cases, for example concerning the legal status of Uber and its drivers, or the taxation of AirBnB rentals.

As a follow-up to the Commission’s Communication on the European Agenda for the collaborative economy, published in June 2016, the European Parliament – in its Resolution of 15 June 2017 – calls for clear guidelines in this area, as well as for a balanced EU strategy that safeguards the sector’s ability to grow, while ensuring consumer protection, workers’ rights, tax obligations and fair competition.

The Resolution, which was adopted during the plenary session of June 2017 with a great majority, raises 70 important points across seven different areas, and contains many calls for the Commission to step up its work so that Europe can truly unleash the potential inherent in the collaborative economy.

A European agenda for the collaborative economy

The basis for the current Resolution was the Commission Communication entitled “A European agenda for the collaborative economy”, a guidance document aiming to support consumers, businesses and public authorities in engaging confidently in the collaborative economy, in order to promote jobs and growth in Europe.

The main aim of the Communication published in June 2016 was to clarify how existing EU law should be applied with regards to the sharing economy, with special attention to the following questions, most of which arose during the public consultation from September to December 2015:

  1. What type of market access requirements can be imposed?
  2. Who is liable if a problem arises?
  3. How does EU consumer law protect users?
  4. When does an employment relationship exist?
  5. Which tax rules apply?

These questions effectively demonstrate the kinds of problems businesses face when trying to interpret and apply existing European legislation in the context of the collaborative economy. Although the Communication managed to clear up part of the confusion, there are still areas where more clarity is needed, according to the European Parliament.

Potential benefits of the collaborative economy

The European Parliament’s Resolution goes to great lengths to emphasise the potential benefits of the sharing economy. First of all, it highlights that the collaborative economy is growing rapidly, with more and more consumers knowing and using such services.

It adds that working in this sector has low entry costs, which means that it can offer opportunities for those who find it hard to enter the “traditional” labour market, such as young people, migrants, part-time workers or senior citizens. It also mentions that, due to its relatively flexible working arrangements, it can help to boost the participation of women in the labour market and the economy. For these reasons, the Parliament regrets that there are no official statistics on the volume of employment in the collaborative economy.

General considerations

The European Parliament welcomes the Commission’s Communication of 2016, highlighting that it is the responsibility of EU lawmakers to take advantage of the potential of the sharing economy, thereby enhancing competition, increasing consumer choice and lowering prices – benefitting citizens, consumers and the European economy as a whole.

The text highlights that currently there are regulatory gaps, technical implications and fragmentation present that hinder cross-border transactions, partially due to the fact that some policy-makers and businesses may view the collaborative economy as a potential threat to the traditional economy, and thus push for restrictive legislation. In certain cases, similar economic actors may be subject to different legal requirements, which may lead to excessive burdens for traditional business models and an uneven playing field, while insufficient and/or confusing legislation (“regulatory grey areas”) contributes to the fragmentation of the Single Market.

Therefore, a dynamic, harmonised and clear regulatory framework is necessary which ensures a level playing field and facilitates the healthy growth of the collaborative economy in Europe.

The current regulatory framework

Even though a large part of the collaborative economy falls within the scope of existing EU legislation, according to the EP Resolution, there are many questions about the application of rules, especially those designed for “more traditional” businesses, while some aspects clearly fall into regulatory grey areas or are not covered at all. MEPs voiced their opinion that although the Commission’s intentions were commendable, the guidelines in the 2016 Communication did not bring the required clarity, and that there is a need for a framework which could help Member States to properly enforce existing legislation.

According to the Parliament, much of the confusion arises from the fact that in the collaborative economy it is hard to distinguish between professionals and private individuals (“peers”). This distinction is very important in order to provide workers occupied in the collaborative economy with the necessary safeguards, irrespective of their employment status (while still ensuring the quality standards). Therefore, MEPs asked the Commission to lay down effective criteria in order to distinguish between the two groups, bearing in mind income levels, sector characteristics and whether the purpose of the activity is profit-making or not. At the same time, the Parliament also highlights that comparable categories of service providers should enjoy a level playing field, with unnecessary regulatory burdens removed and prudent market access requirements in place.

Another issue discussed in the Resolution is how to prevent the circumvention of existing legal requirements; for instance, in the form of tax evasion or on issues regarding liability of the intermediary online platform. In a recent case at the European Court of Justice, one of the Court’s Advocate-Generals in digital matters, Maciej Szpunar, argued that Uber is not dissimilar to taxi companies and therefore “can be required to obtain the necessary licences and authorisations under national law”, which the company usually refuses to accept. The Parliament welcomes the Commission’s efforts to ensure the observation of relevant legislation.

The Resolution also highlights the importance of the “rating” or “review systems”, which constitute the backbone of the collaborative economy, as these business models are largely based on reputation. It highlights that transparency about how the rating system works and how consumers’ data is stored is necessary, since if the rating system is not genuine or personal information is misused the consumers’ trust may collapse.

It also warns that the distinction between a platform that provides a service and one that provides information only is pivotal – even though it is very hard to establish precisely, especially in a way that is technologically neutral and “future-proof”.

Competition and tax compliance

The Resolution highlights that there are many aspects necessary for a well-working collaborative economy, such as free flow of data, data portability and interoperability. Without these, consumers might get “locked in” the system of one provider, creating unfair competition.

The very nature of the collaborative economy is that it is highly digitalised, which the Parliament believes could possibly help to increase traceability of transactions, and subsequently lead to a greater level of tax compliance and enforcement. At the same time, the text admits that actors in the collaborative economy may sometimes try to use these innovative solutions to avoid tax obligations, which it deems unacceptable. It promotes the idea that to businesses providing comparable services, functionally similar tax obligations should apply, no matter whether they are in the traditional or the collaborative economy.

Impact on labour market and workers’ rights

The Parliament argues that while the collaborative economy creates many new opportunities, it also has a profound impact on the labour market and employment rights. In many cases, the employment status of workers in the collaborative economy is equivocal; therefore MEPs are calling on the Commission to examine how far already existing rules are applicable to the digital labour market in order to ensure that current protection standards can be maintained, along with traditional workers’ rights such as the right to organise, bargain collectively or strike.

At the same time, the Commission has to be ready for the shifts and disruptions expected in the labour market, by preparing absorption measures and supporting training and outplacement. For this reason, and to effectively harness the potential in the sharing economy, the Commission is strongly urged to start gathering more reliable and comprehensive data in this respect and to monitor and evaluate trends.

Local dimension and promoting the collaborative economy

The text highlights that the sharing economy can have a significant positive effect on marginalised and peripheral rural regions, even though its main effects are mostly observable in cities where conditions are more favourable for collaborative practices.

As for promoting the collaborative economy, the text lists upcoming technologies such as 5G and electronic identification (e-ID) as developments that could further enhance the effectiveness of this sector, adding that it has the potential to have a significant effect on other areas such as energy, research and innovation, transport, tourism and finance.

Overall, the text represents a necessary step in the direction of a better-regulated collaborative economy in Europe, which could greatly contribute to a more robust EU economy without eroding taxation and labour rules. With the future looking ever-increasingly digital, it is pivotal for the well-being of European society and the economy that the EU provides clear and balanced rules that are beneficial to all actors and stakeholders.

Next Steps

 Following the adoption of the Resolution by the European Parliament, the Council may also decide to formally respond to the Commission Communication by adopting Conclusions. In the next few months, the debate on the collaborative economy might continue in future meetings of the High-Level Working Group on Competitiveness and Growth, as well as in Council configurations. The Commission is also expected to organise a series of workshops on the collaborative economy during 2017, focusing particularly on the tourism accommodation sector.

Additional facts

Official title: Commission Communication on a European Agenda for the collaborative economy [COM(2016) 356]

Commission proposal date: 02 Jun 2016

Procedure: Strategic Consultation

European Parliament Resolution Adopted: 15 Jun 2017