Uber urges EU judges to treat it as an ‘intermediary,’ not a transport service

First published by MLex 29 November 2016. By Magnus Franklin.

Uber Technologies, the ride-booking byword for the “gig economy,” today faced a watershed moment at Europe’s highest court, where a panel of judges weighed a pivotal question in our mobile times: Is Uber a high-tech form of low-tech taxi transport? Or is it simply a smartphone app, leaving it free from the regulations imposed on traditional service providers?

During a hearing at the EU Court of Justice, Uber told a panel of judges that it’s nothing more than an intermediary — a software application that connects consumers and suppliers of a service.

“What is at issue is the capacity of union law to underpin intermediaries and remove undue restrictions that take away innovative services in other member states,” said a lawyer representing Uber, Cani Fernández.

But a Barcelona association of private cab drivers told the court that Uber was a taxi service that had ignored the taxi-licensing rules in Spain’s second-biggest city. The Spanish government supported that argument, saying that Uber was more than “a simple intermediary.”

Uber “doesn’t allow any driver, with any vehicle, to provide services in any way” the driver wants, said Spain’s agent, Miguel Sampol Pucurull.

Wide repercussions

The case before the EU judges in Luxembourg boiled up from a Spanish court dispute in which a local taxi association, the Asociación Profesional Elite Taxi, has filed a lawsuit claiming that San Francisco-based Uber had engaged in unfair competition.

But the outcome of the suit — one of a string targeting Uber around Europe — will lay down an important marker for the digital economy as a whole, establishing whether operators in the “sharing economy” should bend to regulations covering traditional service providers, including hoteliers competing with Airbnb.

The Barcelona case hinges on whether Uber is an “information society service,” as defined by EU law. If Uber fits the definition, it would benefit from a broad exemption from regulatory restrictions.

The exemption, contained in a 2000 law on e-commerce, states that “taking up and pursuit of the activity of an information society service provider may not be made subject to prior authorization or any other requirement having equivalent effect.”

Travel agents

During today’s hearing at the Court of Justice, Uber counsel Fernández said that the correct way of framing the situation was to think of how travel agents are treated as intermediaries.

A travel agent doesn’t need to comply with airline regulations, and a hotel-booking platform doesn’t need to submit to accommodation rules, she said. By the same token, Uber shouldn’t be required to abide by local regulations governing transport, Fernández said. Even independent taxi-radio operators don’t need a license to operate, she said.

But a lawyer representing the Barcelona taxi drivers said that Uber trains its drivers, provides them with phones to run the app, and sets prices. Without Uber, “drivers couldn’t provide their service,” said the lawyer, Diego Salmerón Porras.

“Uber Spain has system to provide transportation services,” he said.

Recent developments in Uber’s business model would validate Uber’s contention that it is just an intermediary. The company now offers a cornucopia of services, all of which are transport-related but range from ride-sharing to food delivery. Some resemble traditional full-time private taxicab services, but others involve looser arrangements for drivers that only carry passengers in their spare time.

Some even involve partnerships with licensed taxi drivers, including its UberX service in Spain. These services emerged as Uber responded to a surge in regulations that drove it to emulate more traditional chauffeur business models.

Uber’s defense rests on the ability of its platform to connect customers with suppliers for any and all of these services. The company’s only role is to verify that its drivers have what it takes to do the job, including a car, a valid license and insurance. In this sense, Uber is no different from other platforms: It’s free to choose who can use the service and free to reject users that don’t meet their standards.

Fernández, for Uber, emphasized that Uber doesn’t control how often its drivers use the platform. Nor does the company forbid drivers to use competing ride-hailing apps — except when a driver is already carrying a passenger who booked the ride through Uber, she said.

Governments weigh in

The hearing also drew governments, some of which have adopted regulations for Uber-like services and some of which are now drafting similar rules.

The governments could be roughly divided into two camps. France, Ireland and Spain suggested that services such as Uber may have characteristics that are similar to both an information-society service and a transport provider. But such services should be governed by one set of standards, not two, they said. And the preferred standard should be that of a transport provider, all three governments argued.

Sampol Pucurull, for Spain, noted that a number of taxi-booking platforms operate in Barcelona without any problems. These include Mytaxi, Hailo and Cabify, he said.

Uber “could have positioned itself as an online service provider platform combining users and drivers,” the lawyer said. But the company had gone a step further by setting prices and becoming the only way drivers could reach Uber clients. As a result, Uber should get a taxi license — just like anyone else in that market, Sampol Pucurull said.

In the other end of the spectrum were Estonia, the Netherlands, the European Commission and the EFTA Surveillance Authority, which acts as the legal steward for Iceland, Liechtenstein and Norway.

These governments suggested a more permissive approach. Eric Gippini Fournier, for the commission, said that EU law should distinguish between the information-society service component of a company’s activities and the transport services it may also be providing.

Fournier said it would be up to national courts to make the call on whether Uber was providing a transport service. The facts in the Spanish case were far too murky for the EU judges to make that determination, he said.

Speaking for the Netherlands, Hélène Stergiou warned that the Spanish approach risked slowing the development of new services.

“It is not just undesirable, it is legally incorrect,” she said. “This approach might impede the development of new information-society services, which would fly in the face of the objective of the e-Commerce directive.”

For the EFTA Surveillance Authority, agent Clémence Perrin said that this divide “puts even greater onus on the EU Court of Justice to settle the question, since a legislative initiative is unlikely to take place until a compromise between member states has been reached on this point.”

Several lawsuits targeting Uber around Europe, including one in Madrid, are currently on hold while the EU court deliberates on the definition of an information- society service.

The advocate general assigned to the Barcelona case, Maciej Szpunar, said he will deliver his opinion on the case on April 6, 2017.

The court’s case number is C-434/15.

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