Month: May 2017

The European Court puts start-ups and European sharing economy in danger

Posted on Updated on

20140426_LDD001_0

 

The redde rationem between taxi drivers and Uber is getting closer and closer, with the Uberpop application likely to be definitively out-of-law. This may not be a serious prejudice for Uber, which is more concentrated on other value-added modalities such as UberX, Uber Limo ecc where service providers are regular taxi drivers, not private citizens. However, the impact of today’s opinion of the Attorney General of the European Court, Maciej Szpunar, may be more relevant in other sharing economy sectors where the activity of private citizens is prevailing (such as Airbnb, for instance).

The legal opinion rendered in the case C-434/15 Asociación Profesional Elite Taxi vs Uber is not binding for the Court, which will adopt the final, binding decision in 8/10 months. However, statistics say that in 80% of the cases the court substantially confirms the legal solution suggested by the Attorney General.

As we all know, Uber is a US-based company which has developed a successful computer program that can be used on smartphones. The program has created an online platform connecting users and car owners for urban journeys, competing de facto with traditional taxi transportation. The success of Uber and the replication of the same model in other services sectors (doctors, baby-sitting, take-away ecc) has even created the term “uberization”, meaning the process whereby traditional economic activities are replaced by an online platform connecting directly users and providers.

In this preliminary reference, the Court of Justice was asked to determine the type of service provided by Uber, whether transport services, information society services or a combination of both. The question was fundamental to determine whether Uber, and its drivers, may be required to have authorizations and licenses, normally required by national transport legislation. In Barcelona, like in many European cities, the operations by Uber has been challenged by local taxi organizations claiming that Uber and its drivers should hold a normal taxi licenses and be subject to the taxi legislation. This would be, however, the end of the UberPop application as we have learned it sofar. In the specific Spanish case, an absence of such authorizations and licenses amounts to a breach of the provisions governing competition in Spain.

Obviously, Uber always denied to provide transport services, instead claiming that its computer program should be seen as an information society service falling within the scope EU Directive 98/34/EC. This Directive prohibits restrictions on the freedom of establishments and would mean that national taxi legislations could not make such services subject to administrative authorizations. In addition, in the specific case Uber claimed that an authorization scheme applicable to its program and services should be justified by general interest and not be discriminatory, in line with art. 9 Directive 2006/123 which governs authorization schemes and the freedom of establishment.

The opinion of the Attorney General is restrictive vis-à-vis services rendered by private citizens, since it requires them the be subject to the general legislation of the sector. In the case of Uber, this means the end of UberPop, not of other transportation services provided by licensed taxi drivers via the same platform (Uber X, Uber Limo, ecc).

However, the worst impact of this principle will be upon other sharing economy platforms which are based on private citizens rather than on licensed workers. This is the case, for instance, of AirBnb, which is constantly under attack by the hoteling industry. In that case, imposing the full application of hotelling rules upon Airbnb’s clients would be the end of the business model. The same may happen for innovative applications intermediating private citizens. Thus, the final decision to be rendered by the European court would be more fundamental for future European start-ups rather than for Uber.