Business Essentials for Professionals


Global Risks for Airbnb Highlighted by New NYC Law and San Francisco Lawsuit

Global Risks for Airbnb Highlighted by New NYC Law and San Francisco Lawsuit
A reckoning is faced by Airbnb, the online lodging service that investors now believe is worth $30 billion.
The simmering tensions that were generated as the company clashed with local public officials seeking to minimize the impact of short-term rentals on neighborhoods and urban housing markets are starting to boil now in the eight years of torrid growth of the company.
Airbnb’s business in New York City, the company's largest U.S. market could seriously be damaged after New York Governor Andrew Cuomo, signed a legislation on Friday. As an immediate reaction and seeking to overturn the law, the company immediately filed a lawsuit in federal court. Barcelona and Amsterdam are imposing steep fines for listings that violate laws there and the German capital of Berlin recently passed a law banning most short-term rentals.
And in its home of San Francisco, Airbnb has also sued to block a new requirement that it reject booking fees from property owners who have not registered with the city and this has resulted in a pitched battle.
A crucial test of Airbnb’s business model is the New York and San Francisco legal fights. How landlords use its platform is not the responsibility of the company, it argues. Listings - and revenue - in some of its biggest markets could be drastically reduced if it is required to enforce local laws on short-term rentals.
James Emery, deputy city attorney of San Francisco said that other cities are looking to the city's law as a potential model and are looking to rein in Airbnb.
"Throughout the country, people representing cities have called me to ask what's going on with the litigation," he said.
Known as Section 230 of the Communications Decency Act - a 20-year-old statute designed to protect free speech online, forms the basis of Airbnb's legal argument in both the San Francisco and New York cases. While Aribnb is merely a platform for communications between property owners and guests, the city "impermissibly treats Airbnb as the publisher or speaker of third-party content", the company asserts in the San Francisco lawsuit.
To shield themselves from liability for any improper transactions among users of their services, other online marketplaces - such as Amazon, eBay, and Craigslist – have cited the same law.
He wasn't "seeing the link" between free speech protections and San Francisco's short-term rental regulations, said U.S. District Judge James Donato said at an Oct. 6 hearing in San Francisco. Donato is expected to issue a ruling soon.
In relations to regulations that the company contends are illegal, the beach city of Santa Monica, and the Southern California city of Anaheim, home to the Disneyland theme park, have also been sued by Airbnb.
Airbnb charges a service fee to guests and takes a cut of the revenue when a room or a home is booked. By enabling middle-class families to make extra money it helps communities, the company says.
Agreements, mostly for tax collection and in some cases for broader short-term rental regulation, with officials in nearly 200 locales around the world are also pointed out by the company.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc