Airbnb has sued San Francisco over new regulations. Does the city stand a chance?

Airbnb and San Francisco Go to War

Airbnb and San Francisco Go to War

Moneybox
A blog about business and economics.
June 28 2016 6:09 PM

Airbnb Just Sued San Francisco. Does the City Have a Leg to Stand On?

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Has San Francisco's new regulation gone too far?

Justin Sullivan/Getty Images

Earlier this month, San Francisco’s Board of Supervisors voted to require Airbnb and other short-term rental websites to post only the listings of hosts who have registered with the city. The registration procedure is supposed to help San Francisco enforce stringent regulations governing short-term rentals. But few users register.

Henry Grabar Henry Grabar

Henry Grabar is a staff writer for Slate’s Moneybox.

On Monday, Airbnb sued the city in federal court, alleging the registration requirement—whose penalties were levied on intermediary companies like Airbnb, rather than on users directly—violated laws on privacy and online corporate liability.

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It’s a bitter twist in what had been a story of cooperation between Silicon Valley and City Hall. Airbnb was founded in San Francisco in 2008, and in 2014, the city became one of the first to legalize short-term sublets and apartment rentals.

The most important question in the lawsuit is whether Airbnb is protected by the Communications Decency Act, a 1996 law that shields “interactive computer services” from liability for third-party postings on their sites.

If courts decide that Airbnb, like Craigslist or eBay, is protected by the CDA, it would be very difficult to hold the company responsible for the actions of its users, including those that disobey municipal laws or discriminate.

If it's found that Airbnb isn’t covered by the CDA, that could constitute a fundamental challenge to its business model, forcing Airbnb to intensely scrutinize host behavior. It would set a new precedent for the regulation of so-called internet matching companies.

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The background here is that in San Francisco, land of the $6,000 rent hike, politicians have gradually begun to see Airbnb as a contributor to the housing crisis. According to Statista, San Francisco has nearly twice as many Airbnb listings per capita as peer cities like Washington, D.C., and Seattle. “We’ve got to have a stronger system in place that goes after people who have entire units off the market for this purpose,” San Francisco board president London Breed said before the vote. “That is definitely a huge problem in the city.”

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Since legalizing short-term rentals in 2014, city pols have made a series of attempts (some successful, some not) to tighten the registration policy. Right now, would-be Airbnb hosts are required to register in person with an appointment at the Planning Department downtown. (Hosts must also be permanent residents of the unit they rent out and may not let more than one unit.) It’s onerous. No wonder barely 1 in 6 short-term landlords have registered with the city.

Here’s San Francisco’s problem: There’s pretty strong precedent that Airbnb can’t be held responsible for user activity. Section 230 of the Communications Decency Act reads: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” That text has been used to indemnify AOL, Backpage, and MySpace. Thanks to Section 230, eBay wasn’t liable for sports memorabilia with forged autographs sold through the site, and Craiglist wasn’t liable for discriminatory housing ads. Airbnb, which sees itself as a marketplace, argues the city is trying to regulate speech.

The city says otherwise. “Nothing in San Francisco’s ordinance punishes hosting platforms for their user content,” a spokesman for the San Francisco city attorney told SF Gate. “It regulates business activity of the hosting platform itself.”

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Could the company, by virtue of its role arranging financial exchanges or developing and soliciting the information in listings, qualify as something more than a “passive intermediary” that gathers advertisements? Some legal theorists think there’s room to distinguish Airbnb from content companies like Yelp and Twitter and transaction hubs like Craigslist and eBay.

One possible precedent is the case of Roommates.com. Here’s how Nancy Leong and Aaron Belzer described a 9th Circuit decision from 2008:

Roommates.com required users to disclose their sex, their sexual orientation, and whether they had children via drop-down menus in order to use the website, and provided that information to other users; as a result, the court held that Roommates.com was not merely a “provider or user of an interactive computer service,” but rather an “information content provider.”

California courts used similar logic in the conviction of Kevin Bollaert, the revenge-porn operator. A California court of appeals affirmed that judgment on Tuesday, writing that there was “evidence that Bollaert developed, at least in part, the offensive content on his Web site by requiring users to input private and personal information as a condition of posting the victims' pictures, making him an information content provider within the meaning of the CDA.”

What, exactly, does a website need to require of users before it becomes a liable “information content provider”?

Barring any agreement between the city and the company, though, the legal issues favor Airbnb, suggested Venkat Balasubramani, an attorney in Seattle with experience in internet litigation. “I think it’s clear that Airbnb fits the definition of an entity covered by CDA 230,” he wrote to me. It would be a legal earthquake if it didn’t.