Europe’s top court leaning towards dealing Uber a big regulatory blow

Europe’s top court appears to be leaning towards calling a spade a spade by judging Uber’s business a transportation company, rather than just an enabling tech platform as the company prefers to think of itself, ie. as a way for the on-demand ride hailing app to work around the (stricter) licensing regulations that can be applied to traditional taxi firms.

But how much longer Uber’s regulatory bypass strategy will wash in the European Union remains to be seen.

The bloc’s top court, the ECJ, is due to make a ruling on the classification of Uber’s business — in a case pertaining to how EU law applies to Uber’s regional operations — later this year.

And now today an influential advisor to the court, Advocate General Maciej Szpunar, has published his opinion on the case. And that opinion is not looking good for Uber.

Szpunar’s assessment is that Uber “exerts control over all the relevant aspects of an urban transport service” — from price, to minimum safety conditions, to accessibility of transport supply, to conduct of drivers and access to the service.

“While this control is not exercised in the context of a traditional employer-employee relationship, one should not be fooled by appearances,” the AG writes.

“Indirect control such as that exercised by Uber, based on financial incentives and decentralised passenger-led ratings, with a scale effect, makes it possible to manage in a way that is just as — if not more — effective than management based on formal orders given by an employer to his employees and direct control over the carrying out of such orders.”

“A genuine organizer and operator of urban transport services”

On the crucial classification of Uber’s business, the AG’s conclusion is that Uber’s activity is to provide transportation services, rather than merely being an intermediary platform.

He notes, for example, that the business “comprises a single supply of transport in a vehicle located and booked by means of the smartphone application and that this service is provided, from an economic standpoint, by Uber or on its behalf” and that the service is “presented to users, and perceived by them, in that way”, as well as asserting that “when users decide to use Uber’s services, they are looking for a transport service offering certain functions and a particular standard of quality”, and noting: “Such functions and transport quality are ensured by Uber.”

His conclusion is that while Uber is using innovative methods to deliver a transportation service, the core service is still transportation.

“Uber is… not a mere intermediary between drivers willing to offer transport services occasionally and passengers in search of such services. On the contrary, Uber is a genuine organiser and operator of urban transport services in the cities where it has a presence. While it is true, as Uber states in its observations in the case, that its concept is innovative, that innovation nonetheless pertains to the field of urban transport,” he writes.

While an AG’s opinion is not binding on the court, it is highly influential and the court frequently accords with it. So it looks as if the ECJ is leaning towards a determination that could level the legal playing field between Uber and traditional taxi firms operating in the EU. And not in the way Uber would like.

An ECJ judgment that Uber’s business is to offer a “service in the field of transport” would mean its activity is not governed by the principle of the freedom to provide services in the context of ‘information society services’ under EU law — which in turn would mean Uber is subject to the conditions under which non-resident carriers may operate transport services within EU Member States.

So, basically, Uber would be bound by national regulations of Member States and could not legally claim a route to circumvent local transport rules. The company has already pulled out of multiple EU markets where it deems regulations not to its taste — most recently in Denmark. So an ECJ ruling that accords with the AG would likely cement those regional retreats.

A spokeswoman for the ECJ said there is no date for the judgement on the case yet but she told us these usually follow between three and six months after the AG opinion has been delivered.

In certain sections of his opinion, Szpunar’s view appears to echo a separate legal judgment against Uber by a UK employment tribunal last year, which also disagreed with the company’s classification of itself — describing Uber’s claim that it merely provides “self-employed contractors” with “business opportunities” as a “pure fiction”.

Although Szpunar also makes a point of emphasizing that despite his assessment that Uber is acting as an employer in the manner in which it uses technology to manage drivers and the quality of service, the issue of whether all Uber drivers are then “necessarily” employees is an entirely separate question — and one that is not part of the legal determination in the case before the ECJ.

The case before the ECJ now was originally filed in Spain in 2014, by an association of taxi drivers in Barcelona angry at Uber trying to circumvent licensing regulations (Uber’s UberPop service, which lets any driver offer ride-hailing services, remains banned in the city). The court there referred it up to the ECJ for a determination on how to interpret EU law.

Once the ECJ has responded to the questions referred to it the Spanish court will decide the substantive case in that city. And while, at the local level, the case will only determine whether Uber needs to gain licenses and authorizations required by the city of Barcelona’s regulations in order to operate in that city, it has much, much greater legal significance with regional implications for Uber’s activities.

Given that the ECJ is Europe’s top court there is no onward appeal route for Uber to seek to escape its interpretation — opening the company’s EU business to other legal challenges on these grounds.

Responding to the AG’s opinion today, an Uber spokesperson emailed us the following statement: “We have seen today’s statement and await the final ruling later this year. Being considered a transportation company would not change the way we are regulated in most EU countries as that is already the situation today. It will, however, undermine the much needed reform of outdated laws which prevent millions of Europeans from accessing a reliable ride at the tap of a button.”