FT- Sharing economy and prejudices of strangers show law’s weakness

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Airbnb in a difficult position that may require legislative help after some guests can’t check in

When police officers accosted a young American rapper on the premises of the smart property he had rented in Atlanta last year, the shadow of old prejudices fell across Silicon Valley’s ideal of the sharing economy.

Stefan Grant may have reacted with good grace after neighbours saw him and his entourage at the house and assumed them to be intruders. “Yo!” he tweeted alongside a photograph of himself with some bemused but smiling policemen. “The Air B&B we’re staying at is so nice the neighbours thought we were robbing the place and called the cops.”

But his story has since reverberated across social media and into the boardrooms of some of America’s most exciting new companies. It is a narrative that challenges Silicon Valley’s self image as a beacon of enlightenment and virtuous wealth creation.

The sharing economy is founded on the idea that, with the help of clever software, people can find mutual advantage in opening up their private possessions to strangers. This simple insight has spawned a growing number of multibillion-dollar businesses, such as the ride-hailing service Uber and Airbnb. Sharing has brought down prices, improved services and drawn in tens of millions of customers. But it also risks allowing the private prejudices of users to exclude disfavoured minorities from what are becoming everyday transactions.

Startled by the uproar, Airbnb invited Mr Grant to various inconclusive meetings where he says they discussed how to make minorities feel more welcome on the service. “We told them, hey guys, our story isn’t an isolated case,” recalled Mr Grant. “It has happened, it is happening and it will probably get worse.”

And so it has. Earlier this year, Gregory Selden, a 25-year-old black man, launched a civil rights claim against Airbnb over alleged racial discrimination. Having tried and failed to book a property that was listed as free on the network, he tried again using two fake profiles pretending to be white, only to have both requests accepted. Then, in May, an Airbnb host in North Carolina caused a sensation by making hateful and racist posts in cancelling a booking by a black guest.

These cases have prompted a rash of complaints on social media from people about their experiences of discrimination and bias. While race isn’t the only issue, many use the hashtag #AirbnbWhileBlack. They are backed up by an academic study.

Two professors at Harvard Business School — Benjamin Edelman and Michael Luca — recently published a paper that looked at Airbnb’s rental practices. They concluded that users with distinctly African-American names were roughly 16 per cent less likely to be accepted than those with distinctively white names. The bias persisted whether the host was black or white.

Airbnb has responded to the North Carolina incident by very publicly banning the offending host from its service. The company has also hired Laura Murphy, a former official at the American Civil Liberties Union, to conduct a review of its practices. “We take this issue incredibly seriously,” says Nick Papas, a spokesman at Airbnb.

But fixing it may be more difficult than Airbnb might like to acknowledge. In past battles — over affordable housing and rental regulations — it has been adept at mobilising its hosts and user base to combat threats to its business. This one potentially pits the company against its own hosts — the very source of its trade and its $25bn valuation. Yet if it does too little, it may alienate the guests who ultimately pay the bills.

Some already scent an opportunity to lure minorities into taking their business elsewhere. For instance, Mr Grant plans to set up his own home-sharing website, called Noirbnb, which is branding itself “the future of black travel”.

But the issue also raises wider questions about the legal regulation underpinning the sharing economy. Unlike the hotels with which it competes, Airbnb shields itself from litigation by requiring customers to waive their rights either to sue or to enter class-action lawsuits. It may also be protected by communications laws that protect internet companies from liability for user-generated content.

In practice that may mean customers have little or no recourse at all. Anti-discrimination legislation excludes rentals in buildings with five or fewer rooms that are “actually occupied by the provider of such establishment as his residence”. While the exemption isn’t necessarily watertight, it potentially encompasses the great majority of Airbnb hosts.

So solving the problem may require more than Brian Chesky, Airbnb’s boss, trumpeting his abhorrence of discrimination, or revisiting the design of the site to make it more inclusive. The proper venue for specifying what constitutes unacceptable discrimination is legislation. And if sharing businesses are to keep growing as a share of the economy, some of these ambiguities about legal responsibility will need to be ironed out.


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