The city of San Francisco is suing Turo for continuing to operate at San Francisco International Airport (SFO) without a permit, a requirement for all entities conducting commercial business at the airport.
Car rental companies are required to pick up and drop off customers at SFO’s rental car center, as well pass a fee of $18 per contract onto rental car customers for use of the AirTrain, the people mover that connects to the rental car center, and pay 10% of gross receipts above a certain threshold for SFO rental car transactions. Additionally, car rental companies occupying the rental car center must pay rent.
Turo, which defines itself as a peer-to-peer carsharing company, has been picking up and dropping off customers at terminal curbside without paying those fees. The company claims it does not to fall under the same definition of car rental, and should therefore be exempt from the same requirements.
The lawsuit cites Turo’s website references to “car rentals at SFO Airport” and curbside pickup and drop off. By continuing to operate at SFO and access renters directly at the terminals, the lawsuit claims that Turo adds to airport traffic and compromises funding for facilities maintenance, while having an unfair advantage over the car rental companies that comply with the airport’s permitting requirements.
Turo disagrees. Michelle Fang, Turo’s general counsel, notes that Turo does not itself own a fleet of cars, but rather enables peer-to-peer carsharing through an internet platform in the same way that eBay brokers auctions of third-party goods.
“Since 2010, California has a law in place that defines peer-to-peer carsharing, and we fall squarely within that,” says Fang. “Rental car laws are totally distinct from carsharing laws.”
Fang references AB 1851, which when enacted amended California insurance code to ensure that owners of private vehicles in “personal vehicle sharing programs” would not have their personal auto insurance invalidated as a result. The language of the legislation specifies that to be protected under the statute, revenue received by the vehicle’s owner from a personal sharing program should not exceed the annual expenses of owning and operating that vehicle.
Fang, who had previously litigated for eBay, also references federal law that excises internet platforms such as eBay from responsibility for the conduct of its users. “Federal law is clear that it’s not Turo conducting that activity, Turo is providing a platform for other entities to conduct that activity,” she says. “We’re in a very good and strong position via state law and federal law. It’s very clear we are not a rental car company.”
Along with the San Francisco city attorney and SFO, the American Car Rental Association contends that Turo is operating as a car rental company. Greg Scott, ACRA’s lobbyist, says that for-profit Turo facilitates daily car rental transactions for compensation and should therefore abide by the federal, state, and local laws governing car rental companies.
Scott points out that the California law was designed to rectify a specific issue with personal vehicle sharing programs and personal insurance — and says nothing about taxes and fees. “This law does not give Turo the right to avoid taxes at SFO or elsewhere,” he says.
As of 2016, Turo allows car rental companies to list vehicles on its platform, and in so doing allows rental companies to use their commercial insurance policies instead of Turo’s. Fang agrees that car rental companies using Turo’s platform should abide by the rules governing car rental companies at an airport.
Is there a workable real-world model in which rental company-provided vehicles on Turo’s platform can be charged appropriately per trip? Fang suggests that entities using Turo’s owner-provided insurance tool could be blocked online from airport transactions, for instance.
The lines are blurred further, however, in the evolving definition of vehicle owner for the purposes of peer-to-peer programs. A growing number of independent entrepreneurs are buying multiple vehicles and putting them on Turo’s platform with the intent to generate revenue — contrary to the revenue threshold requirements in the 2010 law.
Fang says Turo has continually tried to work with the airport on the permit issue. She says Turo has asked SFO to create a permit specific to carsharing, in which Turo would pay an airport trip fee similar to those paid by ride-hailing networks such as Uber and Lyft, but that has gone nowhere. Fang believes the major car rental companies are trying to litigate this new type of competition to death.
Scott says either Turo, the vehicle owner, or the Turo renter must take responsibility for paying airport fees — and abide by other consumer and safety protections that car rental companies must follow. “If there is a level playing field, we welcome Turo come on into the market and join ACRA,” he says.
Originally posted on Business Fleet
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