Diane Francis | March 13, 2015 | Last Updated: Mar 13 7:04 PM ET
Uber and Airbnb are the darlings of Silicon Valley whose founders describe themselves as technology companies and pioneers of the “sharing economy.” But I don’t buy it.
The shared economy — multiple use of assets — is an old model and cabs, Zip Car and hotels have been around for some time.
Airbnb and Uber are simply intermediaries with technology and a business model that undercuts competitors and harms customers because it is based on circumventing rules, regulations and laws that apply to everyone else or to Zip Car, hotels and other intermediaries or brokers.
Airbnb is an online listings site that books more nights than does Hyatt Hotels worldwide at relatively low prices, but here’s how.
The company requires clients to sign a Terms of Service agreement that indemnifies the company from responsibility for injuries, damages, taxes, regulations or anything.
Because Airbnb believes it is indemnified, the company does not vet renters or units. This means that strangers who have not been checked or referenced can stay in units without permission of the landlord or neighboring condo owners or renters. These people may be convicted burglars, pedophiles or terrorists and, through Airbnb, they are able to gain access to residents, corridors, stairwells, gyms, pools, locker rooms, lounges and parking garages.
This also means that renters could be exposed to risks, too, because they may be staying in units obtained through Airbnb that violent persons own or have access to.
Airbnb listings also ignore the reality that in New York City and other urban areas, short-term rentals are, legally speaking, “hotels” and must pay hotel and income taxes. In addition, “hotel” units must meet hotel-standard fire, security, safety, zoning and other protective criteria, and Airbnb units do not.
Not surprisingly, horror stories are starting to surface about prostitutes, criminals or worse renting through Airbnb in many places. In January, New York City Council held hearings into an outright ban, New York State’s Attorney declared Airbnb short-term rentals as “illegal hotels” and the Real Estate Board of New York said such rentals raise “serious concerns for the safety of residents”.
Then there is Uber.
It’s an online cab dispatch service that matches passengers with drivers — nothing more than a digital hitch-hiking service. Uber also requires clients to sign away their rights: “You expressly waive and release the company from any and all liability, claims or damages arising from or in any way related to the third party transportation provider.”
The result is that Uber can offer cheap fares (through its Uber X option) because it uses drivers without training, livery licences, inspected vehicles or sufficient insurance. (Uber also has a luxury service, called Uber Black or SUV, that uses properly licensed, inspected and insured cars and drivers who demand very high fares.)
Not surprisingly like Airbnb, Uber X horror stories have surfaced and the company is under attack and banned in some jurisdictions. So far, Uber X drivers have been charged with dangerous driving, physical assault, sexual assault and rape.
While such incidents have been few and far between, Uber X’s business model exemplifies the same disregard for laws, rules, regulations and public safety as does Airbnb’s.
Most agree, as I do, that people have a right to rent out their residence for extra cash, but that they do not have the right to bypass their building bylaws, neighbors’ safety, regulatory safeguards or to evade taxes.
Similarly, people have a right to hire someone to drive them around, and if they don’t check their insurance, safety or criminal records, they have only themselves to blame. But allowing companies like these to make millions in fees as intermediaries without adhering to laws, rules, regulations or adherence to public safety is not something that any government on any level should allow.
Frankly, Uber X (not its platform to match passengers with legitimate livery services) should be banned and so should Airbnb unless it lists only legally constituted units that meet hotel criteria and pay taxes.
Most importantly, no company should be allowed to ask clients to indemnify them and no courts should recognize this indemnification either.
Nobody else has this privilege, not individuals or businesses like Marriott or Hyatt Hotels, Checker Cabs, Air Canada, American Airlines, Via Rail, Amtrak, Greyhound Bus, financial advisors, lawyers, accountants and other intermediaries.
Despite many critics and negative headlines, the two companies have not mended their ways, but have hired fancy public relations experts to protect their brands. But the only fix is for governments and tax authorities to crack down on them and make them accountable for their actions.