Oral evidence - Online Platforms and the EU Digital Single Market

Members present

Lord Whitty (Chairman)

Lord Aberdare

Baroness Donaghy

Lord Freeman

Lord German

Baroness Randerson

Lord Rees of Ludlow

Lord Wei

________________________

Examination of Witnesses

Patrick Robinson, Head of Public Policy Europe and Canada, Airbnb, and Mark McGann, Head of Public Policy EMEA, Uber

Q158 The Chairman: Good afternoon. Sorry we have started a few minutes later than anticipated, but I am sure we can get through the business.

Welcome. You will know that this is a formal evidence session. It is therefore being recorded, you will receive a transcript, it will be on the web and therefore accessible, so anything you say will in practice be on the public record. Members of the Committee have recorded their interests as far as they are relevant to this inquiry, and they are available to you. You will also be on a webcast; I should have mentioned that. This room’s acoustics are not brilliant, so please ensure that you speak up. If we start waving at you to speak up, please respond.

Thank you very much for coming. I will kick off with an opening question. Both of your organisations would claim that they are part of the collaborative or sharing economy, and the European Commission, in its strategy, which is the focus of our inquiry, suggests that the collaborative economy could increase global revenues from around €13 billion to €300 billion. That is a pretty colossal rate of growth. There are also differences about what the collaborative economy is and what its benefits and downsides are. No doubt you would like to tell us the benefits; we may come on to questions about potential downsides. Could you put your organisations in the context of that growth of the collaborative economy and explain your understanding of such terms?

Mark McGann: Thank you very much, and thank you for inviting me and my company to give evidence here today.

The starting point for us is the massive investment—hundreds of billions of pounds—in technology in the UK and Europe over the past 30 years: mobile technologies, broadband, 3G, 4G, LTE and satellite navigation. The European Union is still sending Galileo satellites into orbit. So companies such as ours are really standing on the shoulders of giants in the massive infrastructure investments that the United Kingdom and the European Union have made.

Many people say that, after the agrarian and industrial revolutions, we are now witnessing the beginnings of a digital revolution. For us, it is really about new services based on technology. In Uber’s case, that is the ability to press a button and get a ride, the ability to engage in this double-sided marketplace, which brings tremendous benefits for people on both sides of that marketplace. There are the users, the consumers, who we in the Uber jargon term riders: people who want to live their cities better, who want to get around their cities more efficiently, safely and cheaply.

On the other side of that double-sided marketplace you have drivers: people who wish to use technology either to drive full time to make a living, as more than 20,000 people are now doing just here in the United Kingdom on the Uber platform—fully licensed, fully regulated private hire drivers—or people who drive occasionally. There are approximately 400,000 people in the United States today out of 1 million globally using the Uber platform to drive. More than half those people in the US drive for 10 hours or less a week in order to supplement their income or to deal with an unforeseen household bill.

We are talking about a broad segment of the economy that is certainly new and that is growing at a very fast pace, but really begins with—and, going full circle, ends with—the potential enabled by technology.

Patrick Robinson: I, too, thank the Committee for inviting me to give evidence today. Airbnb is another two-sided online marketplace. In our case, we have built a platform that allows people who have space in their home to share it with guests from around the world. In the context of the UK, we have about 52,500 hosts who have hosted a guest over the past 12 months or so. They typically host for 46 nights a year and typically make about £2,000 a year, so participating in a marketplace such as Airbnb as a host is a great opportunity to earn some extra money. For guests, we are growing their range of choices when they choose to travel. About 2.2 million people came to the UK and chose to stay in an Airbnb last year, and 85 per cent of them, when we ask them, tell us that they wanted to stay somewhere that allowed them to live like a local. They did not want to experience the city like a traveller; they wanted to stay in a different part of town and experience it through the eyes of a local. So we are really broadening the choice here.

On the question of the definition of the collaborative economy, as the Committee will have seen, a very large range of definitions is out there and it has become a bit of a cottage industry to try to draw the boundaries. From our perspective, this is really about a person-to-person platform where the platform provides the technology and connectivity to allow those people to connect with and provide services to one another. That is just generating more choice and more diversity of options for consumers, and it is helping to drive real innovation across a number of different markets.

Q159 Baroness Randerson: Your businesses undoubtedly bring new and interesting impacts to the industries that you are working in. Do you think that some collaborative economy platforms have an unfair competitive advantage against the businesses that they disrupt, because you can offer a similar service without having to comply with all the same regulations?

Patrick Robinson: From our perspective, I do not talk an awful lot about disrupting the travel market; we are actually growing the travel market and providing new choices. I think that consumers are choosing to use sharing economy or collaborative economy services because they genuinely offer something different and an alternative to what they might get in other places.

Over many years and in many markets, consumers have got used to the idea that they have a number of options open to them. If I want to travel from London to Edinburgh, I could get on a train, fly, ride share on a platform such as BlaBlaCar, or get on a National Express coach. Each of those services is regulated differently and is subject to a different kind of regulation. It is true that in a single market such as travel or transportation, there will be a range of models that are regulated differently.

The typical Airbnb host, as I said, is hosting for about 46 nights a year. That puts them on a very different scale to, say, the Hilton on Park Lane. Therefore, what we see, certainly in the UK, is an approach that applies proportionate regulation to different kinds of activity that might be being provided in the same market.

Mark McGann: Let us look at the regulation of urban passenger transport, which dates back to the 13th century here in London. At the outset, it was regulation to deal with overcharging and unsafe practices. You see that there will always be business models that come and operate differently from the services that they are trying to break into. The chairmen and the watermen believed that competition coming from horse carriages was unfair. The watermen believed that competition coming from steam boats was unfair. The horse carriages considered the motor carriages to be operating unfairly. You could argue that motor carriages today, or taxis, believe that technology presents the characteristics of unfair competition.

Regulation must be focused on the needs of the consumer first and foremost. There is a high prevalence in other markets—thankfully, not here in the UK—of regulation over time favouring and protecting the incumbent, to the detriment of the consumer, and certainly of new entrants.

Uber is able to be more competitive on price because of the efficiency of the technology. Previously, a cab would be occupied for perhaps 12 to 15 minutes of every hour, so taxis in cities are sitting idle outside hotels and train stations or hoping for someone to come out of an office block to hail that prized, lucrative trip to the airport. This is why in my previous answer I said that it really begins and ends with the efficiency that new technologies allow for existing business models. With the technology platform, there is a dynamic allocation of supply and demand, so drivers know where the next trip will be requested, so you do not have cars sitting idle and waiting inefficiently, not earning, sometimes taking up public property, blocking roads and contributing to pollution, but better utilisation of that car, and the driver has the potential to earn more every hour.

We do not view that as unfair competition. The regulator must set the standards, and every trip and every driver must be compliant with the rules, regulations and standards. In the United Kingdom, Uber services and the drivers are strictly and tightly regulated by TfL, which is the way it should be, but we would certainly not agree with any statement that the success of these new business models represents unfair competition to the incumbent business model.

Baroness Randerson: Can I follow up on that? The current legislation on taxis and private hire vehicles is predicated on a binary system: you either use a hail-and-ride vehicle or you have to pre-book. Would you agree that you are using a technology that cuts through the middle of that system? Do you therefore believe that the legislation needs updating?

Mark McGann: The United Kingdom, contrary to too many countries in the European Union, has a very competitive and vibrant for-hire market with, as you stated, certain exclusive rights granted by the state to the taxi operators—for example, to London’s iconic black cabs—and different rights and obligations in the private-hire segment. I would just say that the ability to push a button on your smartphone, thanks to technology, makes pre-booking more efficient. We used to have to phone up for a minicab or perhaps send a fax, so technology is making that entire process more efficient. Rather than a dispatch operator allocating trips on opaque criteria, the technology would allocate an Uber trip on the basis of the nearest available driver, so it is very transparent and very fair.

As to whether the regulatory framework in the United Kingdom needs to be amended to take stock of technological developments, all I would say is that I would dream of having the same regulatory treatment for our business and our services across the European Union as we have here in the United Kingdom. It is not perfect. It is difficult for regulators and for you as legislators constantly to keep pace with fast-moving technological innovation. There is certainly room for consistent, coherent and equitable implementation of the existing laws across the United Kingdom. There are certain quirks and tweaks to the existing framework where, in certain jurisdictions, a driver must not wear short sleeves or a private-hire vehicle cannot be silver-coloured. Many bells and whistles are added to the primary legislative framework, which, as the Competition and Markets Authority pointed out last week, is not in the interests of competition or consumers.

Q160 Baroness Donaghy: Good afternoon. My questions are about the areas of existing employment regulation and health and safety. Let me give a couple of examples to show where some people’s concerns are. The International Labour Organization has expressed concern about the abuse of the just-in-time workforce, including disguised employment, restrictive terms and conditions, such as exclusivity clauses, asymmetric shift of costs and liabilities to workers while retaining control of them, and unilateral change of terms and conditions and pay—for example, increase in platform fees. Do you have any comments about that? I suppose a particular issue for Airbnb is that hotels and bed and breakfasts have to conform to a certain level of health and safety, and it could be argued that Airbnb hosts do not have the same requirements, which could be an unfair advantage.

Patrick Robinson: Thank you, Baroness Donaghy. I will address that point directly. The 2005 fire safety order—a law passed a little while ago—makes the fire safety rules clear for hosts and in fact for anybody who is taking payments for accommodation, whether they are listing that accommodation on Airbnb or in a local newspaper. It is a risk-based system, which requires all hosts to identify the possible risks in their places and to take appropriate steps to mitigate those risks. The Government published some straightforward and clear guidance in 2008, which we make available to all our hosts so that they understand what they need to do.

On the question of asymmetric regulation, I just come back to the nature of the properties being offered on Airbnb. The vast majority of them are somebody’s home for the majority if not almost all of the year. We already have regulations in things such as building codes for private landlords and many other regulations that apply that will keep families safe in their homes. Those naturally extend to guests when they come to stay. I think that the fire safety rule is a good example across Europe of a good, sensible risk-based approach that applies the right kind of regulation to the right kind of people at the right time. I do not have anything in particular to say about the employment issues that you raise. Suffice it to say that the vast majority of people who use our platform do so just to generate a bit of extra cash. They often already have jobs. They are in total and complete control of when they host, how they host and how much they charge. The fees for doing so on the platform are very transparent and well understood.

Mark McGann: I am not sure that anyone expected that those massive technology investments that we have made, which I referred to earlier, would transform our daily lives to the extent that applications such as ours and others are starting to do. To take the example of Uber, it is not just the regulation of urban passenger transportation that needs to be updated or modernised, as is the case in many EU member states, and to be adapted to the new realities of what technologies can enable. It is also true that we are realising that, for lawmakers and businesses alike, the impact on other areas of regulation, such as labour law, employment law and the tax code, is a much more comprehensive and fundamental challenge that absolutely must be addressed. Companies such as ours need to continue to do what we are doing today and to make a contribution, not necessarily giving all the answers—I wish that we had all the definitive answers to give you—but the debate must be here and now with regard to the broader impact on society and the economy.

With regard to employment law—you referenced decisions or resolutions of the ILO—there is considerable and understandable concern about just-in-time contracts or zero-hours contracts here in the United Kingdom and in other countries, including the Scandinavian countries. The advantage for the people using the Uber technology to make a living is that they have absolute flexibility with regard to when they work, how long they work for, when they log on to that application and when they decide to stop and do something else. In the minicab industry, which is the incumbent industry that our technology is changing, the work pattern of minicab drivers was often long and fixed; a minicab driver had little or no control over his or her hours and would often have to work very long shifts and cater to trips allocated on, as I said, an opaque basis by dispatchers. Uber partners—the drivers are our customers and the riders or passengers are the customers of those drivers—value the flexibility that this type of work affords them. They fit their work around their daily lives, particularly those who have childcare responsibilities or are caring for an elderly parent. They do not have to clock on or clock off at a time predetermined by somebody else. We are absolutely against any notion of exclusivity. The trend and the pattern in those markets where our business is more mature—that is perhaps a rather grand expression, since we have been around for only five years—is that a driver will have several applications on her or his phone and be able to decide, “I’m going to work on Uber from 10 to 11, because I know that’s when it’s going to be busy”, or they will decide to work on Addison Lee or other applications. We would be very critical of and resistant to any regulatory initiatives to force exclusivity on drivers. There is a consultation pending here in London with TfL, which believes that it is in the interests of the consumer and the driver to introduce such exclusive contracts. We think that flexibility and choice are what matter, both for the provider of the service and for the consumer.

The Chairman: Do you regard your drivers as employees, or are you paying them for services?

Mark McGann: The drivers are sole traders, they are independent workers, they are contractors. Uber does not own cars or employ drivers. Of course, we have our own workforce, our employees, but the drivers are independent. In some cases, they are self-employed, when they are full-time licensed drivers. In other cases where, unlike in the UK, we have the ridesharing service, they are non-professional drivers who meet certain regulatory specifications and background checks and can drive a couple of hours of week or a couple of hours a day. These people are not employees, and the profiles of the people who drive using the Uber technology are extremely different from one scenario to the other.

The Chairman: But you were just comparing your drivers with a minicab company, which does have employees, even if they are on zero-hours contracts. I am also referencing the court case in California.

Mark McGann: You are absolutely right, Lord Chairman. A class-action suit has been brought in a court in a jurisdiction in California, which is still pending, by some private hire drivers who believe that they should be classified as employees and eligible to the benefits afforded to employees. But it is very clear: the drivers enter into a contractual relationship with Uber, so Uber, as I said, is the provider or the licensor of the technology for those drivers. They are independent, self-employed. In many professions, the nature of independent, flexible self-employment is nothing new.

Q161 Baroness Donaghy: That last statement is absolutely correct. In fact, this has been an issue in an area that I know about: construction. There is an unclear area between genuine self-employment and what in reality constitutes employment. Those issues are with us today, even though this is not an entirely technology-based industry. There are similar issues about who is responsible for health and safety, and for consumer rights. Where do people go if they are not satisfied that they have had a good experience? We are not trying to say that the new technology has caused uniquely new problems, but obviously it may have complicated some of them.

I would be interested to hear your comments on whether the model saves on the labour costs that other organisations have, and whether the business risk is to the driver or the host. In the scheme of things, how should concerns about those issues be addressed and by whom?

Mark McGann: If I may respectfully disagree with at least part of your statement, our belief is that, once again, regulation and the law has to set the framework and the standards that must be met, but increasingly technology can fulfil some of the public interest objectives of the legislation.

You mentioned consumer protection and consumer interests. For a few years now, we have seen the trend of the so-called peer-rating system, where the quality of the service is much improved on what we had become used to. To use the example of Uber, every time you take a trip, you rate the performance of the person who has driven you, and the drivers rate the customer—the rider—on behaviour, et cetera. That means that there is constant monitoring and a momentum of better customer service, which again is very transparent.

For safety, which is one of the core objectives of consumer protection, in particular in instances where people are getting into cars to be transported by other individuals, thanks to technology you have much stronger standards of safety. Before you get into that car, you receive the photograph, the licence plate number and the name of the driver. You have the opportunity to contact that driver through anonymised numbers. You are safer than before during the trip, thanks to GPS technology. You can share your so-called ETA, your estimated time of arrival, with a friend or family member, and he or she can see exactly where you are on a map and as you are approaching.

In terms of safety, but also customer redress, once you have ended the trip and closed the door of that vehicle, you receive a digital receipt. In conjunction with or parallel to providing a rating of the service that that driver has provided, if you have lost anything or there has been an incident—as we are doing 3 million trips a day worldwide, the one in a million incident does of course happen—you have a much improved system of customer redress. Over 75 per cent of the claims or inquiries that we receive here in the United Kingdom are dealt with in less than six hours, and the more serious claims or concerns are dealt with in a much shorter timeframe.

So I would argue that many of the public interest objectives set by the law and legislators, which are as necessary today as they were at the time of the watermen and the carriages, can be met by the operators of these platforms. There can be self-regulation, but at the end of the day it is the regulator, such as TfL, that regulates the service that we provide. We are a regulated operator here in the UK. TfL regulates the drivers, and there is even a third level of regulation of the vehicles.

Patrick Robinson: I would add only the fact that these marketplaces rely on trust in any number of directions, but one of the most crucial elements of trust is between the users and Airbnb, Uber, BorrowMyDoggy.com, or whoever the marketplace operator may be. The idea that we have no stake in that is incorrect. If users are unhappy with our services, if they lose trust in us, if we do not help to deliver great outcomes for them every time, they will go somewhere else. These are two-sided marketplaces: we need both sides of the market to be happy, fulfilled and content to make our business successful. That is why we, Uber and others have been innovating so heavily on these self-regulatory responses, which go beyond what regulation and consumer protection laws require of us across Europe.

On the point which the European Commission is asking about—which laws apply in the collaborative economy—consumer law applies in the collaborative economy just as it does in the real world.

Lord German: I would just like to understand a bit more about flexibility of the workforce, because that helps us to understand what sort of workforce we are talking about. Airbnb has been very helpful in giving us statistics: 31,200 guests, 52,500 bed and breakfast in the country, typically spending 46 nights per annum and, for the person selling, £2,000 per annum. Do you in Uber have any similar statistics that would allow us to understand the nature of the business: for example, the number of hours worked on average, the amount earned by a driver, the number of days or whatever for which they work and the number of customers that they have? That would give us a picture that would be helpful, if you have it.

Mark McGann: Absolutely, with great pleasure. The nature of our business here in the United Kingdom is the fully licensed service with professional drivers, who are themselves regulated. We are not talking about the occasional ridesharing that we operate in other markets. The regulatory framework in the United Kingdom currently does not foresee such a ridesharing service. If I give a snapshot of where we are today in the UK, things have changed quite substantially between this year and last year. Last year, we were operating only in London; now, we are in 13 cities across the United Kingdom. We are very excited about the fact that we will be launching, we hope before Christmas, in Belfast. We are doing almost 4 million trips a month. More than a million people in London have the Uber application on their smartphones and use the service. There are 30,000 people who are downloading that app in London every week, so by next summer we expect to have 2 million people in London alone, which of course means that a quarter of the population will use Uber.

There are just over 20,000 partner-drivers—our customers who are driving on the Uber platform. I cannot tell you how many hours they are doing, because they do not work exclusively for Uber, so we are not privy to that data.

Lord German: But you would know for how many hours they work for Uber.

Mark McGann: We would be able to check for individual drivers.

Lord German: Typically, you would know what an Uber driver works in any week.

Mark McGann: There would be some who would work 20 hours or less. I am very happy to provide in written evidence the statistics for the number of drivers working 10 to 20 hours or 20 to 30 hours. You must forgive me for not having the exact details, but I am very happy to follow up with written evidence.

In terms of average earnings, we know that for the month of October, after paying the so-called service fee, which is the fee that the drivers pay for the use of the technology—the licence fee—on average drivers were making about £16 an hour. Then of course they have to take their operating costs out of that, and those costs would differ depending on whether they were owning or leasing their vehicles.

The Chairman: This goes to the heart of the nature of the relationship between you and the drivers, but I understand that you have recently unilaterally changed the platform service charge. That obviously eats into the drivers’ income, because, presumably, the charge to the customer is still the same, so you are getting a bigger share of it. You have determined that on what basis? If it is not a contract with the driver, it is difficult to see how you can do that.

Mark McGann: Again, there are contractual terms and conditions. We are not imposing anything on any particular individual. This was a change that we made globally, so it is not specific to United Kingdom. As we grow, we need to invest more in the technology, but as the technology allows drivers to increase their earnings through greater efficiency, for certain levels of the Uber service—we provide various categories of the Uber service here in the United Kingdom—we made amendments to the fee that drivers pay for the use of the service, the use of the technology.

The Chairman: Interesting.

Q162 Lord Aberdare: The Commission’s recent single market strategy included a focus on the collaborative economy and encourages deregulation of existing sectors where appropriate. At the same time, it recognises that this needs to be balanced with the need to protect public interests. Do you have a view on what sort of public interests might need to be protected in your particular two sectors, and how that should be done?

Patrick Robinson: That is a very big and broad question. I think the Commission is asking the right question, which is how we take account of the growth of the collaborative economy and ensure fair competition, notwithstanding that we want to see proportionate regulation applying to the right people at the right time. I sit on panels with representatives of the hotel industry, small bed and breakfasts and others, and I hear a lot from them about the burdens that they feel they are under. As we look at the impact of the collaborative economy on established sectors, I absolutely agree that it is right to ensure that all industries are regulated properly and proportionately.

In our case, the public interest at stake here is, first, about consumers and consumer choice not just to consume services but to be producers of services too. The additional income that Airbnb hosts are making is very important to them. Identifying outdated rules and regulations that might stop people engaging in what is beneficial activity is a good exercise and one that I am delighted that we undertook in London earlier this year when they introduced the new rules allowing people to share their homes without the need to seek planning permission, for example. That then raises other issues that we need to be mindful of. We need always to be mindful of the impact that that could have on neighbours or on local communities. That is why we and many other companies in the collaborative economy spend a lot of time measuring impacts and finding effective ways to deliver good public interest outcomes.

For example, there are the rights of neighbours in terms of insurance against potential damage from one property into another. We have innovated by introducing insurance that protects hosts’ liability up to $1 million. That is something that we recognised would help others in a building to feel more secure and safe about having someone engage in Airbnb activity in their building. The peer-to-peer review system that Mark mentioned earlier is one that we have pioneered and continue to refine over time, so that reviews are available double blind. That is a good example of how to deliver quality outcomes.

On the safety side, we are looking at providing smoke detectors, carbon monoxide detectors, to hosts at no upfront cost, costs which they can recoup. There are a number of public interest outcomes that we can play a part in helping to regulate ourselves.

Lord Aberdare: There is one specific concern that you alluded to. You mentioned that most of your hosts are renting their places for only 30 or 40 days a year, but it is possible that some of those accommodations are not occupied and are being rented for a great deal longer than that. Do you see a role in sorting that out? Is there a limit on the number of days?

Patrick Robinson: In London, there is a limit before you need to seek planning permission. Outside London, there is no such limit, and many of the places available in the Lake District, Cornwall and Devon are already somebody’s furnished holiday let. They have been rented out for many, many years using various means, and Airbnb is now providing people with another platform to market their services. The rules differ very greatly from one place to the next. Even in London, the rules that apply to your particular block of flats or building may be very different from your next door neighbour’s or the person’s over the way.

It is appropriate that hosts should be the ones understanding the rules and regulations that apply to them in their fullest extent, and helping guests to understand what they are, too: where to put the rubbish, when not to play loud music. That is something that the hosts are really best placed to understand and educate their guests about.

Mark McGann: In terms of the Commission’s single market strategy, if one looks at what constitutes the public interest, clearly with regard to the Uber business—again, I will talk about that—and the service that Uber provides, for people living in cities it is about adequate choice, availability and affordability of transport, which is still, unfortunately, very much an aspiration in many parts of the European Union. I would not necessarily advocate for new directives or new laws, but we need proper implementation of the existing laws, which are laid out clearly in the European treaty and the various directives that have been transposed into law here in the UK as elsewhere: Article 56 on the freedom to provide services, Article 49 on freedom of establishment, the e-commerce directive et cetera. Beyond any single market strategy, the European Commission has the legal obligation as the guardian of the treaties to ensure that member states are fair, proportionate and non-discriminatory in their regulation of these new services, as with all services. Unfortunately, many member states across the European Union, although thankfully not the UK, seek to erect new barriers and are not looking at this in terms of public interest, the interest of the consumer or even the interests of people who need to work—I am happy to return to that subject—when you have places like Brussels with 25 per cent unemployment, yet the regional government bans Uber at the behest of the minority not of taxi drivers but of a handful of people who own and control taxi licences. The south of Spain has 40 per cent youth unemployment; it is not in the public interest for the Spanish state to be prohibiting Spanish consumers from having more affordable and more competitive transport. Very often, a car is the single most or second most valuable asset that people have, yet they are not allowed to use it to work if they have lost their job or to get their foot back on the ladder of professional activity. The rules need to meet the proportionality test, and they are disproportionate. In Germany, private hire drivers are required to have a paper contract in the car for every passenger who is transported. After every trip, they have to return to the garage—to a base that is often outside the city—to wait for the next trip. That adds to congestion, pollution and inefficiency, as it denies the driver the chance to do more trips an hour. In France, you have to study for 250 hours and pay up to €6,000 or €7,000 to become a professional driver; most of these people come from the poorer suburbs of Paris, for example, where they do not have the luxury of taking time out from having to earn to feed their families. In Brussels, for a private hire vehicle, the minimum fare is €90. These rules are not fair. They are not in the public interest, either for the consumer or the driver. These are things that the European Commission should be taking into consideration. There is no need for an ex nihilo creation of a new body of regulation, as the treaty and the directives are clear, but the Commission needs to do more to ensure that the likes of Spain, Germany, France and Belgium are respecting laws that have been voted for years if not decades ago.

Patrick Robinson: I would absolutely add to that. We have our own examples of disproportionate rules that affect hosts. There are countries that require you to have five coat-hangers in your wardrobe and to make sure that every bedroom has a chair in it and that you have a front desk that is manned 24 hours a day, with a bell to ring and a complaints book to fill in. This is not sensible. The services directive is the crucial piece of legislation to help not just companies such as Airbnb and Uber but European companies that are trying to operate consistently across a market. These are peer-to-peer marketplaces; we are in a world now where more and more consumers are seeking to transact with one another. If you are a resident of Barcelona and you want to rent your spare room to a visiting German, at the moment the rules prohibit you from doing that, but the same German can host the same Barcelona resident in his spare room with no restrictions whatever. The fact that these rules are so fragmented affects cross-border transactions as well. There does not seem to be a huge amount of public interest underlying those kinds of restrictions.

Q163 Lord German: I do not think it would be an exaggeration to say that you would prefer to have a European set of regulations that were enforced most strongly by the European Commission. Is that exactly where you are coming from? Is it your belief that the case for local authorities, regional governments and national member states having their own rules in the areas in which you work is diminishing? Do you feel that there is not really a role for them and that this should all be done by Brussels?

Patrick Robinson: From our perspective, no, that is not where we are coming from at all. The issues that arise from home sharing are very local. Cities, towns or regions are going to want their own responses to tourism and travel. In fact, the kinds of laws that apply to hosts most directly—planning laws, zoning and those kind of building laws—have no European competence anyway. From our perspective, we are always going to be having local conversations. That feels appropriate, given that our platform is about providing people with access to areas of towns and cities that they do not normally get, and we have to enter into a dialogue with them. What I am getting at is that the Commission can and should be challenging national Governments, who should then be challenging in an onward way regional and municipal governments, to justify why the regulations that they are putting in place are justified and why they are not, as Mark outlined, disproportionate and discriminatory. Some of that pressure that can be applied from Brussels can be very powerful in unlocking that. It is a good thing that Commissioner Bieńkowska has said in the internal market strategy that she sees the greatest value here in the Commission examining where existing laws apply and challenging member states to update or adapt their rules or to look at new rules wherever possible.

Mark McGann: We are supposed to be talking about a single European market for services. Whether you are an entrepreneur from San Francisco or from Cambridge, you require the legal certainty to know that if you innovate and take risks, as all entrepreneurs must do, you will be able to have access to markets and provide your services at scale if you are to compete globally. Frankly, I am not so worried about the future of the Airbnbs or the Ubers of this world; I am more concerned about domestic companies here in the UK and across Europe not being able to make it into the global market for these services based on technology because of the outdated, protectionist measures that we find so often across this supposedly single European market. I would not say that it is up to Brussels to make decisions. This is the European Union and it is the member states collectively. We would not have the single market if it were not for the United Kingdom.

As for the technology, two computer engineers came up with the idea of being able to push a button and get a ride when they could not hail a taxi in Paris, because there are artificial caps on the supply of taxis in Paris to protect the incumbent, which is essentially one large company belonging to one very wealthy family. Once you have these innovations, you should be able to deal with one regulatory framework. Today Uber is operating in 23 out of the 28 member states. It is not even fragmentation on the level of the member states. It is not 23 or 28 different ways of doing things; it is more than that. The framework in Catalunya is different from the framework for Spain.

The Chairman: Yes, but there is also a question of subsidiarity, which we as regulators and legislators have to observe. Your markets are ones that should be regulated in line with the needs of the local community, so do not go too far down that road. Lord Freeman has the next question.

Q164 Lord Freeman: Good afternoon. Your detailed evidence so far has been very helpful, but perhaps I could ask you to comment on what the Commission might do in looking at competition, particularly between platforms. On the one hand, the Commission is obviously anxious to promote innovation and competition—you have explained clearly the achievements of your respective companies in that field. On the other hand, there is a need to provide regulations concerning safety and to promote competition and free entry. Could you sum up, almost in a nutshell, what your advice would be to the Commission on what it should concentrate on in drafting a new regulation for your specific parts of this industry, the digital market?

Patrick Robinson: I would probably advise them not to try to write a regulation to apply to the whole market. We ought to keep reminding ourselves that regulations already exist across a range of different verticals, and they are appropriate to the market being dealt with. The collaborative economy is hugely broad, and the kind of rules and regulations that you would want in place to protect the public and consumer interest in peer-to-peer financial lending or financial products will be rather different from protecting somebody who wants somewhere to stay in Paris for a weekend. Trying to come up with a single regulation to apply to the sharing or collaborative economy will be very difficult, if not impossible.

The appeal is similar to what Mark and I have been saying for the past 20 minutes or so: let us understand what exists today, how well, consistently and effectively the existing regulations are applied and let us see where they might need to be changed. The convening power of the Commission in this process could be very useful, but I would hesitate to suggest that there is a regulation that the Commission should be pushing now. This is a very young market. The companies that you see before you did not exist before 2008, so we are talking about very fast-moving sectors where the companies and platforms concerned are moving a lot faster than regulators can, to deliver positive outcomes to consumers. I think that the Commission can afford to stand back and watch for the time being.

The Chairman: We are running towards the end of our time. I have two consumer-related issues from Lord Wei and Lord Rees. Perhaps we could take them together.

Q165 Lord Wei: The European consumer organisation, the BEUC, has told us that when consumers transact with online platforms, it is not always clear who is responsible. From the terms of reference of platforms themselves it seems that they are not responsible for very much. How does consumer protection law apply in the collaborative economy? If something goes wrong, to whom does the consumer turn to seek redress? Is that something that we need to address through regulation?

Lord Rees of Ludlow: Can I add a footnote to that? You mentioned the peer-rating system as a safeguard for consumers. I wonder whether you could say a bit more about how efficient it is. Particularly in the case of Mr Robinson, there is the issue of fake reviews and all that. The question is whether you feel that that needs more regulation or whether, from a consumer’s point of view, it can be left to peer review.

Patrick Robinson: On Lord Wei’s question, I think I mentioned to Baroness Donaghy earlier that consumer protection law applies to the collaborative economy just as it does to other aspects of the economy. Terms and conditions give you one picture; the real picture to look at is what happens if something goes wrong. The first thing to say is that issues relating to consumer protection are incredibly rare on our platform. We employ around 450 people in Dublin who are schooled in 22 European languages and are there to help 24 hours a day, seven days a week for every time zone of the world if you need to get in touch with somebody.

These are peer-to-peer marketplaces, so we always encourage users to resolve things with their hosts when they check in. We ensure that the host does not get your money as a guest until 24 hours after you have checked in, so you have a window to try to resolve things with your host—if the wi-fi is not working or you have not been provided with that extra bed that you asked for—but we are here to help make sure that hosts and guests are happy. We have gone way beyond what we are required to do by law in providing protection insurance for hosts and in ensuring guest refund promises. If during that 24-hour period you cannot resolve something with your host and you want your money back, you can come to us and the guarantee will kick in.

It is certainly true that consumer-to-consumer models present unique challenges in terms of redress, but if people suggest that there is a gap in the law there, I do not think that we know that yet. We need to look at the way platforms are dealing with those issues to identify whether there is a problem that needs to be filled by regulation.

Turning to Lord Rees’s issue, it is impossible to leave a review on Airbnb unless you actually stayed in the property. At the end of every stay, the host and the guest review each other. We go further than just a star system: we want you to tell the story of your experience. People can provide private feedback to one another as well if they do not want all that feedback to be published. They can provide private feedback to us if there are things that need to be flagged. You can be sure when you read a review on Airbnb that it relates to a trip that actually took place. If a host feels that a guest’s review, or vice versa, has been unfair, there is scope for a right to reply. You can make a comment to say, “I think this is very unfair”, or, “I am sorry you didn’t enjoy yourself. I have resolved this for next time”.

We have done a lot to make that system effective and efficient. In fact, the last big change we made was to ensure that you do not get to see somebody else’s review until you have written one yourself. The reviews are published simultaneously, which means that you cannot game the system by trying to entice a good review by writing a good one yourself, or hold back, if you genuinely wanted to give some bad feedback, for fear of being given bad feedback yourself.

We made that change, and that works hugely effectively. More than three-quarters of all our stays end with host and guest reviewing one another, which is an incredibly high proportion.

Mark McGann: Thank you again for the questions. I would argue that here, regulation needs to step in when the market and consumers are unable to solve things themselves. Technology is empowering the consumer in this regard. The technological revolution is perhaps changing the tipping point. There are areas of consumer law where technology is less involved and there is perhaps a greater need for regulation. If I compare our business model and the service we provide with how similar services were provided prior to that technology, the digital nature of this service guarantees absolute transparency. From an consumer interest perspective, in the past she or he may have gotten into a taxi in some city across the EU where they were charged cash, so they were not sure whether it was a fair price—especially if the meter happened to be broken. Very often, the credit card reader would be broken. There was no guarantee that the trajectory of the trip was the most efficient in distance between A and B.

In terms of both of safety during the trip and the possibility of redress after, I would argue that technology really has stepped in and taken on much of the burden with regard to consumer protection.

I explained some of the characteristics of the Uber service earlier, and I will not bore you by repeating myself. The rating system did not start with Uber or Airbnb; it has been with us now for almost 10 years in various services at various levels. The rating system at Uber is extremely secure and individualised; no one can provide feedback on that trip except the person who took it. We view it as very important to encourage adequate behaviour on the part of the writers: to show respect towards drivers. This is not all about the consumer, of course; it is also about the individuals who are providing that service.

We would argue that the market is the appropriate mechanism for finding the right balance, and there is no need for additional consumer protection legislation. As with the regulation of these services in what should be a single market, we would argue that the existing body of law is more than sufficient.

The Chairman: Thank you very much. There are more questions that we could ask you, and you have already offered to give us some further information. If you think of anything else that we should register, please get in contact with the secretariat here. Meanwhile, thank you very much. We will absorb your evidence and, over the next two or three months, that of others, including some who you know about who will be slightly critical of your operation. Thank you very much for comprehensively dealing with all our questions.

Mark McGann: Thank you.

Patrick Robinson: Thank you.