The rise of the sharing economy has raised regulation problems across Europe.
A lack of understanding over how European law affects these firms means so far each country has made up its own rules when it comes to dealing with ride hailing app Uber or Airbnb, a service through which local can rent their room or home.
On Thursday, the EU commission issued new guidelines warning officials to ease on the crackdowns on these companies as they have contributed about €28 billion (£21.6bn) to the European Union economy in 2015, with their revenues doubling in a year.
Elzbieta Bienkowska, Europe's senior official for industry and entrepreneurship, said such services were an opportunity, not a threat.
An outright ban “should only be a measure of last resort,” Bienkowska said.
The guidance to adopt a softer approach may prove controversial in France, where officials have placed restriction on Uber, after thousands of taxi drivers blocked roadways and burned tires calling for an end to the ride-hailing company.
Meanwhile, Berlin authorities have banned tourists from renting entire apartment trough Airbnb last month.
Jyrki Katainen, the senior European official for jobs and growth, said the EU needs a “coherent approach” if it wants to see its startups to flourish.
“We want to keep up, and keep Europe as open as the US for new innovative business models, at the same time as addressing the negative effects,”” he said.
The Commission said sharing economy companies should not be subject to additional sector-specific rules such as hotel and taxi regulations - unless they own assets and set the final price.
However, EU officials said these businesses had the duty to behave responsibly.
“Taxes must be payed, consumers must be protected, social security must be guaranteed,” Bienkowska said.
US firms Airbnb, founded in 2008, and Uber, launched a year later have both welcomed the guidlenes.
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