1
EMBRACING THE SHARING ECONOMY:
ON THE LEGALITY AND LEGITIMACY OF RESTRICTIONS OF
UBERPOP UNDER EU INTERNAL MARKET LAW
Final version 02-01-2017
Student: A.J.M. Louwers
LLM Intern. & Eur. Law Track: Comp. Law & Reg. Supervisor: Mw. Dr. K.J. Cseres
University of Amsterdam Amsterdam Centre for European Law and Governance
2 ABSTRACT
The purpose of this thesis is to analyze the legal nature of UberPOP and the legality of trade restrictions imposed by authorities of MS’s upon its activities under EU Internal Market Law. Amidst public controversy and a lack of clarity on the legal nature and regulatory categorization of UberPOP, national courts of the majority of MS’s have classified UberPOP as an unlicensed transportation company and banned it from providing services, based on non-compliance with national law on licensing requirements.
As an information society service, UberPOP’s services can still be
regulated. However, authorization schemes are generally prohibited and a more stringent proportionality test would apply. Transportation Network Companies (‘TNC’s’) such as UberPOP reduce the need to correct market failures by MS’ intervention. Therefore, absolute bans and other excessive restrictions relating to licensing requirements imposed on UberPOP go beyond what is necessary to pursue public policy objectives. Also, it seems disproportional to equally apply the concept of professional ‘taxi services’ on occasional private service providers and consequently subject those providers to equal authorization and licensing requirements. Establishing lighter regulated categories that distinguish professional services from peer-to-peer services by imposing minimum thresholds may offer a proportionate alternative.
The cases currently pending before the CJEU highlight the clash between those who would regulate in the traditional way and others who argue that the new reality of rapid technological developments requires alternative approaches. This thesis uses the preliminary questions in the Spanish referral case as a departure point and seeks to answer the following
question:How does UberPOP fit within the EU law framework and to what extent can current restrictions of its services be justified under EU law principles on free movement?
Keywords: ‘sharing economy’; ‘collaborative economy’; ‘UberPOP’; ‘TNC’; ‘transportation law’; ‘free movement of services’; ‘freedom of establishment’; ‘public restrictions’.
3 LIST OF ABBREVIATIONS
AG Advocate General
Charter Charter of Fundamental Rights of the
European Union
CJEU Court of Justice of the European
Union
Consumer Rights Directive Directive 2011/83/EU
Council The Council of the European Union
E-Commerce Directive Directive 2000/31/EC
GC General Court
EC European Commission
EP European Parliament
EU European Union
MS Member State
Services Directive Directive 2006/123/EC
Technical Standards Directive Directive 98/34/EC as amended by Directive 98/48/EC (codified)
TNC Transport Network Company
TEU Consolidated version of Treaty on the
European Union
TFEU Consolidated version of Treaty on
Functioning of the European Union
Treaties Treaty on the European Union (TEU)
and Treaty on the Functioning of the European Union (TFEU)
4 TABLE OF CONTENTS ABSTRACT ... 2 LIST OF ABBREVIATIONS ... 3 TABLE OF CONTENTS ... 4 I. INTRODUCTION ... 5
II. A CONCEPTUAL OVERVIEW OF THE SHARING ECONOMY ... 7
2.1. Framing the sharing economy ... 7
2.1.1. Characteristics of the ‘sharing economy’ ... 7
2.1.2. Actors in the ‘sharing economy’ ... 8
2.2. EU perspective on the sharing economy ... 11
III. LEGAL FRAMEWORK OF TAXI TRANSPORT ACTIVITIES ... 12
3.1. Regulatory categories of for-hire transport services ... 12
3.1.1. Taxis ... 12
3.1.2. Pre-booked Private Hire Vehicles (PHV’s) ... 12
3.1.3. Transportation Network Companies (TNC’s) ... 13
3.2. Motivation of common regulatory regimes applicable to UberPOP ... 14
3.3. Conclusion ... 17
IV. UBERPOP’S ROLE UNDER EU INTERNAL MARKET LAW ... 18
4.1. European dimension of UberPOP ... 18
4.2. The pending preliminary ruling cases on UberPOP ... 19
4.3. Free movement of services and freedom of establishment ... 21
4.4. UberPOP, an information society service or a transport service? ... 23
4.4.1. Classifying UberPOP as a service in the field of transport ... 23
4.4.2. Classifying UberPOP as an information society service ... 27
4.4.3. Also providing the underlying service? ... 29
4.5. Conclusion ... 34
V. REGULATING UBERPOP UNDER FREE MOVEMENT LAW ... 36
5.1. Compatibility of national restrictions of UberPOP with the Services Directive ... 36
5.2. Compatibility of national restrictions of UberPOP with the E-Commerce Directive ... 39
5.3. Proportionality of taxi licenses: the least restrictive measure available? 43 5.4. Conclusion ... 49
VI. CONCLUDING REMARKS ... 51
5
I. INTRODUCTION
“I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.”1
As ‘sharing economy’ innovators disrupt traditional business models in markets with high regulatory overheads or barriers to entry, Member States experience difficulties in framing those peer-to-peer platforms within existing regulatory categories due to blurring legal distinctions between markets, consumer and producer, professionals and private individuals.2 Authorities risk being captured by incumbents advancing the industry interest over the public interest.3 UberPOP’s entry in European cities has sparked a lot of tension and incumbent taxi operators have tried to block their operations through various legal means. National regulatory authorities in Europe have responded by subjecting platforms to burdensome regulatory compliance or outright banning their economic activities.4
This thesis analyzes the legality and legitimacy of national restrictions imposed on UberPOP under EU primary and secondary law on free movement.5 Those restrictions relate to the enforcement of market access requirements in the form of licensing and authorization schemes. The for-hire personal transportation market displays the specific features of a market with strict regulatory frameworks and high barriers to entry. It reflects the
1A.H. Maslow, The Psychology of Science (1966), p. 15.
2 S. Ranchordás, ‘Regels voor de digitale deeleconomie, oftewel ‘uber-regulering’,
RegelMaat 2016-2, p. 112.
3 J. Waterworth, ‘Uber, the Court of Justice and the Shapeshifting Duck’, Disruptive
Competition Project Blog (November 25, 2016)
4 S. Ranchordás, ‘On Sharing and Quasi-Sharing: The Tension between Sharing-Economy
Practices, Public Policy and Regulation’ (October 11, 2016), in: P.A. Albinsson & B.Y. Perera (Eds), The Sharing Economy: Possibilities, Challenges, and the Way Forward (Praeger Publishing 2017), p. 7.
5 Articles 26, 49 to 55 and 56 to 62 (services) TFEU; Services Directive (Directive
6
hard line that authorities have chosen to deal with ‘sharing economy’ platforms.
The current application of EU and national legislation to ridesharing platforms creates legal uncertainty, a lack of transparency and legal
fragmentation across the EU for innovators and incumbents alike. Following the referral of preliminary questions by several national courts, the CJEU is currently considering how to fit UberPOP within the EU law framework and whether it is proportionate to equally apply the concept of professional ‘taxi services’ on occasional private service providers and consequently
subjecting those providers to authorization and licensing requirements.6 Accordingly, by using the structure of the preliminary questions in the Spanish referral case as a departure point, this thesis sets out to answer the question: How does UberPOP fit within the EU law framework and to what extent can current restrictions of its services be justified under EU law principles on free movement? The thesis is written with a critical normative perspective and combines a de lege lata and a de lege fererenda approach. The first chapter will briefly describe the conceptual framework of the sharing economy and the legal relationships of UberPOP. Subsequently, I will explore how to fit UberPOP within the regulatory context of the
traditional for-hire personal transport market. The third chapter describes the legal role of UberPOP in the context of EU internal market law. The final chapter will consider the limitations imposed on UberPOP by Spain in light of the applicable prohibitions in the E-Commerce Directive and Services Directive. Under which conditions can national restrictions upon the activities of UberPOP be lifted? After this substantive analysis, I will analyze whether public restrictions of UberPOP, especially licensing
requirements, are justified under the principle of proportionality and in light of the provisions prohibiting such restrictions of free movement.
6 Case C-434/15Asociación Profesional Élite Taxi/Uber Systems Spain, S.L. [2015];
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II. A CONCEPTUAL OVERVIEW OF THE SHARING
ECONOMY
2.1. Framing the sharing economy
2.1.1. Characteristics of the ‘sharing economy’
In its essence, transactions in the sharing economy consist of agreements on the sharing of surplus services, goods, spaces and other products between peers mostly through an online platform with or without a commercial transaction.7 The key feature of the sharing economy is the increased use of idle capacity at reduced transaction costs, thus potentially improving social and economic efficiency. Technology and the internet have enabled the emergence of digital platforms that make sharing between individuals less informal by conveniently facilitating the matching process between supply of underused goods and their demand.8 In doing so, these platforms serve as business intermediaries providing temporary access to products and services by mediating the payment between the supplier and the buyer.9
Rather than inventing new products or services, sharing economy platforms have developed a new market model in which services are
de-professionalized and provided by peers rather than professionals. These platforms mediate transactions in this process without owning assets or bringing in employees on a for-profit or not-for-profit basis.10
7 A. Stemler, Betwist and Between: Regulating the Shared Economy (diss. Bloomington,
Indiana) Indiana University Kelley School of Business Research Paper 2014/15, iss. 6 (online public) p. 2.
8 S. Ranchordás, ‘On Sharing and Quasi-Sharing: The Tension between Sharing-Economy
Practices, Public Policy and Regulation’ (October 11, 2016), in: P.A. Albinsson & B.Y. Perera (Eds), The Sharing Economy: Possibilities, Challenges, and the Way Forward (Praeger Publishing 2017) (forthcoming <https://ssrn.com/abstract=2851202>), p. 3.
9 Business Innovation Observatory, The Sharing Economy: Accessibility Based Business
Models for Peer-to-Peer Markets, Case Study 12, September 2013, p. 2-3.
10 S. Ranchordás, ‘Regels voor de digitale deeleconomie, oftewel ‘uber-regulering’,
8
While a wide range of terms have been deployed to refer to the above-mentioned development, the term sharing economy originally focused primarily on the efficient use of idle capacity. The European Commission has however adopted a different definition in its Communication, referring to the collaborative economy as “business models where activities are facilitated by collaborative platforms that create an open marketplace for the temporary usage of goods or services often provided by private
individuals”11. This definition thus includes a new collaborative channel for existing business-to-consumer professional service provision.12 Some legal scholars argue that a distinction should be made between pure sharing platforms and unlicensed professional practices disguised as collaborative platforms.13
2.1.2. Actors in the ‘sharing economy’
Technological innovation and the accompanying developments in the sharing economy have made it possible for private individuals to engage in service provision on an occasional basis, while such services were
traditionally only provided by professional service providers. Consumers are therefore transformed into ‘prosumers’, simultaneously enabled to both provide and consume services.14
Transactions take place in a multisided triangular scheme involving other players than ‘bipolar’ transactions between businesses and consumers. In general, the sharing economy involves three categories of actors: (i)‘Service providers’; (ii) ‘Consumers’; and (iii) ‘Platform intermediaries’.15 The two
11 Communication from the Commission to the European Parliament, the Council, the
European Economic and Social Committee and the Committee of the Regions, ‘A European agenda for the collaborative economy’, COM(2016) 356 final, p. 3.
12M. Cohen & A. Sundararajan, ‘Self-regulation and innovation in the peer-to-peer sharing
economy’, University of Chicago Law Review Dialogue 82:116 (2015), p.2-3.
13 S. Ranchordás, ‘On Sharing and Quasi-Sharing’, p. 7.
14 P. Parigi & K. Cook, ‘Viewpoints on the Sharing Economy’, Contexts Vol. 14, No. 1
(American Sociological Association 2015), pp. 12-19 (ISSN 1536-5042, electronic ISSN 1537-6052).
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groups, service providers and consumers of those services, interact via the platform intermediary. As both groups are characterized by a high degree of heterogeneity, information dispersion is high and thus there is a need to aggregate information, while keeping transaction costs low.16 Pricing mechanisms in these processes involve auctions, real time price adjustments by sellers and automated price adjustments by algorithms.Trust and
reputation between peers take a crucial place in these transactions, as individuals must be willing to share property or services with strangers. Platforms facilitate in this need by ways of upfront inspection, external enforcement and reputation or feedback and rating systems.17
The changing market structure complicates the application of the EU acquis on consumer contract law to transactions in triangular platform
relationships.18 Consumer law is based on the concept of ‘bipolar’ relationships between a trader and consumer. In platform transactions however, both the actual service provider as the end-user entertain legal relationships with the platform intermediary, as shown in the figure below.19 It is therefore unclear what the platform operator’s role is. Accordingly, there is a real danger that consumers engaged in those transactions are left without effective protection.20 Therefore, authorities need to establish criteria for distinguishing between mere facilitating platforms and the actual suppliers. Secondly, the duties and obligations of that platform operator
16 J. Van Dijck, T. Poell & M. De Waal, De Platformsamenleving: Strijd om publieke
waarden in een online wereld (Amsterdam University Press: 2016), p. 37-38.
17 Einav, Farronato & Levin, Peer-to-peer markets (2015), p. 9-11.
18 F. Zoll, ‘Discussion Draft of a Directive on Online Intermediary Platforms’ Research
Group on the Law of Digital Services, Discussion Draft of a Directive on Online Intermediary Platforms, Journal of European Consumer and Market Law 164-169 Iss. 4/2016 (August 11, 2016) (Publishers: C.H.Beck, Nomos and Wolters Kluwer).
19 C. Wendehorst, ‘Platform Intermediary Services and Duties under the E-Commerce
Directive and the Consumer Rights Directive’, EuCML Iss. 1/2016 (2016), p. 31-32.
20 C. Busch, H. Schulte-Nölke, A. Wiewiórowska-Domagalska and F. Zoll, ‘The Rise of the
Platform Economy: A New Challenge for EU Consumer Law?’, Journal of European Consumer and Market Law 3 Iss. 1/2016 (2016) (Publisher: C.H. Beck), p. 5.
10
should be clarified so that it is clear for consumers when the platform is liable for a breach of contract on behalf of the actual supplier.21
Assuming that UberPOP would fall under the provisions of the E-Commerce Directive, the ‘platform use contract’ describes the quasi-contractual relationship (C) between the consumer and the platform. The main question however remains whether the platform has to fulfill certain duties under the E-Commerce Directive, Distance Selling Directive22 and the Consumer Rights Directive regarding the ‘supply contract’ concluded between the user and the actual driver (A). This depends to a great extent on the interpretation of the contractual relationship between the service
provider and the platform (B).23 Platforms such as UberPOP make it explicit with statements in their terms of service that their only intention is to act as
21 C. Busch, H. Schulte-Nölke, A. Wiewiórowska-Domagalska and F. Zoll, ‘The Rise of the
Platform Economy: A New Challenge for EU Consumer Law?’, Journal of European Consumer and Market Law 3 Iss. 1/2016 (2016) (Publisher: C.H. Beck), p. 3.
22 Article 2, paragraph 1, Directive 97/7/EC states: “any contract concerning goods or
services concluded between a supplier and a consumer under an organized distance sales or service provision scheme run by the supplier, who, for the purpose of the contract, makes exclusive use of one or more means of distance communication up to and including the moment at which the contract is concluded”.
23 C. Wendehorst, ‘Platform Intermediary Services and Duties under the E-Commerce
11
an intermediary, such as in the case of Uber.24 Nevertheless, from the consumer’s perspective it is often the online platform that appears as the actual partner in the contractual relationship and not the underlying service supplier. Therefore it is unclear whether the platform should be held liable in case of insufficient performance by the suppliers’ contractual
obligation.25
2.2. EU perspective on the sharing economy
According to experts the sharing economy could add EUR 160-172 billion to the EU economy.26 However, regulatory fragmentation across the EU caused by diverging opinions on the suitability of old regulatory rules, may hamper the development of the sharing economy in Europe.27
The EC and some competition authorities in various MS’s consider the sharing economy as an opportunity to liberalize transport markets by loosening local transport regulation, principally taxi norms, and eliminating traditional bureaucratic burdens.28 The EC has described the EU market as being “insufficiently innovation-friendly” and considers that “outdated regulations and procedures” are an obstacle to innovation in Europe.29 Additionally, the Spanish Competition Authority (CNMC) has stressed that current transport restrictions are anti-competitive and unduly restrict the entry of new players into the market to the detriment of consumers.30
24 C. Busch, H. Schulte-Nölke, A. Wiewiórowska-Domagalska and F. Zoll, ‘The Rise of the
Platform Economy: A New Challenge for EU Consumer Law?’, Journal of European Consumer and Market Law 3 Iss. 1/2016 (2016) (Publisher: C.H. Beck), p. 5.
25 Ibid, p. 8. 26 Ibid.
27 COM(2016) 356 final, p. 2.
28 E. Genç, “It’s time to ditch EU anti-Uber business rules”, EU Observer (Washington
2016). Accessible via: < https://euobserver.com/opinion/132763 >
29 Ibid.
30 Comisión Nacional de los Mercados y la Competencia, ‘Public Consultation on New
Models for Service Delivery and the “Sharing Economy”’, Departemento de Promoción de la Competencia – Subdirección de Estudios e Informes (November 2014).
12
III. LEGAL FRAMEWORK OF TAXI TRANSPORT ACTIVITIES
3.1. Regulatory categories of for-hire transport services 3.1.1. Taxis
For-hire passenger transport services are an important component of urban mobility in metropolitan areas. The most obvious form of for-hire transport services are regular taxis, that collect random passengers on the street without previous reservations. Taxis are licensed to operate in public spaces and pick up passengers who hail them in the street or who get in at
designated taxi stands.31 The particularities of the street hail and taxi stand markets are historically require an adequate regulatory framework in order to mitigate market failures. In the absence of regulatory control, market failures could lead to consumer harm. Specifically, permits and licensing schemes of qualified service providers and requirements on market entry conditions are common denominators in regulation of taxi services across Europe. 32
3.1.2. Pre-booked Private Hire Vehicles (PHV’s)
The emergence of telecommunication technology has led most hailing and taxi rank based access taxi services to supplement their services with pre-booked transport services. Such pre-pre-booked for-hire transport services, known as ‘Private Hire Vehicle’ (PHV) services, fall under a different regulatory framework in some jurisdictions.33 PHV’s operate on the basis of pre-arranged trips and pre-negotiated fares and are in principle not licensed to serve taxi-hailing passengers on the street or at taxi stands. The applicable regulation for this type of for-hire transport service differs, such as
31 OECD, ‘App-based Ride and Taxi Services, Principles for Regulation’, International
Transport Forum Report (2016), p.10.
32 Ibid, p.11.
33 S. Rienstra, P. Bakker, J. Visser, ‘Internationale vergelijking taxiregulering en Uber’,
13
obligations to return to a home base between trips.34 Some jurisdictions, however, make little regulatory distinction.35
A common feature is that PHV’s are overall more lightly regulated than taxis and as a consequence licenses for these types of transport are generally more easily obtainable.36 In many jurisdictions commercial dispatch centers serve as intermediaries between individual PHV-drivers and consumers. Some jurisdictions even require a driver to be associated with a local dispatch center, like in the Netherlands.37 This functioning of dispatch centers bears strong resemblances with the role that Uber plays in the process of mediation between the consumer and Uber’s “partner drivers”.38 3.1.3. Transportation Network Companies (TNC’s)
Technologic advancements in GPS and smartphone usage have enabled the rise of online platforms that facilitate users to connect with licensed PHV-drivers or unlicensed individual car owners.39 In this effort, such platforms efficiently match supply and demand. Experts prefer to refer to the term ridesourcing.40 Platforms that intermediate in this search and selection process are generally referred to as either Transportation Network
Companies (TNC’s). The term ‘Transport Network Company’ was invented as a different category of taxi regulation by the California Public Utilities Commission (CPUC) to solve regulatory issues regarding Uber, Lyft and
34 OECD, ‘App-based Ride and Taxi Services, Principles for Regulation’, International
Transport Forum Report (2016), p.12.
35 Supra note 44, p.10-11. 36 Ibid, p.12.
37 Ibid, p. 9-10. 38 Ibid, p.11.
39 D. Geradin, ‘Should Uber be Allowed to Compete in Europe? And if so How?’,
Competition Policy International (CPI) (June 2015), p. 5.
40L., Rayle, S., Shaheen, N., Chan, D., Dai, & R. Cervero, “App-Based, On-Demand
RIbide Services: Comparing Taxi and Ridesourcing Trips and User Characteristics in San Francisco University of California Transportation Center”, University of California
14
other similar services.41 TNC’s outsource rides to private individuals without actually deploying owned assets. Where ridesharing assumes the sharing of a common destination in order to reduce congestion, travel costs, fuel consumption and vehicle emissions, ridesourcing is generally
considered to be motivated by drivers’ income considerations and does not necessarily imply a shared destination.42
Ridesourcing evidently offers advantages to consumers, who generally gain additional supply, more convenience, better quality and lower prices. By giving consumers access to driver information, reputational scores and the pricing process, TNC’s make the provision of for-hire transport services more transparent. However, while proponents point at the benefits of increased efficiency and reliability of matching and pricing, opponents argue that those efficiency gains are largely due to their avoidance of regulatory supply and pricing restrictions.43
3.2. Motivation of common regulatory regimes applicable to UberPOP Historically, these services have known market imperfections in the context of the commercial relationship between a professional taxi-driver and a consumer44. Regulation was conceived in order to correct or attenuate them.45 In general, the three market failures associated with the taxi industry
41 California Public Utilities Commission (CPUC), Transportation Network Companies.
Accessible via:< http://www.cpuc.ca.gov/PUC/Enforcement/TNC/> .
42L., Rayle, S., Shaheen, N., Chan, D., Dai, & R. Cervero, “App-Based, On-Demand
RIbide Services: Comparing Taxi and Ridesourcing Trips and User Characteristics in San Francisco University of California Transportation Center”, University of California
Transportation Center(UCTC) Working Paper UCTC-FR-2014-08 (2014) p. 2-3.
43L., Rayle, S., Shaheen, N., Chan, D., Dai, & R. Cervero, “App-Based, On-Demand
RIbide Services: Comparing Taxi and Ridesourcing Trips and User Characteristics in San Francisco University of California Transportation Center”, University of California
Transportation Center(UCTC) Working Paper UCTC-FR-2014-08 (2014), p. 2.
44 D. Geradin, ‘Should Uber be Allowed to Compete in Europe? And if so How?’,
Competition Policy International (CPI), June 2015.
45 C. Buckley, “An Examination of Taxi Apps and Public Policy Regulation” (2015)
(Available via: < http://clarebuckley.ca/pdf/Clare%20Buckley%20-%20public%20policy%20regulation.pdf>), p. 4.
15
are asymmetrical information, market externalities and economies of scale or ruinous competition.46
The regulatory responses across Europe to those market failures share some common features and can be grouped into three forms of regulation: (i) fare regulation, (ii) quality regulation and (iii) market entry restrictions and controls.47
Firstly, authorities have imposed price or fare regulation to prevent price gouging in the street hailing market by taxi operators due to the information asymmetry between drivers and consumers.48 TNC’s like Uber offer
transparency of prices and increase supply responsiveness by using variable pricing to balance supply and demand.
Secondly, by imposing quality regulation authorities have tried to protect public safety and consumers. This type of regulation includes criminal background checks, adequate levels of insurance and protection against discrimination regarding access to taxi transport.49 Also, the quality of services is protected by requiring vehicle safety inspections and ensuring sufficient training for drivers.
While the manner in which public safety guarantees are delivered can be disputed with regard to their application to TNC’s, quality regulation should generally be a continued area of regulatory attention.50 Nonetheless, when combined with licensing and authorization requirements, the motivation of such measures could be called into question.
Regulation in the field of for-hire transport typically includes the use of market entry restrictions and controls in the form of licensing and
46 Supra note 45, p.3-4.
47 S. Rienstra, P. Bakker, J. Visser, ‘Internationale vergelijking taxiregulering en Uber’,
Kennisinstituut voor Mobiliteitsbeleid (KiM) (Maart 2015), p. 9.
48 OECD, ‘App-based Ride and Taxi Services, Principles for Regulation’, International
Transport Forum Report (2016), p. 26.
49 Ibid, p. 20-21. 50 Ibid, p. 20.
16
authorization schemes. Some authorities have employed restrictive capacity regulation to control market access for taxis.51 By putting a cap on the number of licenses awarded to taxis within a certain geographic area, authorities intend to counteract an oversupply of relatively unskilled workers, prevent ruinous competition and combat traffic congestion within city areas. Also, it supposedly makes it easier for authorities to direct quality controls while giving drivers the opportunity to recoup their investments in education, license and vehicle by profiting from monopoly rents.52
Geographic restrictions associated with the awarding of licenses and authorization are motivated by the need to ensure an adequate level of service coverage in certain jurisdictions.53
A regime that is characterized by a restricted number of permits determined by law or local regulation allows only permit holders to operate taxi and PHV services. The value of those permits can be considerable, and
accordingly offers holders the prospect of profiting from future monopoly rents.54
On the other hand, an open entry regime places no limit on the number of taxis that serve a certain jurisdiction. No permit or prior authorization is required and operators can enter and leave the market without obstacles. Nevertheless, operators or individual drivers can be required to meet certain requirements laid down by law.55
51 This is the case with the Spanish licensing requirements for taxis, see to that effect; Ley
16/1987, de 30 de Julio, de Ordenación de los Transportes Terrestres <Boe> 182 (‘Law for Road Transports’) [BOE-A-1987-17803].
52 S. Rienstra, P. Bakker, J. Visser, ‘Internationale vergelijking taxiregulering en Uber’,
Kennisinstituut voor Mobiliteitsbeleid (KiM) (Maart 2015), p. 9.
53 OECD, ‘App-based Ride and Taxi Services, Principles for Regulation’, International
Transport Forum Report (2016), p. 26.
54 Supra note 52, p. 20-22.
55 OECD, ‘App-based Ride and Taxi Services, Principles for Regulation’, International
17 3.3.Conclusion
UberPOP’s services fall in a category previously undefined by for-hire transport regulation. As a platform connecting individual drivers with potential consumers, its services were able to escape regulatory attention.56 The conceptual misfit of TNC’s with traditional regulatory categories is the basis of the preliminary ruling case of Uber Spain. Also, motivations behind especially market entry restrictions have been put under pressure due to the emergence of TNC’s. The fourth chapter will explore whether such
restrictions continue to be justified when the existence of market failures is put into question.
56 C. Cauffman, ‘The Commission’s European Agenda for the Collaborative Economy –
(Too) Platform and Service Provider Friendly?’, Maastricht European Private Law Institute Working Paper No. 2016/07.
18
IV. UBERPOP’S ROLE UNDER EU INTERNAL MARKET LAW
4.1. European dimension of UberPOP
The applicability of the prohibitions of restrictions contained in Article 49 and 56 TFEU on free movement of services requires a European dimension. Wholly internal situations are generally left to Member States.57 Article 4(1) TEU prescribes that any competences, which are not granted to the Union through the Treaties remain with the MS’s.58 While MS’s have the duty to comply and meet obligations contained in the Treaties or resulting from measures of EU institutions, the EU can only act in a certain field when it has the competence to do so.59
Public transport and taxi regulation has always been an area were Member States were strongly opposed to European legislation because of its local character.60 However, TNC’s like Uber have changed the nature of this industry and have given it a European scope.61 These platforms enable drivers to operate on a cross-border basis. Drivers can transport passengers from one MS to another and provide services in other MS’s. Additionally, an Uber branch established in one MS can expand its services to another MS, and when UberPOP’s services are banned in a MS this may affect competition in the taxi market of another MS.62
57 See, Case C-108/98 RI-SAN Srl v. Commune de Ischia, Italia Lavoro SpA, Ischia
Ambiente SpA [1999] ECR I-5219, Case C-52/79 Procureur du Roi v Marc JVC Debauve and others [1980] ECR 833, Case C-15/78 Societé Alsacienne de Banque v Koestler [1978] ECR 1971.
58 Article 4(1) TEU (principle of conferral).
59 Article 4(3) TEU (principle of sincere cooperation).
60 D. Geradin, ‘Should Uber be Allowed to Compete in Europe? And if so How?’,
Competition Policy International (CPI), June 2015, p. 1-2.
61 F. Johnson, ‘UberPOP and EU Internal Market Law’, Lund University Faculty of Law
2016, p. 23.
62 G. Stadtmann, L. Barainsky, E. Gumberidze & A.M. Nurul, ‘Uber and Taxi Regulations:
are Member States preserving a legal monopoly to the detriment of consumers?’, Researchgate (Frankfurt, September 30, 2016), p. 13-14.
19
The CJEU has established in its case-law that a cross-border element is easily found, as it considered in Gebhard63 that all national measures “liable to hinder or make less attractive the exercise of fundamental freedoms”64 are restrictions on free movement. National measures in the taxi-industry in the form of imposing authorization and licensing schemes generally
complicate entry and therefore a cross-border element is clearly present. Additionally, in the Trijber65 case, the CJEU considered that a service is not a wholly internal situation if it could also be enjoyed by nationals or
provided by service providers from other MS’s.66 This reasoning could be equally applied to the case of UberPOP.
4.2. The pending preliminary ruling cases on UberPOP
Uber began operating UberPOP in Spain at the end of 2013 through Uber B.V. as Uber Systems Spain S.L.67 Its inception of service provision immediately sparked protests and strikes by local taxi operators what
resulted in a national ban of Uber services.68 Uber stopped operating in 2014 by suspending its taxi services as a result of judicial actions filed against it by a Spanish association of licensed taxi drivers (‘Asociación Profesional Élite Taxi’) in Madrid and Barcelona on the alleged violation of Article 15 of the Law on Unfair Competition69.70
In Madrid, the courts argued that Uber drivers did not have the required licenses to provide its services and thus was not a certified transport
63 Case C-55/94 Reinhard Gebhard v Consiglio dell'Ordine degli Avvocati e Procuratori di
Milano (Gebhard) [1995] ECR 411.
64 Ibid, par. 39.
65 Joined Cases C-340/14 and C-341/14, Trijber v. College van burgemeester en
wethouders van Amsterdam and Harmsen v. Burgemeester van Amsterdam [2015] I-0000.
66 Ibid, par. 41.
67R. Rivera, ‘It's Time for Spain to Embrace the Sharing Economy-An Outsider's
Perspective’ (July 6, 2016), p. 3.
68Ibid.
69 Ley Nº 3/1991, de 10 de enero de 1991, de Competencia Desleal (modificada por última
vez por la Ley Nº 29/2009, de 30 de diciembre de 2009)
20
mediator.71 This requirement to obtain a license for private hire vehicles (PHV’s) is contained in the Spanish Law for Road Transports72. Spanish law prescribes that private individuals offering rides may not ask higher tariffs for their services than the mere costs of transport and a potential tip.73 Since tariffs were higher, it was considered a commercial service requiring a license.74 According to the court, the non-compliance of Uber of regulatory requirements, led to the conclusion that its operations amounted to unfair competition. After a similar case was filed in Barcelona, this court referred the case to the CJEU and legal proceedings were put on hold pending the ruling by the CJEU.75 The GC initiated proceedings in this case on 29 November 2016.76
Basically, the first and second question referred to the CJEU by the Spanish court come down to the issue whether the economic activity of UberPOP should “be considered to be merely a transport service or must it be considered to be an electronic intermediary service or an information society service”77. If the CJEU were to consider UberPOP as a transport service in the meaning of the Services Directive, it would be excluded from the application of this Directive and left for national regulatory enforcement. If UberPOP would be classified as an information society service as defined by Article 1(2) of Directive 98/34/EC, the court asks if UberPOP could “benefit from the principle of freedom to provide services as guaranteed in
71 Supra note 67, p. 3.
72 Articulo 133, Capítulo VI, Ley 16/1987, de 30 de Julio, de Ordenación de los Transportes
Terrestres <Boe> 182 (‘Law for Road Transports’) [BOE-A-1987-17803].
73 P. Gustavsson, ‘UBER and UberPop – To be or not to be banned in the EU?’, Lund
University Faculty of Law (2016), p. 27.
74 S. Rienstra, P. Bakker, J. Visser, ‘Internationale vergelijking taxiregulering en Uber’,
Kennisinstituut voor MobiliteitsbeleIbid (KiM) (Maart 2015), p. 38.
75 D. Geradin, “Online Intermediation Platforms and Free Trade” (2016), p. 4.
76 “Case C-434/15, Asociación Profesional Élite Taxi – Uber’s new software destroys the
old order of labour”, EU Law Radar Blog (2016).
77 Case C-434/15, Request for a preliminary ruling from the Juzgado Mercantil No 3 de
Barcelona (Spain) lodged on 7 August 2015 — Asociación Profesional Élite Taxi/Uber Systems Spain, S.L. [2015].
21
the Community legislation”78 and whether this would mean that the
application of the Spanish law on unfair competition in this case violates the provisions on freedom of establishment and Article 9 of the Services
Directive containing rules on authorization schemes.79
4.3. Free movement of services and freedom of establishment
According to Uber, restrictions of UberPOP’s services violate its freedom to provide services and the right of establishment. The free movement of services and the freedom of establishment contained in Articles 49 and 56 TFEU are two fundamental principles of EU law, that generally prohibit restrictions on the freedom of establishment and provision of services between Member States.80 The main distinguishing factor between these two fundamental freedoms lies in the duration of the activity pursued.81 Whereas the freedom to provide services applies primarily to temporary cross-border activities, the freedom of establishment covers the right to pursue permanent activities of a stable and continuous nature by self-employed persons.82 Regarding for-hire personal transportation services, some MS’s have regulated the service itself while others have regulated the service provider.83 Since the structure of the two provisions does not differ much, I will discuss the two freedoms concurrently.
The CJEU played and continues to play a key role in developing these principles in its case-law and has established that these provisions should be read to “preclude any national measure, which even though it is applicable without discrimination on grounds of nationality, is liable to prohibit
78 Supra note 77.
79 D. Geradin, “Online Intermediation Platforms and Free Trade” (2016), p. 7-12. 80E. Postnikova, ‘The scope of the freedom to provide services: prohibited
restrictions’, Higher School of Economics Research Paper No. WP BRP 19 (2013), p.4-5.
81 P. Gustavsson, ‘UBER and UberPop – To be or not to be banned in the EU?’, Lund
University Faculty of Law (2016), p.38.
82 M. Maciejewski & K. Pengelly, ‘Factsheet Freedom of Establishment & Freedom to
ProvIbide Services’, European Parliament (09/2016).
83 P. Gustavsson, ‘UBER and UberPop – To be or not to be banned in the EU?’, Lund
22
impede or render less attractive the exercise by Community nationals of the freedom of establishment and the freedom to provide services guaranteed by those provisions of the Treaty”84. The notion of “Community nationals” in this regard has been explained in case law as covering both legal persons and natural persons who are nationals of a Member State. 85 Uber is incorporated in the Netherlands through Uber B.V. and thus qualifies as a Community national.
Nevertheless, the conclusion that a national measure constitutes a prima facie restriction on the freedom of establishment or the free movement of services does not exclude possible justifications for that restriction.86 While a MS can justify a measure under the exceptions contained in the Treaties or by imperative requirements in the public interest, the CJEU has established that a measure cannot be easily justified under these provisions when there is existing EC legislation aimed at harmonization.87 As secondary regulation has been introduced in order to assist in the gradual removal of legal and administrative barriers to trade, this legislation should be leading. In the context of the issues in question, the two most important pieces of secondary legislation are the Services Directive and the E-commerce Directive. Both the Services and E-Commerce Directives are generally
84 Case C-376/08, Serrantoni Srl and Consorzio stabile edili Scrl v Comune di Milano.
Serrantoni Srl [2009] ECR 808, par. 41 (see, to that effect, Case C-299/02 Commission v Netherlands [2004] ECR I-9761, paragraph 15, and Case C-433/04 Commission v Belgium [2006] ECR I-10653, paragraph 28).
85 D. Geradin, ‘Online Intermediation Platforms and Free Trade Principles – Some
Reflections on the Uber Preliminary Ruling Case’, Tilburg Law & Economics Center (TILEC) (April 5, 2016), p. 4.
86D. Chalmers, G. Davies & G. Monti, European Union law: Text and materials
(Cambridge university press (third edition) 2015), p. 892-893.
87 Case C-158/96 Raymond Kohll v Union des Caísses de Maladie [1998] ECR 171, paras
23
founded on case-law regarding the interpretation of Article 56 TFEU and therefore complement each other.88
The Services Directive was designed to clarify the application of the free movement provision to services and the extent to which MS’s are able to impose licensing and business authorization schemes upon service
operators.89 The third chapter of the Services Directive contains rules on the freedom of establishment and authorization schemes. Article 9 of the
Directive prescribes that authorization schemes have to be
non-discriminatory, justified on grounds of public interest and proportional in order to be in conformity with EU law.90
The provisions on restrictions of the freedom of establishment and free movement of services in the Treaties and the Services Directive have been complemented by the provisions contained in the E-commerce Directive.91 This Directive was designed to further the integration of the Single Market in the field of information society services by eliminating barriers to the provision of such services and harmonizing liability.92
4.4. UberPOP, an information society service or a transport service?
4.4.1. Classifying UberPOP as a service in the field of transport
Following Article 58(1) TFEU, the freedom to provide transport services is governed by Title VI TFEU. This title contains provisions that aim to establish a framework for a common transport policy that promotes
efficient, safe and environmental friendly mobility for cross-border transport
88 D. Geradin, ‘Online Intermediation Platforms and Free Trade Principles – Some
Reflections on the Uber Preliminary Ruling Case’, Tilburg Law & Economics Center (TILEC) (April 5, 2016), p. 12.
89 Directive on services in the internal market (2006/123/EC), Recital 1-7. 90 Ibid, Art. 9.
91 M. Maciejewski & K. Pengelly, ‘Factsheet Freedom of Establishment & Freedom to
Provide Services’, European Parliament (09/2016).
24
provision.93 Accordingly, MS’s are prohibited to impose rates and conditions that give “support or protection in the interest of one or more particular undertakings or industries”94, unless authorized by the EC. While EU action in the field of professional transport has established some common rules95, such rules however do not apply to the provision of taxi services.
Article 2.2d of the Services Directive has excluded services in the field of transport from the application of this Directive. Explicitly in recital 21 it mentions the exclusion of taxi services from its scope. This implies that services similar to those of taxi services – potentially TNC’s – are generally left for the discretion of MS’s. However, in the case-law of the CJEU this notion of a transport exception has been interpreted restrictively.96
In the case of Grupo Itevelesa97, AG Wahl argued in his Opinion98 that the transport exception should be handled “with care”99 when it concerns services that are only indirectly linked to transport services. Therefore, there must be a strong link between the service provider and “the physical act of moving persons or goods from one place to another”100
93 Consolidated version of the Treaty on the Functioning of the European Union, Title IV:
Free Movement of Persons, Services and Capital.
94 Article 96(1) TFEU.
95 Regulation (EC) No 1071/2009 of The European Parliament and of the Council of 21
October 2009 establishing common rules concerning the conditions to be complied with to pursue the occupation of road transport operator and repealing Council Directive 96/26/EC.
96 D. Geradin, ‘Online Intermediation Platforms and Free Trade Principles – Some
Reflections on the Uber Preliminary Ruling Case’, Tilburg Law & Economics Center (TILEC) (April 5, 2016), p. 12.
97 Case C-168/14, Grupo Itevelesa et al. v. OCA Inspección Técnica de Vehículos SA,
Generalidad de Cataluña, [2015] E.C.R I-0000.
98 Opinion of Advocate General Wahl delivered on 3 June 2015, Case C-168/14, Grupo
Itevelesa et al. v. OCA Inspección Técnica de Vehículos SA, Generalidad de Cataluña, [2015] E.C.R I-0000.
99 Ibid, par. 22. 100 Ibid, paras 22-23.
25
Consequently, in the case of Trijber101, AG Spuznar102 argued that the notion of a service in the field of transport should be interpreted
restrictively, and that “where the main purpose of the activity is not the physical conveying of goods or people but other matters such as
entertainment or renting, one cannot speak of services in the field of
transport”103. According to the AG, if the main purpose is not the “physical conveying of people” but “other matters” the transport exception cannot be applied.104 Following this approach, the CJEU argued in its ruling that for the transport exception to apply “it is necessary to consider what the main purpose of the service at issue is”105.106
Applying this reasoning to the case of UberPOP, it is rational to argue that the main purpose of UberPOP is not the “physical conveying of people”107, but the provision of a platform intermediation service, connecting
independent drivers with passengers. Compared to conventional taxis, UberPOP’s economic activity would not entail the provision of transport services assuming its drivers are independent contractors using their private vehicles who can freely choose to connect to the platform to provide
services. 108 Uber arguably does not maintain an employment relationship with its drivers and thus merely provides an online intermediary service for
101 Joined Cases C-340/14 and C-341/14, Trijber v. College van burgemeester en
wethouders van Amsterdam and Harmsen v. Burgemeester van Amsterdam [2015] I-0000.
102 Opinion of Advocate General Spuznar of 16 July 2015, in: Joined Cases C-340/14 and
C-341/14, Trijber v. College van burgemeester en wethouders van Amsterdam and Harmsen v. Burgemeester van Amsterdam [2015] I-0000.
103 Ibid, par. 37. 104 Ibid. 105 Ibid, par. 51.
106 D. Geradin, ‘Online Intermediation Platforms and Free Trade Principles – Some
Reflections on the Uber Preliminary Ruling Case’ (April 5, 2016), p. 10-11.
107 Supra note 102, par. 37.
108A.D. Thierer, , et al. “How the Internet, the Sharing Economy, and Reputational
Feedback Mechanisms Solve the'Lemons Problem”, University of Miami Law Review, Vol. 70, No. 3 (2016) 850-851.
26
exchange between peers.109 Its primary purpose therefore lies in “other matters”, as the “physical link” between the platform and the service of transportation is missing.110 The online matching service that Uber is providing is detachable from the transport service provided by drivers and should therefore be considered separately.111 This argument combined with the fact that UberPOP shares many features with other online intermediation platforms, such as the ability of online ratings and the intermediation of large numbers of transactions, would lead to the conclusion that UberPOP is not a mere transport service in the meaning of the Services Directive112. In the case Eventech113 the CJEU considered that the simple fact that conventional taxi services and PHV services are competing for passengers in the same market sector does not necessarily mean that their services are comparable.114. The fact that UberPOP satisfies the same consumer needs as conventional taxi services and the fact that it has an impact on transportation market, is thus in itself not a valid argument for comparison.
According to the reasoning of the AG in Grupo Itevelesa115, services ancillary to transport, in which transport only plays a lesser role, do not constitute a service in the field of transport.116 Therefore, “the activity carried out for profit by the defendant, consisting of acting as an intermediary between the owner of a vehicle and a person who needs to make a journey within a city, by managing the IT resources […] which
109 D. Geradin, ‘Online Intermediation Platforms and Free Trade Principles – Some
Reflections on the Uber Preliminary Ruling Case’ (April 5, 2016), p. 11.
110 Supra note 105, par. 37. 111 Supra note 109, p.13.
112 K. Erickson & I. Sørensen, ‘Regulating the Sharing Economy: Introduction to the
Special Issue’, Internet Policy Review 5.2 (2016), p. 8-9.
113 C-518/13 Eventech Ltd v The Parking Adjudicator [2015] ECLI:2015/9. 114 Ibid, par. 61.
115 Supra note 126. 116 Supra note 127.
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enable them to connect with one another”117 should not be defined as a mere transport service.
4.4.2. Classifying UberPOP as an information society service
In order to classify UberPOP as an information society service within the meaning of Article 2a of the E-Commerce Directive, it would have to meet the requirements formulated in Article 1(2) of the Directive on Technical Standards118.119 In my consideration, UberPOP seems to meet the essential criteria to qualify as an information society service defined as “any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services”120. Firstly, drivers and users can locate each other “by electronic means” through GPS via the smartphone app and consequently file an individual request. The service is therefore only provided through the transmission of data at an individual request of its recipient.121
However, regarding the second condition it could be disputed whether the service is provided “at a distance”122. This is described in Article 1(1)(i) of Directive 2015/1535 as meaning “that the service is provided without the parties being simultaneously present”123. Accordingly, services that are provided in the physical presence of the parties even though they involve the use of electronic devices, are not regarded to be provided at a
117 Case C-434/15, Request for a preliminary ruling from the Juzgado Mercantil No 3 de
Barcelona (Spain) lodged on 7 August 2015 — Asociación Profesional Élite Taxi/Uber Systems Spain, S.L. [2015], par. 1.
118 Directive 98/34/EC as amended by Directive 98/48/EC, codified in Directive 2015/1535;
Article 1(2).
119 See, Art. 2(a) of Directive 2000/31/EC (‘e-Commerce Directive’) and Art. 1(1)(b) of
Directive 2015/1535.
120 Directive 2015/1535, Art. 1(1)(b).
121 D. Geradin, ‘Online Intermediation Platforms and Free Trade Principles – Some
Reflections on the Uber Preliminary Ruling Case’ (April 5, 2016), p. 11.
122 Directive 2015/1535, Article 1(1)(b)(i). 123 Directive 2015/1535, Article 1(1)(b)(iii).
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distance.124 In the case of UberPOP, the underlying service is provided in the physical presence of both driver and rider in the car.125 However this does not concern the service provided by UberPOP, as the driver and the rider do not meet until after the transaction is performed through a mobile software application. The electronic intermediary service of UberPOP is therefore concluded by matching both parties at a distance.
While generally the aspect of some exchange of payment will suffice to meet the notion of remuneration126, it is yet unclear if cost sharing would qualify as an activity for remuneration in the context of the free movement of services. Remuneration has been clarified by the CJEU, which has considered that “the essential characteristic of remuneration lies in the fact that it constitutes consideration for the service in question”127 by the beneficiary or on his behalf.128 According to the CJEU, such remuneration can be indirect129 and there is no need for a profit seeking nature of the service.130 In other words, remunerated services do not lose their economic nature because the provider is a non-profit-making enterprise.131 .
Furthermore, the CJEU has confirmed in the case Sotiris Papasavvas132 that Article 2(a) should be interpreted as covering the provision of online
124 See, Annex I of Directive 2015/1535 for an indicative list of services not covered by this
definition.
125 P. Gustavsson, ‘UBER and UberPop – To be or not to be banned in the EU?’, Lund
University Faculty of Law (2016), p. 23.
126D. Chalmers, G. Davies & G. Monti, European Union law: Text and materials
(Cambridge university press (third edition) 2015), p. 805-806.
127 Case C-263/86 Humbel and Edel [1988] ECR 5365, par. 17. 128 Ibid.
129 Joined Cases C-191/97 and C-51/9, Christelle Deliège v Ligue francophone de judo et
disciplines associées ASBL, Ligue belge de judo ASBL, Union européenne de judo en François Pacquée [2000] ECR I-2549, par. 56.
130 C-157/99 Smits and Peerbooms [2001] ECR I-5473, paras. 50 and 52. 131 Case C-70/95 Sodemare [1997] ECR I-3395, par. 22.
132 C-291/13 Sotiris Papasavvas v O Fileleftheros Dimosia Etaireia Ltd et al. [2014] ECR
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information services for which the service provider is not remunerated by the recipient, but by income generated by advertisements.133
In the case of UberPOP, currently there is a clear economic element present as Uber charges a higher tariff for the rides it facilitates. It is therefore unlikely that the CJEU will consider that the money charged is only a compensation by the beneficiary for private ownership costs of the driver. The question whether it is an activity for remuneration should therefore be answered affirmative under the current circumstances.
4.4.3. Also providing the underlying service?
The second preliminary question under review mentions a situation in which UberPOP is ‘in part’ an information society service.134 While we have established that UberPOP presumably meets the essential criteria to qualify as an information society service, there may still be cases in which a
platform such as UberPOP could be considered to be offering other services in addition to the information society services.135 In this regard, EU
Commissioner Adamowicz has commented that “Uber is a technology […] that has an impact on transportation”136. Besides its online intermediation service, it could also be considered to be providing the underlying service. As a result, sector-specific regulation in the form of licensing or
authorization requirements could be applied to the platform.
This question should be answered on a case-by-case basis by taking into account the “level of control or influence that the collaborative platform exerts over the provider of such services”137. According to the EC, relevant
133 C. Wendehorst, ‘Platform Intermediary Services and Duties under the E-Commerce
Directive and the Consumer Rights Directive’, EuCML Iss. 1/2016 (2016), p. 31.
134 D. Geradin, ‘Online Intermediation Platforms and Free Trade Principles – Some
Reflections on the Uber Preliminary Ruling Case’ (April 5, 2016), p. 12-13.
135 Ibid.
136 G. Sebag, ‘Is Uber a Taxi Service or a Mobile-Phone App? EU Asks’ (1 april 2015)
(Available via: < https://www.bloomberg.com/news/articles/2015-04-01/is-uber-a-taxi-service-or-a-mobile-phone-app-eu-regulators-ask>) (Accessed 31-12-2016).
30
criteria in determining the level of influence are the pricing mechanism, other key contractual terms between the platform and the underlying service providers and the ownership of key assets.138 Nonetheless, platforms can assist service providers in the provision of its services by offering ancillary activities, like payment facilities and insurance coverage. Such assistance, in addition to user rating and review mechanisms, does not necessarily
constitute proof of influence and control.139
In the case of UberPOP, key assets are owned by the individual service providers, who also run the financial risk as an entrepreneur.140
Additionally, the contractual conditions between Uber and its ‘partner drivers’ do not include an explicit obligation to provide the service, they can connect whenever they want and for as long (or as short) a period of time as they want.141
These arguments combined suggest that UberPOP is not providing the underlying service. Nonetheless, the pricing mechanism suggests otherwise since drivers are not free to negotiate prices with passengers, but are obliged to apply tariffs calculated by an algorithm (‘Uber Surge Pricing’142) which, using a market price mechanism, increases tariffs when demand
increases.143
The question whether a platform is also providing the underlying service has become particularly relevant because of a recent decision by the
138 COM(2016)356 final. 139 Ibid, p. 7.
140 S. Nerinckx, ‘The ‘Uberization’ of the labour market: some thoughts from an
employment law perspective on the collaborative economy’, Europäische Rechtsakademie (ERA) Forum Vol. 17, No. 2 (Springer Berlin Heidelberg: 2016), pp. 256-257.
141 D. Geradin, ‘Online Intermediation Platforms and Free Trade Principles – Some
Reflections on the Uber Preliminary Ruling Case’ (April 5, 2016), p.11
142 Supra note 140, p. 256.
143 A. Di Amato, ‘Uber and the Sharing Economy’, Italian LJ 2 (2016): 177, p. 178.
(Available via: < http://www.theitalianlawjournal.it/data/uploads/italj-vol-02-no-01-2016/10-di-amato-177.pdf>) (last accessed 31-12-2016).
31
Employment Tribunal in the UK144 The Tribunal concluded that UberPOP’s ‘partner drivers’ are not self-employed and independent contractors, but should be regarded employees.145 It is generally for MS’s to decide who is considered to be self-employed. For the application of EU law it is
important whether someone can be considered a worker since only self-employed persons may benefit from the freedom of establishment.146 The British Tribunal considered that under the current circumstances, only “in performing individual services (here driving trips), a claimant is working ‘for’ the putative employer pursuant to a contract”147. The British court stipulated that none of its reasoning should be interpreted as doubting that Uber could have devised a business model not involving the employment of drivers. 148
A decisive factor in the decision of the British Tribunal was the existence of a subordination relationship149 due to the contractual terms and the fact that drivers have no control over the pricing mechanism.150 Additionally, the fact that Uber automatically deducts a 20% share of the ride fair was also an indication of the degree of subordination exerted by the platform.151
144 Employment Tribunal (UK) Case No. 2202550/2015, Aslam & Others v Uber BV &
Others [2016] EW Misc B68 (ET) (28 October 2016).
145 Ibid.
146 S. Nerinckx, ‘The ‘Uberization’ of the labour market: some thoughts from an
employment law perspective on the collaborative economy’, Europäische Rechtsakademie (ERA) Forum Vol. 17, No. 2 (Springer Berlin Heidelberg: 2016), pp. 245-265.
147 Supra note 144. 148 Ibid, par. 97.
149 See, Case C-268/99 Aldona Malgorzata Jany and Others v Staatssecretaris van Justitie
[2001] ECR I-8615. According to the criteria formulated by the CJEU in the Jany case, a self-employed person must be free to determine the choice of the activity, the remuneration and the working conditions. Additionally, he must work under his own responsibility and in return for remuneration to be paid directly and in full.
150 G. Stadtmann, L. Barainsky, E. Gumberidze & A.M. Nurul, ‘Uber and Taxi Regulations:
are Member States preserving a legal monopoly to the detriment of consumers?’, Researchgate (Frankfurt, September 30, 2016), p. 15.
32
In its Communication, the EC refers to the definition of worker as it has been established by CJEU case-law.152 According to the Court, “the essential feature of an employment relationship is that for a certain period of time a person performs services for and under the direction of another person in return for which he received remuneration.”153 While a
subordination link in this case may exist, the Court has clarified that the notion of worker generally excludes services on such a small scale as to be regarded as purely marginal and accessory.154 The main characteristic of UberPOP drivers is that they provide services on an occasional non-professional basis. They cannot be regarded as workers following the considerations of the Court in Raulin155, in that for the interpretation of the notion of worker it is necessary to “take account of the irregular nature and limited duration of the services actually performed under a contract for occasional employment”156.Therefore, UberPOP’s drivers should not be defined as workers for the application of EU law. This issue is also brought up in the preliminary ruling case Uber Belgium157, which will be discussed in a later stage. Consequently, drivers should be able to benefit from the right of establishment. This does not, however, alter the competence of MS’s to decide who is considered to be a worker in their national legal order.158 The EC Communication explicitly recommends MS’s to establish thresholds in order to determine this distinction.159
152COM(2016)356 final, p. 12. 153 Ibid.
154 COM(2016)356 final; see Comparative Report 2015, ‘The concept of worker under
Article 45 TFEU and certain non-standard forms of employment’, FreSsco network for the European Commission (2015).
155 Case C-357/89 V.J.M. Raulin v Minister van Onderwijs en Wetenschappen [1992]
ECR-0357, par. 1.
156 C-526/15 Uber Belgium BVBA v Taxi Radio Bruxellois NV [2015].
157 Case C-526/15 Request for a preliminary ruling from the Rechtbank van Koophandel
Brussel (Belgium) lodged on 5 October 2015 — Uber Belgium BVBA v Taxi Radio Bruxellois NV [2015].
158 COM(2016)356 final, p. 12 159 Ibid, p. 7.
33
The existence of a subordination link between the service provider and the platform does not automatically imply that it would also be providing the underlying service.160 Other criteria must be weighed in order to determine whether the platform exerts significant control or influence over the
provider of the underlying service. This is a question that requires a highly factual analysis which goes beyond the scope of this thesis. Nonetheless, if the level of control or influence cannot be sufficiently established in the case of UberPOP to consider it as one activity, UberPOP would in principal not have to comply with taxi regulation.161
Since the second question refers inter alia to the applicability of Article 56 TFEU and the Services Directive, the notion that UberPOP is in part an information society service could be interpreted as meaning that the
referring court considers UberPOP to be composed of two separate services: an intermediation service based on its software application and platform and a detachable transport service performed by an independent “partner
driver”.162 If the court would have considered that UberPOP is providing a transport service, in addition to an information society service, those provisions would not have applied.163 Nevertheless, individual taxi drivers could still be made subject to licensing and business authorizations schemes for taxi services.
Regarding such underlying transport services, national authorities would in principle retain the competence to regulate such services in the absence of EU harmonizing measures and therefore be able to “define the conditions for the pursuit of the activities in that sector”164. In the exercise of these powers MS’s must nonetheless respect the basic freedoms guaranteed by the
160 S. Nerinckx, ‘The ‘Uberization’ of the labour market: some thoughts from an
employment law perspective on the collaborative economy’, Europäische Rechtsakademie (ERA) Forum Vol. 17, No. 2 (Springer Berlin Heidelberg: 2016), p. 248.
161 D. Geradin, ‘Online Intermediation Platforms and Free Trade Principles – Some
Reflections on the Uber Preliminary Ruling Case’ (April 5, 2016), p. 5-7.
162 Ibid, p. 13 163 Ibid.
