The go-to holiday rental company, Airbnb, is under scrutiny as the EU is expected to release a draft of a new Digital Markets Act this December.

What is the Digital Markets Act?

Since 2000, this is the first time an act like this is being revised. It is “expected to overhaul the management of content on platforms like Google and Facebook with its Digital Services Act.” Representatives, from Amsterdam, Barcelona, Florence, had a meeting with the EU Competition Commissioner, Margrethe Vestager, to discuss the implications of the current legal framework being outdated and inhibiting officials from addressing concerns created by online platforms. As Big Tech companies grow increasingly powerful in the marketplace, the aim of this act is to enforce stronger regulations that promote fair competition in the EU market. 

How will this affect Airbnb?

One of the current issues at hand regarding the Digital Markets Act is deciding whether or not Airbnb will be among the companies that will have to comply with the new rules. Officials are still in the process of deciding whether the rules should apply only to tech giants such as Google and Amazon, or to also include 20 other companies.

22 European cities have come together to persuade the EU to impose stricter regulations on Airbnb (and other short-term holiday rental platforms) because they are squeezing out domestic competition. The Dutch government indicated that the short-term holiday rental industry creates negative externalities for the “house market, liveability, social cohesion, safety, and the level playing field for other providers of such accommodation.”

Without regulations directly from the EU, Airbnb is permitted to continue its operations with great freedom by affirming “it is simply a platform to put people in touch with renters.” Airbnb definitely has a chance of being targeted because of “its large share of short-term rentals market.”  If the EU does decide to include Airbnb, the company will be expected to share their research and data with smaller rivals and local authorities. The Digital Markets Act would impose a ban on pushing out their own products and services stronger than those of third party sellers. There will also be additional rules that prevent unfair competition to allow markets to function better. Officials will have greater power to “intervene in digital markets to address structural problems before they become… baked-in internet monopolies.”

Industry impact

This will significantly affect the dynamics of competition as tech firms spend a great amount of time and money on capital developing systems that collect and analyse consumer and market data. This gives them a strong competitive edge which is why these companies have declined to reveal their algorithms for years. The regulation will especially impact Airbnb as it is preparing for its multibillion dollar public listing in 2021.