The position of the European Institutions in 2016

25 January, 2017

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Rosa Guirado

On June 2, 2016, European Commission published a Communication titled “A European Agenda on the Collaborative Economy”. This Communication was directed to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions.

Throughout December 2016, the European Parliament (both the Committee on Employment and Social Affairs and the Committee on the Internal Market and Consumer Protection), the European Economic and Social Committee, and the Committee of the Regions have published Reports answering and giving their opinions on such Communication of the European Commission.

Communication from the European Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: “A European Agenda on the Collaborative Economy”. June 2, 2016
Draft OPINION of the Committee on Employment and Social Affairs of the European Parliament. December 8, 2016.
Draft REPORT of the Committee on the Internal Market and Consumer Protection of the European Parliament. December 22, 2016.
OPINION of the European Economic and Social Committee (EESC). December 15, 2016.
OPINION of the European Committee of the Regions on “Collaborative economy and online platforms: a shared view of cities and regions”. December 7, 2016.

You can find all the reports dully systematized in the “European Resources” Section of Legal Sharing.

1.- Communication from the European Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: “A European Agenda on the Collaborative Economy”. June 2, 2016 [Document]

The European Commission focused on the following main issues:

Market access requirements: service providers should only be obliged to obtain business authorisations or licences in order to meet relevant public interest objectives. Absolute bans of an activity should only be a measure of last resort. Platforms should not be subject to authorisations or licences where they only act as intermediaries between consumers and those offering the actual service (e.g. transport or accommodation services). Member States should also differentiate between private individuals providing services on an occasional basis and providers acting in a professional capacity, for example by establishing thresholds based on the level of activity.
Liability regimes: collaborative platforms can be exempted from liability for information they store on behalf of those offering a service. However, they should not be exempted from liability for any services they themselves offer, such as payment services.
Protection of users: Member States should ensure that consumers enjoy maximum protection from unfair commercial practices, while not imposing disproportionate obligations on private individuals who provide services occasionally.
Employment relations (employed and self-employed): Labour law mostly falls under national competence, supplemented by minimum EU social standards and jurisprudence. The Court of Justice has defined the concept of ‘worker’ on the basis of an employment relationship characterised by certain criteria such as subordination, remuneration and the nature of work. Member States may consider criteria such as the degree of subordination to the platform, the nature of the work or the salary received when deciding whether a person can be considered as an employee of a platform.
Taxation: Collaborative economy service providers have to pay taxes. Relevant taxes include tax on personal income, corporate income and Value Added Tax. Member States are encouraged to continue simplifying and clarifying the application of tax rules to the collaborative economy. Collaborative economy platforms should fully cooperate with national authorities to record economic activity and facilitate tax collection.

2.- Draft OPINION of the Committee on Employment and Social Affairs of the European Parliament. December 8, 2016. [Document]

This opinion is directed from the Committee of Employment and Social Affairs of the European Parliament to the Committee on the Internal Market and Consumer Protection of the European Parliament, in order to be their suggestions incorporated by the latter (that is the reason why we refer to it in first place):

Need for a clear distinction between ‘professional’ and ‘non-professional’ platforms and for a recognition of activities in the platform economy that are properly categorised as ‘work’.
Need to ensure adequate social security for self-employed workers, who are key players in the digital labour market; stresses that freedom of association and collective action are fundamental rights which must apply to all workers
Calls for a framework directive on working conditions in the platform economy in order to guarantee the legal situation of platform workers and to ensure that all platform workers have the same social and employment rights and health and safety protection as workers in the traditional economy.
Calls for more reliable data on jobs and working conditions in the platform economy and for the adjustment of related policies to create a level playing field between the platform and traditional economies.
Calls for EU standards on transparency and disclosure obligations for platform operators in order to monitor tax payments, social security contributions and practices regarding the rating of work on platforms and advocates the establishment of a ‘right to log off’.

3.- Draft REPORT of the Committee on the Internal Market and Consumer Protection of the European Parliament. December 22, 2016. [Document]

The Report has been issued by the Committee on the Internal Market and Consumer Protection of the European Parliament (hereinafter referred directly as the “European Parliament”). The Report is divided in seven Sections and contains the following main ideas:

General Considerations

The European Parliament welcomes the communication on the collaborative economy. It should represent a first step towards a more comprehensive and ambitious EU strategy on it.
It is very important to develop a dynamic and clear legal environment for the collaborative economy to flourish in the EU.

Collaborative economy in the EU

European Parliament emphasizes that collaborative economy is not only a business model but also a new form of integration between the economy and society which is able to embed economic relations within social ones and to create new forms of community
European Parliament is concerned that, while a large part of the nascent collaborative economy remains unregulated, significant differences are emerging among Member States due to national, regional and local regulations, as well as case-law, posing a risk of fragmentation of the Single Market.

EU regulatory framework: peers, consumers, collaborative platforms

Welcomes the Commission’s intent to tackle the current fragmentation, but regrets that its communication did not bring sufficient clarity about the applicability of existing EU legislation to different collaborative economy models. Thus, European Parliament urges the Commission:
- To provide further guidelines with effective criteria for distinguishing between peers and professionals, which is crucial for the fair development of the collaborative economy.
- To clarify the collaborative platforms liability regime (which could enhance responsible behaviour and increase user confidence).
- To further scrutinise EU legislation in order to reduce uncertainties concerning the rules applicable to collaborative business models and to assess whether new or amended rules are desirable.
- To leverage platforms’ self-governing capacities.
Regarding collaborative platforms, European Parliament points out that:
- They could take an active role in such a new regulatory environment by correcting many asymmetric information and other market failures which have been traditionally addressed through regulation, especially by digital trust-building mechanisms. This self-regulating capacity does not undercut the need for regulation, especially for market failures that platforms cannot address and for other normative goals (e.g. reversing inequalities, boosting fairness, inclusiveness, and openness, etc.)
- And the crucial importance of clarifying methods by which decisions based on algorithms are taken and of guaranteeing algorithm fairness; emphasizes the need to verify the potential harm to privacy caused by big data, to assess the impact of data on different segments of society and to prevent discrimination; calls on the Commission to lay down effective criteria for developing algorithm accountability principles for information-based collaborative platforms.
European Parliament calls on the Commission for an ambitious enforcement framework, and to support the Member States in developing a strong culture of compliance and enforcement. A common EU horizontal and harmonised regulatory framework, consisting of a combination of general principles and specific rules, needs to be developed, in addition to any sector-specific regulation that might be needed.

Competition and tax compliance

Encourages the Commission to foster a level playing field for competition among collaborative platforms; stresses the importance of identifying and addressing barriers to the emergence and scaling-up of collaborative businesses, especially start-ups; underlines in this context the need for free flow of data, data portability and interoperability, which facilitate switching between platforms and prevent lock-in, and which are key factors for open and fair competition and empowering users of collaborative platforms.
Regarding taxes, there is a urgent need for collaboration between the competent authorities and collaborative platforms on tax compliance and collection, and asks for the latter to play an active role, while encourages the Member States to agree on a uniform set of information that businesses must disclose to tax authorities in the framework of their tax information duties.

Impact on labour market and workers’ rights

Importance of safeguarding workers’ rights in collaborative services, of avoiding social dumping, and of guaranteeing fair working conditions and adequate social protection.
Risk that on-demand workers might not enjoy genuine legal protection, and that collaborative platforms might pass on their risks to workers with no entrepreneurial responsibilities.

Local dimension of the collaborative economy

European Parliament underlines the local dimension of the collaborative economy:
- (i) Local governments are already active in regulating and promoting the collaborative economy, focusing on collaborative practices both as the subject of their policies and as an organising principle of new forms of collaborative governance;
- (ii) there is ample room for manoeuvre for national, regional and local authorities to adopt context-specific regulations in order to address clearly identified public interest objectives with proportionate measures fully in line with EU legislation.
- European Parliament calls on the Commission therefore to support the Member States in their policy-making and in adopting rules consistent with EU law.
First movers have been cities, where urban conditions such as population density and physical proximity favour the adoption of collaborative practices, but European Parliament is also convinced that the collaborative economy can offer significant opportunities to inner peripheries and rural areas, too.

Promotion of the collaborative economy

In order to promote the collaborative economy, the European Parliament:

(i) points out the importance of adequate competences and skills, in order to enable as many individuals as possible to play an active role in the collaborative economy [the potential of the collaborative economy will be fully unleashed only through effective policies of social inclusion at EU level, starting with confident and critical use of ICT as a key competence for lifelong learning strategies]; and
(ii) draws attention to the difficulties faced by European collaborative platforms in gaining access to risk capital and in their scaling-up strategy, accentuated by the small size and fragmentation of domestic markets and by a critical shortage of cross-border investments.

4.- OPINION of the European Economic and Social Committee (EESC) on the “Collaborative economy” Communication of the European Commission. December 15, 2016. [Document]

Conclusions and recommendations

Social culture, consumption patterns and the ways of meeting consumers’ needs are undergoing a period of profound change. In the transition towards new forms of production and consumption, certain sectors of economic activity have been swept up in a powerful tsunami resulting from the incursion of new actors. Some of these actors are motivated by cooperation and a sense of commitment to their community, while others are simply driven by the opportunity to do business (and do not always respect the idea of a level playing field).
Digital platforms, in particular those that support gainful activity, deserve the full attention of the European Commission, in order to regulate and harmonize their activity and ensure a level playing field on the basis of transparency, information, full access, non-discrimination and appropriate use of data.
The challenge, therefore, consists in drawing a line between the different forms that this economy can take and proposing differentiated regulatory approaches, giving priority to those digital initiatives that are founded on democratic, solidarity-based and inclusive governance, in harmony with social innovation, which results in the need to inform consumers about their identity-giving values and their organisation and management arrangements.
As a result, the EESC calls for the development of a specific methodology for regulating and measuring a new economy with different standards. From this perspective, the value of trust – from the point of view of information symmetry – plays a central role. The criteria for transparency, honesty and objectivity in assessing the product or service should also be strengthened, rather than simply resorting to algorithms automatically.
The EESC likewise recommends to create both (i) an independent European rating agency for digital platforms, with harmonised competences in all Member States, which can assess the governance of these platforms with regard to competition, employment and taxation; and (ii) a permanent horizontal structure to analyse these emerging phenomena, interweaving its efforts with those of the European Commission, the Committee of the Regions and the European Parliament, in order to tackle the transition to a new economy with significant systemic consequences.

Other remarkable ideas

The Commission is causing confusion by placing digital platforms and the sharing economy in the same basket, without taking on board the idea that the collaborative economy and the common interest may be linked, based on a recognition of its positive externalities with regard to putting values such as cooperation and solidarity into practice.
In its Communication, the Commission misses what should be its main objective, failing to respond to the legitimate expectations of relevant stakeholders – defining a model and parameters within a clear and transparent legal framework in which the multiple forms of the collaborative economy can develop and operate in the European area, be supported and implemented and gain credibility and trust.

5.- OPINION of the European Committee of the Regions on “Collaborative economy and online platforms: a shared view of cities and regions”. December 7, 2016. [Document]

The CoR underlines that:

an early action to prevent fragmentation in the first place would still be far less difficult than ex-post harmonisation of 28 national frameworks and countless local and regional regulations;
Commission’s communication provides elements and criteria for assessment without giving a full response, which will inevitably result in differences in interpretation and further fragmentation of the single market; therefore calls on the Commission to come up with a clear legal framework that ensures that fair competition principles are upheld; regrets, here, that the Commission’s approach seems to be to let the European legislator only endorse a certain number of judicial decisions;
questions whether the Services Directive’s definition of “service provider” is still appropriate, since its current wording captures any economic activity, including the many highly infrequent and non-professional activities provided by peers;
underlines in particular the case of tourist taxes, which are a key concern for many local and regional authorities, since in many locations where such a tax applies, it is not collected on stays reserved through collaborative economy platforms; adds that this breach of regulation cannot be tolerated, that it creates unfair competition vis-à-vis traditional accommodation providers, and furthermore deprives local and regional authorities of revenue.
supports the establishment of a “forum of collaborative economy cities” to share experience and exchange good practice, which besides the CoR should involve the European organisations and networks active in the local and regional dimension of the collaborative economy and liaise with the relevant thematic partnerships of the Urban Agenda for the EU.