Airbnb Competitor Sues San Francisco For Making New 'Legalize Airbnb' Law Too Restricted To Airbnb

from the interesting-legal-theories dept

We've reported a bunch of times on the various legal fights that Airbnb has had to go through lately. Just a few weeks ago, NY's Attorney General Eric Schneiderman (who has admitted in the past that his interest in Airbnb is really about protecting NYC's big hotels), said that he believed most Airbnb listings in NY to be illegal. Under his standards, every Airbnb I've stayed at in NYC would almost certainly be illegal, despite the fact that I have had nothing but fantastic experiences with Airbnb in NYC (much better than my experiences with hotels). San Francisco seemed to be going in a different direction, however, with the city passing a new law just last week that effectively legalized many Airbnb rentals. This law was actually fought by so-called "housing interests" in San Francisco (who seem to have some trouble understanding basic economics).

So you might assume that any legal challenge to the law would come from those "housing interests." Instead, however, it's Airbnb's biggest competitor, HomeAway, perhaps best known for its VRBO site (unofficial motto: "we were Airbnb before Airbnb, dammit"). HomeAway is arguing that the various restrictions that San Francisco put in this new law to appease those "housing interests" are actually unconstitutional in that it unfairly enables Airbnb's particular business model, while limiting HomeAway's. The key issue: many of the people who use HomeAway use it to rent out second homes, while the new law targets short-term rentals of primary residences only.

How could that possibly be illegal? Well, that's where you have to dive into the convoluted legal argument of HomeAway, which argues that this new law violates the Commerce Clause of the Constitution by "discriminating against interstate commerce" because there's "differential treatment" between SF-based residents and non-California residents.
The Ordinance violates the Commerce Clause because it discriminates against interstate commerce through differential treatment of San Francisco-based and non-San Francisco-based interests that benefits the former and burdens the latter. This unconstitutional discrimination takes two forms. First, by its express terms, the Ordinance allows only permanent San Francisco residents to rent out on a short-term basis (which the Ordinance defines as thirty days or less) residential property they own or lease in San Francisco. Non-permanent residents of San Francisco who own or lease property in San Francisco are barred on the face of the Ordinance from renting out their property on a short-term basis. Second, the Ordinance requires entities that provide “Hosting Platforms,” on which owners and lessees of property may advertise their property for short-term rentals, to conform their business operations in San Francisco to one particular model, and no other, under pain of monetary penalties. This anti-competitive measure forces those seeking to rent property to turn over control of selecting short-term tenants to entities that operate the type of Hosting Platform model sanctioned by the Ordinance and to pay whatever fees those entities might charge today or in the future. While facially neutral, the Ordinance’s Hosting Platform rules have the purpose and effect of discriminating against non-San Francisco-based interests.
This seems like a massive longshot.

Admittedly, many of the restrictions in the law do seem silly and pointless. It seems reasonable to let people rent out their homes for short-term rentals whether or not it's their primary residence. But to sue the city of the law? And, it seems worth noting that it's not clear that anyone was seriously enforcing the existing law (which is why Airbnb has been so successful), and even with this law in place, it's not clear that anyone would be enforcing it against VRBO owners. Still, it's interesting to see the kinds of legal fights these new kinds of services are facing from all angles these days. It's hard to innovate without a legal team, apparently.

Filed Under: commerce clause, interstate commerce, san francisco, sharing economy, short term rentals
Companies: airbnb, homeaway, vrbo


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  • identicon
    Ryan, 4 Nov 2014 @ 9:45pm

    Insurance

    One aspect that you might not be aware of is that insurance is very very regulated in California. Insurance companies are notorious for being able to wrangle out of paying out on policies around things like this. So in the contract you might find a line indicating that the insurance covers sublets only if they were legal. Since it is now legal for AirBnB but illegal for VRBO... if there ever was an insurance claim for some reason it would give the insurance company an opportunity to disallow the claim.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 5 Nov 2014 @ 2:31pm

      Re: Insurance

      Not just California. Most homeowner policies don't have coverage for home based businesses without a rider, if not a separate policy in the business' name.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 4 Nov 2014 @ 11:25pm

    Why is this a long shot? They find the law to violate existing laws, so they're suing. Whether or not the allegedly illegal law is being enforced is not relevant to any discussion on whether it should be obeyed, be fought, or exist.

    reply to this | link to this | view in chronology ]

  • icon
    Ninja (profile), 5 Nov 2014 @ 1:22am

    In a few years there will be a "This week in Techdirt history" highlighting this idiocy. I can't help but to laugh when people say the US is a Capitalist country. These fights with Airbnb and Uber are proof enough that it isn't the case.

    reply to this | link to this | view in chronology ]

    • identicon
      Pragmatic, 5 Nov 2014 @ 6:11am

      Re:

      The US is a capitalist country, and like it or not, capitalism tends towards protectionism of incumbents. I've never seen a political philosophy based on a best case scenario and ideal conditions actually work in practice. It can't. Factor variables such as human douchebaggery and natural disasters, then you've got a chance of putting together a philosophy that actually works in the real world.

      "They're doin' it wrong" is just an excuse. The system works fine, it just doesn't work in our best interests.

      reply to this | link to this | view in chronology ]

      • icon
        Ninja (profile), 5 Nov 2014 @ 7:44am

        Re: Re:

        Many of its foundations are capitalistic but as you said Capitalism by itself doesn't factor in human douchebaggery. Much like the USSR wasn't Socialist at it's written form (Animal Farm, and ironically the basic idea applies to the "Western" world).

        "They're doin' it wrong" is just an excuse. The system works fine, it just doesn't work in our best interests.

        Indeed, the current system works almost wonders for a few players. It's just that those pesky plebes aren't taking it without complaining anymore.

        reply to this | link to this | view in chronology ]

  • identicon
    Casey, 5 Nov 2014 @ 5:22pm

    I don't think this is a long shot

    The I.C.C, while it has some larger loopholes is pretty clear on the subject of differential treatment, which has been backed up by court cases. I'm off to Westlaw to find them....

    reply to this | link to this | view in chronology ]


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