Airbnb wins legal victory from Europe’s top court as it looks to IPO

The Airbnb app on display in Paris, France.

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Europe’s top court just delivered Airbnb a major victory as the company readies for its public debut next year.

Airbnb cannot be treated as a real estate agency by European regulators, the European Court of Justice ruled Thursday morning. The court said that the company is instead an “information society service,” or merely an online platform, in a decision that could have broad implications for other businesses in the so-called gig economy.

The ruling is a welcome boon for Airbnb as the company prepares for its anticipated public debut in 2020 and seeks to attract public investors weary of government regulation. The company is facing increased regulation from lawmakers around the world who say short-term renters disrupt the local economy by driving up rent and pricing out longtime residents.

“We welcome this judgment and want to move forward and continue working with cities on clear rules that put local families and communities at the heart of sustainable 21st century travel,” an Airbnb spokesperson said in a statement after the ruling. “We want to be good partners to everyone and already we have worked with more than 500 governments and authorities to help hosts share their homes, follow the rules and pay tax.”

The complaint was lodged originally in France by a hotel lobby, the Association for Professional Accommodation and Tourism, or AhTop, which claimed that Airbnb should face the same regulations and obligations as traditional real estate providers.

The Luxembourg-based court rejected the claims on the basis that Airbnb’s essential feature is not real estate, but rather it is the platform through which Airbnb connects renters and individuals seeking accommodation. The court concluded that Airbnb is ultimately “a tool to facilitate the conclusion of contracts.”

“In that regard, because of its importance, the compiling of offers using a harmonized format, coupled with tools for searching for, locating and comparing those offers, constitutes a service which cannot be regarded as merely ancillary to an overall service coming under a different legal classification, namely provision of an accommodation service,” the court said in the ruling.

AhTop’s president Serge Cachan said in a statement the organization disagrees with the decision and called for a change to the rules at the center of the debate.

“The Directive on Electronic Commerce has shown its limits, [and] it must be changed as soon as possible so that it enters the 21st century,” Cachan said.

Following the ruling, Airbnb co-founder, CSO and Chairman of Airbnb China Nathan Blecharczyk sent a letter to major cities across Europe.

“Indeed this case was always about how our platform should be regulated — not whether it should be regulated,” read the letter sent to London Mayor Sadiq Khan, which was reviewed by CNBC. “Cities can, should and do have their own clear and modern rules for home sharing, and we have worked with governments across the globe on measures to help hosts share their homes, follow the rules and pay their fair share of tax.”

Mounting regulatory scrutiny

As Airbnb prepares for its public debut next year, one of its greatest obstacles is mounting regulation from lawmakers around the world. In Europe, cities from Amsterdam to Barcelona have cracked down on the home-sharing platform.

Paris Mayor Anne Hidalgo has been among the most outspoken critics of the company, which announced an official partnership with the International Olympic Committee through 2028. With Paris set to host the Summer Olympics in 2024, Hidalgo vowed to crack down on Airbnb if she wins re-election. Thursday’s ruling presents a substantial obstacle to more regulation in the city.

In the U.S., a spate of cities have rolled out ordinances to limit Airbnbs to certain parts of the city and restrict home-sharing to one per owner. Boston’s new law recently went into effect, reducing the number of legal Airbnb listings in the city from more than 4,000 to under 800 as of earlier this month. Similar laws will go into effect in important Airbnb markets such as Portland, Oregon; Santa Monica, California, and New Orleans, in the next month.

Elsewhere, a tribunal in Ontario, Canada, last month ruled in favor of Toronto’s short-term housing laws, which require hosts to live in the properties they list on Airbnb. Residents of Jersey City voted overwhelmingly to impose greater regulation on the home-sharing app, after the $30 billion company devoted $4.2 million to fighting the regulations. San Francisco lawmakers imposed strict regulations on short-term rentals in 2018 that sliced the number of Airbnb listings in the city in half, though an Airbnb spokesperson points to data that indicated the number of listings in San Francisco have recovered slightly since then.

Airbnb said last week that its tourist and occupancy taxes remitted will reach $2 billion by year-end, adding that it has also resolved the “majority” of its outstanding litigation in U.S. cities.

— CNBC’s Deirdre Bosa contributed to this story.

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