Iranian Sanctions Are Airbnb’s Latest Legal Stumbling Block

Is the DIY room rental company doing enough to help users stay on the right side of the law?

An Airbnb rental in Istanbul. Credit: Flickr user A.Currell

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Airbnb, the DIY room rental company, is spreading its presence across the globe at a remarkable pace. But as it does so, it keeps running into legal quirks of both the global and local varieties.

The latest story comes from Switzerland by way of Turkey, the Electronic Frontier Foundation’s Jillian York reports. There, an Iranian national named Amir Shafi returned home from a family visit in Istanbul to find that he was one of about a quarter of Airbnb’s users randomly selected for verification. Shafi grabbed the closest ID: his Iranian passport. That prompted this note from the company:

Hi Amir,

Unfortunately, while we at Airbnb would like to keep our marketplace open to the world, we are required to comply with US federal regulations that restrict the use of our site by residents of certain countries. Therefore, we are not able to support user accounts from users from certain countries, until such regulations change. We apologize for any inconvenience and appreciate your understanding in this matter.

Shafi protested, didn’t get a response from Airbnb and took his story public, which is where we find ourselves now. York notes that this sort of thing isn’t unheard of for Iranians. She draws our attention to a situation in Georgia, where an Apple store refused to sell an iPad to a customer speaking Farsi. The Treasury Department itself has suggested that Airbnb was being overly cautious in applying the Reagan-era sanctions on Iran in this case. For one thing, travel arrangements are generally exempt from the rules.

But these sorts of legal restrictions and obligations are something that Airbnb is likely to run into more and more as it expands. And it is expanding. The company is five years old, has really only gained traction in the last few years, and is already reporting operations in 192 countries. That’s a lot of laws to contend with.

Of course, many Internet-based companies find their reach extending that far, but Airbnb is a bit different. It’s an Internet-based company with a very physical, nearly intimate relationship with its users. To wit, in an interview with the Wall Street Journal posted this morning, Airbnb co-founder Nate Blecharczyk talked about how the company broke past the early days when “we didn’t have critical mass anywhere”:

What we decided to do was to focus on New York City and build critical mass there, and really take a hands-on approach with users. We actually met every one of our users in New York at that time, and really helped them to craft their profile, meaning, described their property, took pictures for them, help them set their price — really kind of curate and moderate the inventory, such that it was something that people wanted. And that’s not a very Internet-like approach. With the Internet, it’s all very hands-off, scalable. But when you’re starting a company, you need to be very hands-on with your users.

And yet, even in that petri dish, Airbnb has found itself wrestling with the complexities of the law. Airbnb renter Nigel Warren — whose landlord the New York City Environmental Control Board fined after Warren rented out his room for three nights earlier this year — has become the poster child for legal challenges associated with the company. In taking up his case, the New York Times’ Ron Lieber has leaned on Airbnb to do a better job letting its users know just what they’re getting into.

But it’s clear that Airbnb itself isn’t entirely sure what its users are getting into. In the Warren case, it has gotten involved in the court process, but only on the narrow point that Warren’s roommate was home at the time of the rental, and thus proving that he wasn’t running an illegal hotel.

And that’s just New York. The company is scaling rapidly, something that CEO Brian Chesky has said Airbnb more or less felt threatened to do:

Essentially two years ago we had a company of 40 or 50 people and the Samwer brothers came around, cloned our company, raised $90 million and said they were going to do this huge international expansion, and we realized that we had to grow pretty quickly, because we felt like a global travel site that wasn’t global was like a phone without e-mail… And so we had to grow really, really quickly and we continued ‑‑ we scaled out a home-shored customer support model, which coincidently is what eBay did in their early days. 

(The Samwer brothers are investors known — or perhaps notorious — for finding successful U.S.-based start-ups and copying them abroad. The Samwer version of Airbnb is called Wimdu.)

Airbnb’s support services haven’t kept up with that hurried global growth, which has put a ton of the burden on local users to figure out how to comply with the law. Haaretz today has a piece on the explosive growth of room rentals in Israel. It profiles Haim, who began renting out his two-room Tel Aviv apartment to help cover his mortgage, and now is able to actually bank money on the deals. He’s even started renting out his friends’ little-used apartments using Airbnb.

“Everyone is doing it,” Haim says. Only Haim is not his real name. Afraid of both landlord and tax authorities, every source in the Haaretz piece is going by an alias. The legal ambiguity is driving a thriving economic activity underground.

The whole thing is a challenge for Airbnb, and it’s not going anywhere. Now that the platform has traction, it’s able to scale without the hands-on treatment that it had to give users in those fledgling years. But users are finding themselves in need of help in figuring out how to use the service without putting themselves in legal jeopardy.

Airbnb could point users to things like the new 1099.is, designed to help people figure out their tax obligations in situations like this. But that’s putting more burden on the user than the company seems to feel comfortable doing, at least formally, as it works to go mainstream. It’s a bit of a pickle.

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Nancy Scola is a Washington, DC-based journalist whose work tends to focus on the intersections of technology, politics, and public policy. Shortly after returning from Havana she started as a tech reporter at POLITICO.

Tags: shared cityairbnbstartups

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