Back in October 2015, as part of its Single Market Strategy, the European Commission declared that it would develop an agenda to encourage consumers, businesses and public authorities to engage confidently in the sharing economy (also known as the “collaborative economy”), where private individuals provide on-demand services to other people, without intermediaries. This peer-to-peer model is facilitated by online platforms which act as match makers. Millions of these transactions happen every day across Europe, generating an estimated € 28 billion in the EU in 2015. These platforms can promote new employment opportunities, flexible working arrangements and new sources of income for individual service providers, while encouraging the development of new services, an extended supply, and lower prices for consumers.

But this new economy disrupts traditional business models. What was once a person’s private car can now become a weekend taxi. A spare room or sofa becomes an overnight option for travellers. By effectively crowdsourcing supply, home-grown and foreign technology start-ups that match customers to the crowd can compete with existing business models.

Some incumbent businesses have cried foul, citing regulatory concerns, and national regulators have responded. In France, executives of vehicle sharing platforms have been threatened with imprisonment while in Belgium and Spain some vehicle sharing models have been banned entirely; in Berlin, home owners who use property sharing platforms risk fines of up to €100,000. To address potential concerns regarding a fragmented regulatory approach in different EU Member States the European Commission today published an official Communication, “A European agenda for the collaborative economy”, which provides guidance on how existing EU laws affecting the sharing economy should be interpreted across Member States. The Commission’s guidance Communication, a complement to its Digital Single Market strategy, goes a ways towards levelling the playing field and clarifying the main factors to consider when regulating these dynamic and fast evolving sectors.

The Communication addresses several topics:

Market Access Requirements: Member States should review quantitative restrictions in transport sectors. Absolute bans of an activity should only be applied where less restrictive means of achieving the same policy objective are not available (e.g. limiting the number of days per year a property can be offered for short-term rental to address concerns related to the long-term rental market). Business authorisations (or minimum quality standards) should be required only where justified and proportionate, while not favoring one business model over the other.

In assessing proportionality, Member States should take into account e.g. rating and reputational systems, which may address the legitimate public policy concerns and limit the need for further regulation. Platforms that provide solely a match-making function should not themselves be subject to business authorisations and Member States should differentiate between “occasional” service providers and those that use the platforms to provide services in a professional capacity. Where service providers do need authorisations, administrative procedures and formalities must be “clear, transparent and not unduly complicated”.

Consumer Protection: Member States should not impose disproportionate obligations on private individuals who provide services only on an occasional basis. On the other hand, EU consumer protection laws apply to platform operators and service providers who provide services as a business or profession. In determining whether a service provider in the sharing economy operates as a business, Member States should look at the frequency of services provision, whether services are provided at cost / in exchange or for profit, and the level of turnover generated by the service provider for that particular service. Platform operators should facilitate the identification of professional as opposed to non-professional service providers.

Labor Law: While labor law mostly falls under national rules, in assessing whether an employment relationship exists, Member States should consider criteria such as the existence of a subordination link (whether the platform determines the choice of activity, remuneration and working conditions of the service provider), the nature of the work (is the work done regularly; is it non-marginal), and their remuneration (is it more than just compensation for costs). If an employment relationship is deemed to exist, the service provider is entitled to minimum protections (e.g. limits on working time, annual leave, protection against discrimination). Member States are encouraged to establish minimum thresholds under which service providers operating on a non-professional peer-to-peer basis, could avoid the regulatory requirements imposed on professional service providers.

Sector Specific Regulation: Whether a platform operator is considered a mere match-maker, or whether it itself can be considered a professional service provider, and thus subject to sector-specific rules governing these services (e.g. related to health and safety) should be established on a case by case basis. Relevant assessment criteria include the way the price and other key contractual terms are set, the ownership of key assets, the assumption of risks and costs, and whether an employment relationship exists with the individual service providers. Generally, offering payment facilities to service providers, insurance coverage, or rating and review mechanisms, does not in itself make a platform operator a provider of the underling service in question. Member States are encouraged to relieve service providers from unnecessary regulatory burden regardless of the business model adopted.

Tax: Service providers and platform operators must pay their fair share of taxes. This includes personal income, corporate income and Value Added Tax as applicable. Platform operators should cooperate with national tax authorities to facilitate tax compliance while respecting data protection legislation.

Direct and Intermediary Liability: Platform operators should not be exempt from liability for any service they themselves offer (such as payment services). However, they generally shouldn’t be liable for information posted by service providers and stored on their platforms (in line with the Commission’s e-Commerce Directive). Member States cannot force platform operators to generally monitor or to actively seek out illegal activity.

The Commission’s guidance represents a substantive step towards embracing the new opportunities presented by the sharing economy, and it encourages Member States to clarify their own rules so as to allow the spread of sharing economy platforms across the EU. Rather than increase “Brussels red-tape”, the Communication expresses the Commission’s drive to create a single digital market and reduce regulatory burdens for pan-European sharing economy platform operators.

Moreover, the Communication puts a marker against national patchwork regulation in the field of e-commerce and new business models. Just recently the German and French competition authorities rushed ahead with a thought leadership document on “Competition Law and Data“, while the Commission has only recently published the initial findings of its e-commerce sector inquiry. The Commission will carefully assess its options before taking further steps to ensure a consistent approach regarding the application of antitrust and regulatory law in the field of Tech, Big Data and Industry 4.0 activities.