Thursday, 21 December 2017

CJEU gives Member States a green light to regulate Uber

Just yesterday the Court of Justice delivered its judgment in one of the two high-profile cases brought before it with respect to the European operations of the US-based digital multinational Uber. The ruling in C‑434/15 Asociación Profesional Elite Taxi (or Uber Spain) comes as a serious blow to the company, which has continuously insisted to act merely as a provider of an online intermediation service. The Court has, however, largely followed the earlier opinion of the Advocate-General Szpunar (see our posts on both opinions here and here) and classified the activities of Uber as "services in the field of transport".

Why is this relevant?

Due to its socio-economic importance - both at the national level and from the internal market perspective - as well as specific features - particularly with respect to the (former) public or quasi-public transport networks - transport sector has traditionally been given a special treatment under the EU Treaties. For the similar reasons Member States have long been reluctant to open their national transport markets to liberalisation. As a matter of fact, it required an action brought by the Parliament against the Council to confirm the positive obligation of the latter to extend the freedom to provide services to that sector (case C-13/83 Parliament v. Council). This has led to an intensification of the legislative efforts aimed to remove the barriers to cross-border provision of different transport services - air, road, rail and water - and at the same time reaffirmed the specificity of the path taken in that area, resulting inter alia in the exclusion of "services in the field of transport" from the scope of Services Directive.

In the case at hand the specificity of the transport sector meets with another special area of the EU law - that related to the provision of the so-called "information society services". This domain, associated mainly with online activities, has been subject to a separate legal scheme - the E-Commerce Directive

The question thus appeared whether the activity of Uber - that is the provision of a paid service, by means of a smartphone application, consisting of connecting non-professional drivers using their own vehicles with persons wishing to make urban journeys - should be qualified as a service in the field of transport, an information society service, neither or both. Should the services in question fall under the scope of either Services or E-Commerce Directive, the liberalisation regime established in those acts would kick in, meaning that Member States would only be allowed to restrict their provision if specific conditions set out in those directives were fulfilled.

Judgment of the CJEU

The Court opted for an interpretation which is least favourable to Uber and leaves the widest margin of discretion to the Member States. Its reasoning appears to be largely based on the AG opinion, even though no direct references to that document are made. The following points are worth highlighting:
  • The intermediation service consisting of connecting non-professional drivers with the passengers by means of a smartphone application is, in principle, a separate service from the underlying transport service and, again in principle, meets the criteria for classification as an "information society service" (paras. 34-35).
  • However, the concrete service provided by Uber is more than an intermediation service. In the specific case at hand, the service of intermediation is rather an integral part of an overall service whose main component is a transport service (paras. 38, 40).
  • This is because, as explained in paragraph 39, firstly, the intermediation service is "based on the selection of non-professional drivers using their own vehicle, to whom the company provides an application without which (i) those drivers would not be led to provide transport services and (ii) persons who wish to make an urban journey would not use the services provided by those drivers" and, secondly, Uber exercises "decisive influence" over the conditions under which that service is provided by the drivers (infuences prices, processes payments, engages in quality control).

Consequently, services provided by the company cannot be classified as information society services, but rather belong to services in the field of transport. This means that the activities of Uber fall outside the scope of the E-Commerce and Services Directives as well as Article 56 of the Treaty on the Functioning of the European Union. They are, by contrast, covered by Article 58(1) TFEU and further provisions applicable to the area of transport. This is of limited help to Uber as no common rules coverning the type of services provided within its business model (i.e. non-public urban transport) currently exist at the EU level. Member States, therefore, enjoy a wide margin of discretion when it comes to regulating the conditions under which services of that type can be provided. 

Concluding thought

The judgment is a significant defeat for Uber, which should probably brace itself for the upcoming ruling in the parallel French case. Its implications for other businesses belonging to the so-called "platform economy" may, nevertheless, be less far reaching than it can seem at first sight. After all, it is the specificity of the transport sector that left the services provided by the company outside the scope of both directives. Additionally, the reference to a "decisive influence", while not legally uncontroversial, suggests that it is only in fairly specific circumstances that an online service may fall outside the scope of the information society framework. Negative consequences of the judgment thus appear to be largely Uber-specific - at least for the time being. Or, as its critics might say, what goes around comes around.

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