INTRODUCTION that of Marriot International hotels. Despite its

INTRODUCTION  

 

            As the internet continues to connect
billions of people around the globe and has remarkably enabled peer-to-peer
(P2P) transactions, businesses that adapt such P2P services have experienced a
tremendous growth in such a short span of time. These P2P exchanges of services
include a vast array of goods and services such as rentals of residential
housing and space, transportation, daily chores, professional services, and
countless pioneering other services. Such phenomenon, so called the “sharing
economy”, has facilitated enormous potential to expand entrepreneurship and
innovation that contribute great benefits to our society. For instance,
companies like Airbnb or Uber initially used digital technology and social
media to market its goods and services to provide efficiency and benefits for
society and especially for investors. Although such sharing platform provides
benefits to consumers by increasing more services, lowering costs, and
holistically providing a new ‘value’, it has also raised difficult legal issues
as it violated existing rules and regulations. The problem especially rises due
to the fact that such services grow too fast to the pace where governments and
regulations are not able to control and regulate. Because such services create
a great uncertainty for customers and especially third parties since they don’t
fall into traditional legal frameworks, new regulations need to be tailored
specifically for such platform providers without stifling such innovation.

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            Sharing economy as a whole have caused many
confusions under privacy, security, tax, insurance, employment, antitrust,
liability and tort. For the sake of concise and in-depth analysis, this paper
will only use Airbnb as a sharing economy platform example to unearth its main
issues and propose regulations in accordance with such issues. Airbnb, a
technology sharing platform which allows housing property owners to rent their
space to anyone much efficiently, easily, cost-effectively, and quickly, grew
at a torrid pace since its inception. From its beginning, Airbnb’s market value
is approximately at 30 billion dollars, which is roughly analogous in its value
to that of Marriot International hotels. Despite its growth, some of the
efficiencies and benefits that were gained are expected to decrease as a
growing number of regulations on cities and regions prohibit such services to
be implemented as they mainly violate safety, zoning, taxes, and privacy
regulations. Additionally, product liability regulation requires different legislations
for this platform as it creates a third-party relationship among the provider,
user, and platform. Therefore, there is a rising necessity in regulating Airbnb
services and new legislation proposals will be presented and discussed in this
paper.

 

Safety Regulation Proposal

 

            In
sharing economy platform, mutual trust is paramount not just between the
provider and customer, but also from its facilitator or so called a
‘middleman’, a sharing economy platform. Airbnb’s sharing hospitality services
generate substantial benefits to customers mentioned previously, but they also
create serious safety hazards as frequent reports of vandalism and safety
concerns have been raised. For instance, there has been many unpublicized
stories where guests break into host’s place vandalizing and stealing products,
hosts not maintaining proper speculation for sprinklers, fire alert, fire exit,
to stories where even deaths emerge due to lack of safety standards. In
addition, third parties are negatively affected by such service as many
residents see strangers entering their apartment complex routinely, which
imposes potential threats and harm. To alleviate such ongoing issues, Congress
should enact legislation to foster safety issues in Airbnb services, benefiting
all three parties: Airbnb, customers, providers.

            Currently,
Airbnb isn’t required for inspections and maintenance such as cleanliness of
host’s rooms. Instead, hosts are responsible and share most liable for failure
to keep the facility and space up to par; Airbnb has no control over such
liability. Thus, Congress can borrow and utilize California as an example to
enhance this issue. The California Public Utilities Commission approved
legislation to support ride sharing services such as Uber and Lyft in 2013.

They created a new branch of business called a Transportation Network Company
(TNC), which put and speculated strict safety requirement to ensure that
drivers were legally licensed, had no criminal background, attended driver
training programs, and had insurance coverage. Such new legislation allowed
improvements in guaranteeing safety to customers. Congress should follow such
movement for Airbnb services as safety remains the paramount goal of nascent
legislation. They should create a separate business category aside from Airbnb,
where it specializes in speculation and surveillance services around the host’s
facility. They need regular inspections to check if the host’s place is safe to
provide quality and safety guarantees. Such periodic inspections may consist of
background checks, rental property, sanitation, proper fire exit or
extinguisher placement and surveillance around the neighborhoods that have Airbnb
customers to prevent potential misconduct. By embedding these services and
creating a new business department like that of the TNC, Airbnb will allow and
encourage users and providers to trust and use its services.  

 

Zoning Regulation Proposal

 

            With Airbnb operating nationwide, it
is challenging to enforce regulatory frameworks as each country and its cities
impose different regulations in different places. One of the challenging issues
that arise from Airbnb services lies in the violation of zoning. Local and
state rules that govern traditional hospitality are already highly complex,
which makes a new platform like that of Airbnb even tougher to regulate. For example,
in traditional regulation for short-term rentals, local ordinance includes ‘residential
zoning restrictions’. Zoning laws and regulations are enforced in order to
control the use of private property. Nevertheless, not all cities and
communities have such regulations. In some cities in the U.S, hotel industry, an
Airbnb’s biggest threat, falls under commercial zoning and is following the
zoning laws whereas Airbnb is quite ambiguous as to which zoning law it falls
into. This practically allows such services to violate the zoning law and
provide services literally anywhere as long as the property exists to provide.

As a result, there is an antitrust violation from Airbnb services, which
promote unfair competition against the traditional hotel industries. To clarify
such ambiguous zoning laws and to promote fair competition, Congress should
legislate a new law that puts strict violation where Airbnb services can be
provided and regulate its prices in accordance with location.

            Zoning regulations require hotel or
other accommodation businesses to receive special approval from the government
before deciding where to locate in certain districts such as Manhattan. On the
other hand, there are no strict restrictions on Airbnb providers in Manhattan. The
city of New York deserves protection from such violations who take advantage of
the unregulated system by turning properties into short-term rentals, which is
a violation of National Housing Amendment Act. Congress should therefore
implement a regulation where they should not allow Airbnb services to be
available in regions like Manhattan or San Francisco, where there are strict zoning
regulations. If it is impossible to completely eradicate its services as they
are already too saturated, then a revised regulation should be implemented
where Airbnb services should not be allowed to be provided in certain kilometers
around nearby hotels or other fully authorized accommodation facilities. By
doing this, a fair competition can finally be implemented so such Airbnb
services can be prevented from zoning violation. Because not all countries and
cities have such zoning regulations, it will be impossible to enforce this new
proposed legislation. Nevertheless, for such cities or regions that are
negatively affected by cost-effective Airbnb services, a new regulation can
also be imposed where price for Airbnb accommodation nearby certified hotels should
be priced higher than its original price. Since many travelers choose to stay
at Airbnb since it is mostly cheaper, hotel industries are severely affected as
their customers choose to stay at Airbnb instead. To compensate for such loss
and provide fair competition, Airbnb services that are located nearby hotels
must increase their fares to avoid cost-effective business model. This will
give hotel industries an opportunity to compete against Airbnb in equal and
fair standards. The Congress will never get to fully regulate Airbnb services
as they have come too far, but Airbnb must adapt to zoning law and revised
legislations so that such service does not exercise full control over
hospitality industry and other affected businesses.

 

Tax Regulation Proposal

 

            Hotel industry collected a total of 493
billion dollars in tax alone in 2012, whereas it is unclear how much tax Airbnb
has collected from its users. The sharing economy like Airbnb is no longer
allowed to seek protection from paying taxes and although there have many attempts
to make hosts to pay occupancy taxes, there has not been any luck so far in
this field. Problem especially escalated when New York City’s Attorney General
subpoenaed Airbnb to force hosts to pay unpaid 14.75% state occupancy taxes.

Instead of working with Airbnb to draft regulation, poorly written laws to alleviate
problems will only aggravate and continue to suffer because such subpoena will
severely hurt and jeopardize a private information of thousands of hosts and
users. Rather than aimlessly attacking the issue, Congress should enact new
regulations to facilitate the payment of occupancy taxes from its hosts and
terminate violation of tax payment.

            First and foremost, anyone who makes
an income in any sharing economy, obviously in this case Airbnb, is expected to
pay quarterly payments before the April tax deadline by the law; he or she must
report the income on his or her personal tax return. Nevertheless, there are a
numerous number of hosts who just simply are unaware of such duty since the
contract and policy are just getting more complicated, ultimately confusing
users. This is the biggest problem in tax payment violation from Airbnb users
because most users who are new to the sharing economy are not familiar with
filing a tax return and information. Therefore, new laws and regulations should
be enforced by the Congress to force Airbnb to automatically match professional
accountants or experts to guide users with proper and concise process. These
experts will be matched by location and won’t charge Airbnb hosts for an extra
service. By implementing this system, more hosts will certainly be more
informed and be forced to pay overdue taxes. This regulation will provide
interim protection from violating tax payment rather than revealing private
information of the hosts and forcing them to pay.

 

Security and Privacy Regulation Proposal

           

            Recently, there are been many stories about guests discovering
hidden cameras in their Airbnb host facilities. Several hosts from Airbnb have
placed hidden cameras to monitor and secretly record guests’ activities, breaching
an individual’s privacy. Although some hosts disclose its usage of surveillance
devices to enhance one’s security, there are many others that have not followed
and fully disclosed their property listings. As it is becoming harder to detect
hidden cameras since camera equipment has become smaller, more affordable, and
camouflaged, there is a rising threat in one’s security and privacy. The unknown
number of cameras that are yet to be found is a disturbing thought and jeopardy
that guests have to withstand. To solve this issue that seems impossible not
just for Airbnb users but also regular hospitality industries, an
implementation of proper technology and awareness will be the only ways to
secure one’s privacy and security.  

            A simple way to inform a potential threat in violating
one’s privacy, Airbnb must inform and recommend a few simple ways for guests to
make sure that they are not being monitored at their residencies. For instance,
when staying at an Airbnb properties, the company must inform their guests to
check for tiny holes in their rooms for possible spaces for tiny camera lenses.

Nevertheless, as it is becoming more difficult to detect such lenses as they
are becoming smaller to discover, Airbnb must also recommend their users to use
mobile apps that can scan for cameras that are wirelessly connected. Because
all the hidden cameras are connected to local Wi-Fi, apps such as ‘Hidden
Camera Detector’, ‘Glint Finder’, or ‘Net Analyzer’ are able to see what other
devices are connected and can even check visible lens detection. By forcing
users to download this app and use once they stay at Airbnb hosts, they will
certainly be able to prevent from threat and violation of privacy. Last but not
least, this potential legislation encourages Airbnb to provide ‘Anti-Spy Bug
Detector’ to all Airbnb registered hosts to guarantee trust, privacy, and
safety to users. Since such device costs around ten dollars, there should be
shared responsible in purchasing from both Airbnb and hosts, preferably 60% and
40% ratio respectively, or even from all three parties including the guest to
ensure privacy. This liability concerns will also be addressed later on in this
paper.

            As more stories are disclosed in finding hidden cameras
in Airbnb properties from the users, the regulation must be enforced to protect
and prevent further harm in violation of one’s privacy. Providing users with
proper awareness and recommendation is one way to solve this rising issue and
providing a technology detector is also a reasonable possibility. Therefore,
Congress should legislate a proposal to force users to be aware of their rooms
that they are residing, download such apps that can detect hidden surveillance
devices, and provide a technology device to all hosts so that when travelers
visit, they can use and make themselves feel safe during their stay.

 

Liability Regulation Proposal

 

            It is clear
that hotels are liable for any injuries or damages when they fail to maintain
safety standards and guests are injured as a result. However, the case becomes
quite more complicated when Airbnb’s hosts suffer injuries. According to the
Occupier’s Liability Act, “an occupier is a person who occupies or has the
control of the premises”, which essentially means that hosts are liable for any
accidents that occur to guest due to negligence. As a result, Airbnb hosts
become occupiers and they only become liable for certain damages and dangers
that are caused by negligence such as unstable stairs, broken windows, slippers
floors, or blocked exists. Also, foreseeability of injury is considered where if
host was not able to foresee a host’s injury, liability would not be attached
to the host since he or she couldn’t reasonably have anticipated the injury. Currently,
Airbnb provides ‘Host Protection Insurance Program’, which covers hosts for
personal injury claims up to 1 million US dollars. Nevertheless, this
reassurance is not as comprehensive as it is written in its regulation and therefore,
new legislation should be proposed to come up with better solutions.

            Although
the Host Protection Insurance covers hosts’ personal injuries valued at 1
million dollars, it only applies as a secondary insurance, which means that any
other existing insurance the host holds must be exhausted first. This is a
sneaky way to provide any additional protection and it is only seen as a great marketing
strategy by Airbnb to give its users a false sense of security, making them to
think that they are being protected when they are practically not. Because most
homeowners already have property insurance as a requirement, Airbnb’s insurance
becomes meaningless as the host’s original insurance is used in lieu of Airbnb’s.

Congress can enact a notification based system to help solve and put more
actual liability on Airbnb as it is currently seen as an unfair share of liability
between the company and host (property provider). When hosts face injuries from
guests or third parties, its existing insurance will cover most likely to
cover. The host should notify Airbnb to report a guests’ poor conduct or
damages made from them. If the host faces another injury from future guests,
Airbnb should be fully liable for its damages, not the existing insurance that
the host holds. When Airbnb is negligent to put its hosts’ inquiries into
consideration, they should by liable and this will prevent Airbnb from providing
a misleading insurance, which practically doesn’t cover any. Congress should
therefore implement this system since Airbnb’s insurance is currently ineffective.

            The same
approach can be imposed for guests who suffer injuries from hosts as Airbnb
Host Guarantee Program doesn’t cover liability for a guest injury. To prevent
further guest injury, Congress can adapt the same notification based system where
Airbnb becomes liable when they receive notice of the host’s poor conduct. For example,
Airbnb might currently not be liable for a guest’s harm caused by a host in the
beginning. But, if users in the past have filed complaints about a host’s
misbehavior to Airbnb, the company will be liable for any future damages or
injuries caused by the host because it was negligent to put its complaints into
consideration. This notification based system may fail to protect its users
initially since Airbnb becomes liable only after the injury is made, but if it
can also prevent future injuries and damages much efficiently, Regulators
should definitely consider implementing this system to solve such complex liability
issues.

 

            CONCLUSION

            Sharing
economy platform like Airbnb promises countless benefits to its users by
increasing the availability, efficiency, productivity and providing a new ‘value’.

Along with those benefits, a number of risks and violation of law is posed by
such innovation where it is currently difficult to regulate and apply
traditional regulations. Although Airbnb poses new issues such as safety, zoning, taxes, privacy, and
liability. Congress should create and enforce laws and regulations to address
these risks without shutting down the platform and forcing them to conform to
the same rules that apply to traditional hospitality regulations because it
just simply does not work. Airbnb has certainly come too far to the point where
it is here to stay and continue to grow. Nonetheless, we should not simply
allow such sharing economy platform to violate and take advantage of existing
laws. With legislation proposals imposed in this paper to address a number of important
issues, more responsible regulations for Airbnb will be made in order to
provide safer, efficient, and trustworthy environment.