Uber Dealt Blow as EU’s Top Court Rules It Is a Transport Company
Uber Dealt Blow as EU’s Top Court Rules It Is a Transport
Company
Judgment by ECJ is a defeat for ride-hailing firm’s
efforts to use courts to lighten its regulatory load
Uber has tussled with taxi companies and regulators
around the world for much of its eight-year history, but the scrutiny has been
especially intense in Europe.
By Natalia Drozdiak Updated Dec. 20, 2017 9:43 a.m. ET
BRUSSELS—Uber Technologies Inc. suffered a major defeat
in its effort to overturn strict rules and licensing requirements in Europe,
after the bloc’s highest court Wednesday ruled the ride-hailing company should
be regulated as a transportation service, rather than a digital service.
The judgment by the European Court of Justice won’t force
Uber to curtail most of its services in Europe, but the decision is a blow to
the company’s efforts to use courts to lighten its regulatory load—and forces
it to deal more directly with national and local governments that set rules
governing car and transport services in Europe. Those authorities have sought
to hold Uber to often-strict rules and licensing requirements that apply to
taxi and traditional car-hire services.
“This ruling will not change things in most EU countries
where we already operate under transportation law,” an Uber spokeswoman said.
“As our new CEO has said, it is appropriate to regulate services such as Uber
and so we will continue the dialogue with cities across Europe.”
Still, the decision could have wider ramifications for
Uber, and other sharing-economy firms, in markets beyond Europe. Officials here
over recent years have taken a more aggressive stance than other jurisdictions
on a wide array of regulatory and enforcement issues affecting Silicon Valley
firms—including taxes, privacy and alleged anti-competitive behavior. While the
legal reach of such rulings extends only to Europe, other jurisdictions have
started looking to the continent as an example when tackling regulatory and
enforcement issues on their own turf.
Last year, for instance, Indonesia passed a law creating
a “right to be forgotten,” similar to one the European Union’s top court
established in 2014. That decision allowed EU citizens to request Alphabet
Inc.’s Google and other search engines to remove results deemed to infringe
privacy.
Any specific ramifications from the Uber case at the ECJ
outside of Europe would depend on individual regulatory regimes related to
transportation rules, which varies widely around the world. Indeed, Uber used
Europe’s unique rules establishing lighter regulations for information-services
firms to argue it shouldn’t be subject to the more burdensome rules EU
countries can apply to transportation.
The court’s finding—ruling against Uber’s argument that
it was simply a marketplace to connect people who want services—could also
undermine similar arguments that many Silicon Valley firms make to keep
regulators at arm’s length around the world. Airbnb Inc., for instance, has
declined to proactively filter some types of listings in Paris in part because
it says it is a technology platform, not a housing provider.
“Regulators abroad that have social systems similar to
the EU may find inspiration in this decision with respect to how to craft their
freelance economy rules,” said Dave Anderson, an EU law partner in the Brussels
office of Berwin Leighton Paisner LLP.
Under EU law, national governments have more control over
how they regulate transport companies, like taxis or traditional car-hire
services. But online services are granted freedom from some kinds of regulatory
intervention, such as strict licensing requirements.
The judgment dashes any hopes for Uber of regulatory
rollback in Europe and could embolden regulators to impose more onerous
restrictions on the company. It also creates a roadblock for Uber for any
potential expansion or revival of its lower-cost UberPop service, which uses
drivers without professional licenses. Uber only offers the service in Poland,
Czech Republic, Slovakia and Romania after rolling back the service in most
other EU countries. Uber says it currently has no intentions of bringing
UberPop back to the countries where the company has previously suspended it,
adding the company now operates under the regulatory framework in most of those
countries.
Uber has tussled with taxi companies and regulators
around the world for much of its eight-year history, but the scrutiny has been
especially intense in Europe. There it has faced local or national bans on its
UberPop service in Italy, Germany, Belgium, the Netherlands, Spain and Hungary and
sometimes violent protests from entrenched taxi services. Uber has long tried
to fight local transportation laws by arguing it isn’t a transportation company
but rather an online platform, which is protected under EU law from
disproportionate regulation.
In its judgment, the ECJ said Uber’s service “must be
regarded as forming an integral part of an overall service whose main component
is a transport service and, accordingly must be classified not as ‘an
information society service,’” referring to the legal term for an online
platform.
The ECJ argued Uber’s app is indispensable both to the
drivers and the passengers and that the company “exercises decisive influence
over the conditions under which the drivers provide their service.”
Transport Vs. Tech
Europe's highest court ruled Uber is a transport company,
not a tech company, with big implications for how it is regulated on the
continent.
Uber
Uber argued it's an online service company because:
• Uber is a smartphone app used in 21 EU countries.
• Several court judgments in Barcelona support that view.
What it means for regulation:
• EU laws protect online services from disproportionate
licensing requirements.
European Court of Justice
ECJ says Uber is a transport company because:
• Uber's service goes beyond simply connecting drivers
and passengers.
• Uber's app is indispensable for both drivers and
passengers.
• Uber exercises "decisive influence" over the
conditions under which drivers can offer their service.
What it means for regulation:
• Strict national laws and regulations govern
transportation firms.
Sources: ECJ; the company
While this particular court case cannot be appealed, Uber
can pursue other legal challenges in courts to defend its business.
The ruling is the latest setback for Uber’s new chief
executive, Dara Khosrowshahi, who took the role in September after Travis
Kalanick stepped down in June under investor pressure after months of scandal
and legal setbacks. Mr. Khosrowshahi is appealing a ruling in London that would
prevent Uber from operating there and is cleaning up multiple issues left
behind under Mr. Kalanick’s watch, including a huge data hack that was covered
up and a former security official’s claims of espionage and other tricks to
gain an edge.
In September, London’s top transport authority stripped
Uber of its private-car-hire license in the city, citing “a lack of corporate
responsibility” that it said could undermine public safety and security. Uber
said it would appeal the decision, during which it can still operate.
In November, Uber revealed it paid hackers $100,000 in an
effort to conceal a data breach affecting 57 million accounts one year ago,
when Mr. Kalanick was still CEO. And it was revealed in court, where Uber is
fighting a lawsuit from Alphabet Inc. alleging stolen trade secrets, that Uber
paid a security executive at least $4.5 million to keep concealed allegations
he made that the company surveilled competitors and used devices that couldn’t
be traced to Uber to avoid legal discovery, among a host of other claims.
The EU court case originates from legal action filed by
Elite Taxi, a Barcelona-based association of independent taxi drivers, which is
seeking penalties against Uber for operating its low-cost Uberpop service
without the necessary taxi licenses and authorization from the city. Elite has
argued Uber was competing unfairly by building a new model for transportation
without the costs normally associated with it. A Spanish court banned UberPop
there in December 2014.
The Barcelona-based law firm SBC Abogados, which
represented Elite in the case, said on Twitter: “The Court of Justice of the
European Union has just ruled in our favor that Uber is a transport company,
therefore its activity must be regulated, the unfair competition that we
denounce is over.”
—Greg Bensinger in San Francisco and Sam Schechner in
Paris contributed to this article.
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