Regulation of the new business models in the mobility sector is yet to be secured. Business initiatives are developing too quickly for the regulations to be up to speed. This is why judges are important to adapt the existing law until new rules are adopted. Parallel Avocats shares its views on the European Court of Justice of 20 December 2017 (aff. C-343/15, Asociacion Profesional Elite Taxi / Uber Systems Spain)

The « Uber » decision rendered by the European Court of Justice on 20 December 2017 was very awaited, as almost every information or Court decision concerning the Californian mobility platform. This ruling was, at least in appearance, going to the heart of the argumentation between Uber and its local competitors, the taxis, concerning the nature of the service provided by the platform: is Uber a transportation service company or a mere technological intermediary?

The simplified and inexact answer would be to answer “YES” to this question and to consider that the European Court put an end to this debate.

Reality is very much different because the decision of the ECJ is very technical from a legal perspective and has a narrow impact since it is only an interpretation of European law and not a ruling on the merits of a case.

In order to understand precisely this decision and to avoid any misunderstanding or mystification, it is worth looking at the precise legal issue the European court had to solve (1.), the motives that led the Court to conclude that Uber was a company “in the field of transport” (2.) and the key learnings one could take from this decision regarding platform regulation in Europe (3.).

1.   A technical legal reasoning to address a precise issue

The European Court had been seized by a Spanish Court in order to issue a preliminary ruling on the question whether the service provided by Uber was to be considered as an “information society service” or a “service in the field of transport”.

This procedure is the one by which a national court refers a question to the European Court of Justice to know the interpretation of a European law provision. This takes place in what is called the “dialogue of judges” within the European Union, which enables a common interpretation of European rules.

2.   Uber is a company “in the field of transport”

In the present case, the key consequence of the distinction between an “information society service” and a company “in the field of transport” is to know whether or not Member States are allowed to impose legal and regulatory limitations on the way a company operates without notifying it to the Commission (it would not be possible if the services qualifies as “information society service” because of the free movement of services principle within the Union). In other words, the main question was to determine whether or not Member States are in the position to regulate companies like Uber without any warning/notification to the Union.

The Court considered that “the intermediation 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 […] but as a service in the field of transport”.

The Court notably held that Uber was selecting drivers, providing an application, having a decisive influence on the characteristics of the service (notably the amount of the fare and the payment process) and controlling the good execution of the service provided by the drivers. In addition, the Court held that the service (here UberPop) was more than an intermediation service consisting of connecting, by means of a smartphone application, drivers and passengers.

The ECJ’s position is, despite the defence arguments, to assimilate Uber to other transportations operators such as taxis, Private Hire Vehicles or buses. Having said that, the ECJ underlines that Uber is not 100% transportation since it has an important part of the model relating to digital intermediary.

3. The impact of the decision. What’s next?

The European judges focused on a key aspect of the company’s business model: transportation from point A to point B. By doing so, their goal was to evaluate the level of implication of Uber in the transactions it enables. It is the way the service concretely operates that led the ECJ to its conclusion that the control Uber has over the service and the transactions qualifies as a service in the field of transportation.

We believe this decision is a useful reminder for platforms:

  1. that they are under increased regulatory scrutiny in Europe,
  2. that the level of control they have over supply and demand in their market is a major factor to anticipate when structuring the business model and
  3. that the regulatory requirements of each national market they penetrate need to be carefully weighed and analysed before taking decisions that may endanger their core business model.

Nevertheless, this decision is not as surprising or alarming as we can read in some newspapers (see for instance, the Guardian’s analysis). It does not state that Uber is a transport company but only that it operates in the “field of transport”, which means that Member States can adopt strict sectorial rules without notification to the Union. For instance, in France, platforms in the transportation of persons are considered as “booking centrals” and are held responsible, since 2017, for the good provision of the service by their drivers.

In substance, this decision is not the death penalty of Uber. It is merely a general authorisation given by the ECJ to Member States who wish to impose strict regulations on platforms in the transportation sector.

Such a decision should thus be welcomed as it provides clarification and invites European startups and other transportation companies to think of the role they want to play in the transportation operation that they enable. In other words, it can be summarised as follows: the bigger the intermediation, the higher the level of regulation.

On a more general level, this decision of the ECJ underlines the difficulties to regulate and to find the proper legal concept governing innovative business models in the digital economy. The issue is not only about Uber and transports, it is way broader. Indeed, the key underlying issue is to determine the level of responsibility of the digital intermediary, which may vary according to their role in the transaction. We believe that the European framework for digital actors needs to be amended as the historical distinction between editor and host (resulting from the e-commerce directive of 2004) is no longer adapted to the way platforms operate and to the way business is currently being conducted online. To build a strong digital market in Union, it is needed, in our views, to have a coherent and ambitious legal framework.

Arthur Millerand and Michel Leclerc are lawyers and founding partners at Parallel Avocats. Experts of the regulatory issues of the digital economy, they are co-authors of the blog www.droitdupartage.com (since 2013) and co-authors of the book « Collaborative Economy & Law » (January 2016).

 

Parallel Avocats (www.parallel.law) is a French law firm dedicated to the digital economy and the electronic platforms. Founding partners Arthur Millerand and Michel Leclerc believe that “Mobility is a key sector of the digital transformation: our experience of supporting shared mobility stakeholders has convinced us of the importance of law in the development of an innovative mobility company. We wish to put this experience to the benefit of startups which work for a sustainable mobility.“