VRBO operator HomeAway challenges Chicago short-term rentals rules, says favor Airbnb

By Scott Holland | May 23, 2017

The short-term home rentals company that operates VRBO and other short-term home rentals listings sites, has sued the city of Chicago over its ordinance regulating such businesses, asserting the young policy that’s already been challenged several times in court is indecipherable to home renters and the listing services, and has the effect of favoring Airbnb, VRBO’s largest competitor.

HomeAway.com filed a complaint May 22 in federal court in Chicago, seeking an  injunction against City Hall and its ordinance purporting to regulate the home-rental arrangements offered in many neighborhoods throughout Chicago. HomeAway.com named as defendants the city, Chicago Department of Business Affairs and Consumer Protection and its commissioner, Samantha Fields.

To date, the ordinance had been challenged by groups of Chicago property owners, who asserted the city’s rules violated their constitutional rights, as well as those seeking to rent homes, condominiums, apartments or rooms through Airbnb, VRBO and similar web platforms. Most recently, on April 27, a three-justice panel of the U.S. Seventh Circuit Court of Appeals denied a request from a group identified as Keep Chicago Livable to block City Hall from enforcing the so-called “AirBnb ordinance.” Keep Chicago Livable had filed its challenge in late 2016.

Thus far, however, HomeAway is the first short-term rental listing service to directly challenge the ordinance as a threat to its business.

In response to the earlier lawsuits, the city amended the ordinance earlier this year. Under an amended version of the ordinance that went into effect in March, for instance, websites like HomeAway and Airbnb no longer have to allow city officials to have access to their guests’ personal information without a warrant.

However, HomeAway’s complaint takes aim at the remainder of the ordinance, which it pegs at more than 50 pages, saying it threatens web-based rental services “and does so based upon arbitrary categories — such as ‘advertising platform’ versus ‘intermediary’ and ‘shared housing unit’ versus ‘vacation rental’ — that cannot meaningfully be distinguished from one another and that fail to provide fair notice to regulated parties of what conduct is prohibited and what conduct is required.”

HomeAway further alleged, “the ordinance not only is incurably complex, but would require both short-term rental owners and listing platforms to guess at what category of regulation applies to them.” Since the city “does not define intelligibly even the most fundamental terms,” including providing notice of what constitutes a violation, HomeAway said the city empowered itself to assess “crippling fines” without allowing those fined a reasonable chance to understand the system.

One example cited is language referring to “short term residential intermediary” and “short term residential advertising platform.” HomeAway noted the ordinance makes it clear no one can dually register, despite many operators being eligible under both qualifiers. And though the city holds the classifications as mutually exclusive, “they give rise to completely different and inconsistent responsibilities.”

Further, if an operator guesses incorrectly in determining and documenting its own classification, it can be subject to additional penalties.

Fines specified in the ordinance “apply broadly to all violations” and can reach up to $3,000 per violation per day. By failing to clearly distinguish between “vacation rentals” and “shared housing units,” and “because the entire regulatory structure for online platforms turns on that very distinction,” HomeAway alleged “it places such platforms at imminent risk of substantial fines for noncompliance because there is no way for such a platform to determine in advance what it needs to do to comply.”

HomeAway, based in Austin, Texas, was founded in 2006 and is part of Expedia Inc. In addition to its eponymous site, HomeAway operates VRBO.com and VacationRentals.com.

It said that in addition to the alleged encompassing flaws, the ordinance “was designed to disfavor HomeAway in the Chicago market and to favor AirBnb, HomeAway’s only significant competitor in that market — including by purporting to predetermine what regulatory status each such entity would occupy, thereby giving AirBnb a significant competitive advantage. As such, the distinctions drawn in the ordinance not only lack a rational basis, but create an anticompetitive environment that deliberately and arbitrarily favors one competitor over another.”

Formal allegations include imposition of penalties without due process, violation and preemption under both the Communications Decency Act and the Stored Communications Act, unreasonable searches and seizures, content-based restrictions on speech, prior restrainer of speech, imposition of civil penalties without scienter, compelled speech, a violation of the 14th Amendment’s equal protection clause and a call for declaratory relief.

HomeAway asked the court to invalidate the city ordinance and bar its enforcement, as well as to be awarded court costs and legal fees.

Representing HomeAway in the matter are attorneys with the firms of Gibson, Dunn & Crutcher, LLP, San Francisco, and MartinSirott, LLC, Chicago.

Want to get notified whenever we write about any of these organizations ?

Sign-up Next time we write about any of these organizations, we'll email you a link to the story. You may edit your settings or unsubscribe at any time.

Organizations in this Story

City of Chicago U.S. District Court for the Northern District of Illinois

More News

The Record Network