Airbnb Inc.’s claim that it’s just a conduit for user-generated content was rejected by a judge who said the company may not be able to duck a San Francisco law punishing it for collecting booking fees from hosts who fail to register their rentals with the city.
Denying Airbnb’s request for a preliminary court order against the city, U.S. District Judge James Donato rebuffed Airbnb’s argument that because it operates on the internet, it can’t be held responsible if users circumvent local laws.
“The injunction is denied on the primary grounds urged by plaintiffs, but further proceedings are warranted on an issue relating to fair enforcement,” the judge said in his ruling Tuesday.
Had the world’s fourth-most valuable startup succeeded in its early attempt to block the ordinance enacted in June by its hometown, the strategy might have served as a template for other gig economy firms challenging regulations across the U.S. Instead, while Airbnb may appeal Donato’s ruling, other cities struggling with high housing costs may now be emboldened to follow San Francisco’s model.
“More cities and states will be looking for creative ways to regulate conduct that they don’t like,” Michael Risch, a professor at Villanova University School of Law in Pennsylvania, said before the ruling was issued.
Airbnb spokesman Nick Papas didn’t immediately respond to phone and an e-mail messages seeking comment on the ruling.
Airbnb sued San Francisco after the city adopted its registration enforcement ordinance. The company also sued beach-front Santa Monica in Southern California and the state of New York, after Governor Andrew Cuomo signed a bill into into law that will fine residents who rent out their apartments for illegal short-term stays. Anaheim, home to Disneyland, dropped its effort to regulate Airbnb less than two weeks after it was sued by the company.
San Francisco’s measure imposes a fine of as much as $1,000 a day on rental platforms for every booking of an unregistered host, plus possible misdemeanor charges, and blocks the companies from collecting fees from those bookings.
Airbnb argued a 20-year-old U.S. law shields it from liability tied to users in the same way EBay Inc. isn’t responsible for sales of bootleg recordings or Stubhub Inc. for scalped tickets. Airbnb’s online transactions and fees are protected by the Communications Decency Act of 1996 because they are “part and parcel” of its service, it claimed.
San Francisco contended the company’s attack on the ordinance was absurd because it wasn’t intended to police what rental hosts upload to the website. The ordinance “regulates only conduct — an unlawful commercial transaction, not speech,” the city argued.
The San Francisco law “does not threaten the liability plaintiffs fear,” Donato wrote in his ruling. It doesn’t treat Airbnb as publishers or speakers of the rental listings provided by hosts or regulate what’s said in the listings, he wrote. Instead, the law holds the company liable only for providing and collecting a fee for booking services for unregistered units, Donato ruled.
Airbnb is “perfectly free to publish any listing they get from a host and to collect fees for doing so — whether the unit is lawfully registered or not — without threat of prosecution or penalty,” Donato wrote.
Airbnb, with a valuation of $30 billion, garnered support from competitor Expedia Inc.’s HomeAway, as well as a group representing Amazon.com Inc., Facebook Inc. and Google. The Internet Association, whose members also include Uber Technologies Inc. and ride-hailing rival Lyft Inc., said the dispute has wide-ranging implications for free speech on the internet.
Case is Airbnb v. City and County of San Francisco, 16-cv-03615, U.S. District Court, Northern District of California (San Francisco).
©2016 Bloomberg L.P.
This article was written by Joel Rosenblatt from Bloomberg and was legally licensed through the NewsCred publisher network.