Airbnb recently hired legal and municipal heavyweights, including former U.S. attorney general Eric Holder and ex-Philadelphia mayor Michael Nutter, as the peer-to-peer accommodations provider seeks to gird itself for legal battles in its most lucrative cities while fighting allegations that its hosts discriminate against minorities.
Airbnb, a privately held company, last month tapped Holder to "help craft a world-class antidiscrimination policy," Airbnb CEO Brian Chesky wrote in a July 20 blog post.
The hiring of Holder, who served as U.S. attorney general under President Obama from 2009 to 2015, is part of an effort Airbnb announced early last month to address allegations that some of its hosts practice discrimination when choosing whom to accommodate in their homes.
"We have an obligation to be honest about our own shortcomings, and do more to get our house in order," Chesky wrote. "That's why we've been talking more openly about discrimination and bias on our platform and are currently engaged in a process to prevent it."
Airbnb followed up that decision by forming a paid advisory board of four former big-city mayors in order to improve its relationships with the cities where its hosts rent out homes. In addition to Nutter, Airbnb's Mayoral Advisory Board includes former Rome mayor Francesco Rutelli; ex-Houston mayor Annise Parker; and Stephen Yarwood, former lord mayor of Adelaide, Australia.
The company, which in late June filed its first lawsuit against a city when it sued its hometown, San Francisco, over requirements in a new, short-term accommodations ordinance, said in a July 22 blog post said the board was "the latest step in our ongoing commitment to work cooperatively with cities across the globe." The board, which will meet quarterly with Airbnb staff, will address issues such as improving transparency, paying its share of lodging and tourism taxes and working with municipalities on how to prevent hosts from exacerbating housing shortages.
Airbnb brought in Holder, Nutter and the other former mayors as it makes financial moves that analysts say portend an initial public offering.
This spring, the company, which was founded in 2008, received a $1 billion line of credit from a group of lenders that included Bank of America, Citigroup and JPMorgan Chase and Morgan Stanley, according to Bloomberg News, which cited people familiar with the process. The fact that the funding was in debt instead of equity suggests that Airbnb may be preparing for an IPO, giving the company all the more reason to shore up its legal position.
"It's symptomatic of the broader issues faced by Airbnb and many other sharing economy services," said Eric Goldman, professor at the Santa Clara University School of Law. "They need to find proactive ways to build bridges with government regulators, or the regulatory onslaught or blowback to their innovation threatens to destroy them."
The decision to add the Mayoral Advisory Board might have been spurred by Airbnb's most recent legal battle over how its hosts can rent out their homes or rooms without violating cities' short-term housing-rental laws.
San Francisco in June passed an ordinance that, among other things, required all hosts who hadn't registered with the city to immediately remove their listings and fined Airbnb and its hosts as much as $1,000 a day for listings by unregistered hosts. The lawsuit prevented the ordinance from going into effect on its scheduled date of July 27, and spurred city supervisors to tweak the law's wording.
Airbnb, whose hosts operate in more than 34,000 cities worldwide, alleged that the city's host-registration process was "broken" and "confusing," and it called the ordinance "hastily crafted." The company also alleged in its June 27 blog post that the San Francisco law violates the federal government's Communications Decency and Stored Communication Acts.
Whether Airbnb has a viable case against San Francisco depends on how the company is defined. Should the court regard Airbnb as a marketplace operator, San Francisco would have a more difficult time making Airbnb responsible for ensuring that its hosts are properly registered with the city, Goldman said. If, however, Airbnb is viewed as a retailer of lodging options, its lawsuit could prove to be fruitless.
As for hiring Holder, Airbnb has been the target of a growing number of claims that its hosts discriminate against minorities, allegations supported by a Harvard Business School study released in January. The study, whose data was culled from host responses to about 6,400 accommodations inquiries made last summer, found that prospective guests with "distinctly African-American names" were about 16% less likely to have their reservation requests granted by Airbnb hosts than guests with "distinctly white names."
"Overall, we find widespread discrimination against African-American guests," the study's authors wrote. "Specifically, African-American guests received a positive response roughly 42% of the time, compared to roughly 50% for white guests."
"While we have a policy that prohibits discrimination, we want this policy to be stronger," Chesky wrote in his July 20 blog post. "And we will require everyone who uses our platform to read and certify that they will follow this policy."
David Oppenheimer, professor at the University of California, Berkeley School of Law, called Holder's hiring "a very smart decision."
"He's somebody who has a lot of gravitas," Oppenheimer said. "It communicated that they don't want to fight this, they want to solve this."
As for whether Airbnb hosts can be held to the same antidiscrimination standards as hotels, he said, "When the dust settles, the conclusion will be that these folks are engaged in commercial activities, and the civil rights laws fully apply, so they won't be treated significantly different than hotels.
He added that both the hosts and Airbnb itself "are exposed to liability because of their agency relationship. You cannot escape liability by delegating the duty to not discriminate."