Section 230 Doesn’t Prevent City Regulation of Short-Term Rental Services (Again)–HomeAway v. Santa Monica

[It’s impossible to blog about Section 230 without reminding you that it remains highly imperiled.]

In my list of top 10 Internet Law cases of all time, Airbnb v. San Francisco appeared as an honorable mention because it showed how any regulator could regulate Airbnb and similar services without running afoul of Section 230. As evidence of that, last week a court upheld Santa Monica’s regulation of Airbnb and HomeAway, basically citing the SF ruling.

The Santa Monica law, in the version interpreted by the court, followed San Francisco’s approach. The court summarizes:

the Ordinance states that “[h]osting platforms shall not complete any booking transaction for any residential property or unit unless it is listed on the City’s registry [of licensed home-sharing hosts] at the time the hosting platform receives a fee for the booking transaction.” SMMC § 6.20.050(c). The Ordinance also includes a “Safe Harbor” provision stating that any online hosting platform that operates in compliance with hosting platform responsibilities as set out in the Ordinance will be presumed to be in compliance with the law

The court succinctly rejects the Section 230 challenge to the Santa Monica ordinance:

The court’s reasoning in Airbnb v. San Francisco, is persuasive. Like the San Francisco ordinance, the City’s Ordinance does not penalize Plaintiffs’ publishing activities; rather, it seeks to keep them from facilitating business transactions on their sites that violate the law. This type of regulation falls outside the scope of the CDA protections.

As I explained in my coverage of the San Francisco regulation, the distinction between advertising services and booking services doesn’t make much sense because controlling bookings effectively controls ads. However, the approach does distinguish Craigslist from Airbnb, but to what end? With time-sensitive services like lodging, consumers benefit from closing deals using a trusted payment method, rather than just getting non-transactional advertising that functions more like leads for consumers’ further time-consuming investigations.

The First Amendment challenge to the Santa Monica ordinance also fails because the law targets conduct, not speech:

the conduct banned by the Ordinance—booking transactions for residential properties not listed on the City’s registry—does not have such a “significant expressive element” as to draw First Amendment protection.

While the court’s decision isn’t surprising, this ruling highlights how bad of a loss Airbnb suffered in the San Francisco litigation. Following the court proceedings, Airbnb lost about half of its San Francisco listings. While many of those listings weren’t necessarily high value to Airbnb, the massive reduction in its inventory can’t be good for Airbnb. With this ruling, it’s even clearer that other cities may copy San Francisco’s model, and Airbnb will likely see substantia reductions in its inventory in those cities as well. So after the likely regulatory tsunami, many cities throughout the country will be regulating Airbnb, and Airbnb will have a substantially smaller inventory that it offers to customers.

Case citation: HomeAway.com, Inc. v. City of Santa Monica, 2018 WL 1281772 (C.D. Cal. March 9, 2018)