While Uber recently achieved partial success in the legal fight over a key component for operating driverless cars in the United States, it suffered a defeat at the European Court of Justice (ECJ). On December 20, 2017, the ECJ issued a highly anticipated ruling on the legal classification of Uber’s services, which connect users of its smartphone application to non-professional drivers using their own vehicles. Uber’s business model has been the subject of several lawsuits in different countries in Europe and India, among others. The case at issue was brought before the ECJ by a court in Spain requesting a preliminary ruling (Asociación Profesional Elite Taxi, Case C-434/15). Whereas Uber claimed that it only provides a technical platform, the ECJ held that Uber offers transportation services which can be made subject to an authorization scheme by the Member States in the European Union (EU), similar to the ones used for taxis.
Background on the Main Proceedings and the Main Question Referred
In 2014, a professional association representing taxi drivers in the city of Barcelona brought an action before a local court seeking a declaration that the activities of Uber in Spain must be qualified as unfair practices under the Spanish rules on competition. The plaintiff stated that neither Uber nor the non-professional drivers have the licenses required to provide taxi services in Barcelona. In order to decide whether the services provided by Uber require previous administrative authorization, the Spanish court considered it necessary to determine whether the services are transport services, “information society services,” or a combination of both. According to the Spanish court, Uber’s practices could not be qualified as unfair practices under the Spanish rules on competition if they are “information society services.”
“Information society services” is a name used in EU legislation for digital service providers. They are defined as “any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services.” “Information society services” are regulated by the EU and benefit from the freedom of establishment for service providers and the free movement of services as provided for in the Services Directive and the Treaty on the Functioning of the European Union (TFEU).
Therefore, the ECJ was called upon to rule on whether the service Uber provides should be classified as a “service in the field of transport” within the meaning of article 58, paragraph 1 of the TFEU, or whether it was covered by article 56 (freedom to provide services) of the TFEU, the Services Directive, and the Electronic Commerce Directive 2000/31/EC. Services that fall under article 56 of the TFEU are subject to common EU rules, whereas the “freedom to provide services in the field of transport” falls under article 58, paragraph 1 of the TFEU, which allows the Member States to decide on the conditions under which these services are to be provided. The Services Directive does not apply to transport services either.
The Ruling of the ECJ
The ECJ ruled against Uber. It declared that the service provided by Uber connecting individuals with non-professional drivers using their own vehicles must be classified as “a service in the field of transport” within the meaning of EU law.
According to the ECJ, an intermediation service, which enables the transfer by means of a smartphone application of information concerning the booking of a transport service between the passenger and the non-professional driver can be qualified, in principle, as an “information society service” within the meaning of article 2(a) of the Electronic Commerce Directive. The Court stated, however, that a service such as Uber’s cannot be viewed in isolation. The Court held that Uber concurrently offers transport services, which it renders accessible through the smartphone application and whose general operation it organizes for the benefit of individuals who wish to book a ride. (Case C-434/15, supra, paras. 35–38.)
The ECJ held that without Uber’s smartphone application the drivers would not be able to provide transport services and the potential passengers would not be able to book these services. The ECJ further argued that Uber determines to a significant extent the service conditions by limiting at least the amount of the fare, collecting it from the client, and paying a certain amount to the driver, as well as monitoring the quality of the vehicles, the drivers, and their conduct. Moreover, the ECJ points out that the driver could be excluded if he or she provides poor service. (Id. para. 39.)
The ECJ concluded that the service Uber provides must be classified as “an integral part of an overall service whose main component is a transport service.” The ECJ took the view that the service at issue must therefore be regarded not as an “information society service” but as a “service in the field of transport.” (Id. para. 40.)
The ECJ stressed that this classification is fully in line with its case law, according to which the concept of “services in the field of transport” contains not only mere transport services as such “but also any service inherently linked to any physical act of moving persons or goods from one place to another by means of transport.” (Id. para. 41.)
As the service provided by Uber is to be regarded as “a service in the field of transport,” it is not covered by the freedom to provide services pursuant to article 56 of the TFEU, but instead by article 58, paragraph 1 TFEU, according to the ECJ. As a consequence of this decision, each Member State can decide whether the service provided by Uber should be made subject to the same regulations as traditional taxi operators. (Id. paras. 44–47.)