Liberalising Upstream, Regulating Downstream: The Platform Economy in the EU’s Multilevel System

This paper analyses the law and politics of regulating digital platforms in the EU’s single market. Focussing our legal and empirical analysis on the short-term rental market, we offer a theoretical and empirical account of the regulatory dynamics behind the platform economy with particular emphasis on how those dynamics are conditioned by EU internal market rules. Cities are spaces where the effects of the platform economy materialise, making urban governments key actors in politicising and driving policy-making in the EU’s multi-level governance ‘from below’. We rely on a distinction between ‘upstream’ and ‘downstream’ markets in the platform economy to argue that the current legal and institutional structure of the internal market discourages urban governments to impose obligations on digital platforms ‘upstream’ but triggers them instead to regulate the underlying activities more strictly ‘downstream’. On the basis of an empirical case study of the City of Amsterdam’s efforts to regulate the Airbnb-driven short-term rental market, we illustrate how the legal and institutional structure of the internal market, the E-Commerce Directive in particular, deterred the Amsterdam government from direct regulatory interference with the activities of platforms ‘upstream’. Instead, local authorities directed governmental action towards the strict regulation and enforcement of short-term renal services ‘downstream’, where cities perceive EU law to grant more space for manoeuvring. We conclude that the liberal approach to digital platforms in the internal market, shielding them from the socio-economic and political impact of their services at the local level, is likely to push local and, increasingly, national governments to ever stricter rules and enforcement measures with respect to the underlying services. The (unintended) outcome is regulatory fragmentation along national and local lines with respect to those underlying services as the regulation of short-term rental services will vary from city to city across the EU.