Taxi Label for Uber in Europe Delivers Major Setback

(CN) – Uber’s business model sustained a major blow Wednesday with the EU’s highest court ruling that the ride-hailing app must be regulated by individual member states as a transportation service.

The ruling is not available in English, but a statement on the case from the Luxembourg-based European Court of Justice says the company cannot evade administrative oversight by styling its service as information technology.

Elite Taxi, a group of professional drivers in Barcelona, Spain, brought the issue to a head by claiming that Uber’s practices were misleading and caused unfair competition.

As in other markets, Uber’s subsidiary in Spain relies on a smartphone app that connects riders to drivers who may not be commercially licensed. Unlike traditional taxi services where the drivers use company vehicles, Uber drivers ferry customers to their destinations using personal vehicles, and the entire transaction is cash-free.

The Barcelona commercial court that caught the taxi drivers’ 2014 concluded that it could not determine whether Uber’s practices infringed Spain’s rules on competition without input from the European Court of Justice on whether Uber requires prior administrative authorization.

Wednesday’s ruling says Uber’s service “must be regarded as being inherently linked to a transport service,” according to a summary from the court.

Classified as “a service in the field of transport,” the court said Uber’s “service must be excluded from the scope of the freedom to provide services in general as well as the directive on services in the internal market and the directive on electronic commerce.”

This means Uber will be subject to varying transportation regulations in all eu member states.

Mareike Mohlmann, an assistant professor of information systems at the United Kingdom’s Warwick Business School, interpreted the ruling as one rung in a long ladder that EU regulators must climb as they navigate the so-called gig economy.

“It is not uncommon that existing regulation lags behind when new digital innovations or business models are entering a market,” Mohlmann said in a statement. “Existing regulation or rulings are often not well equipped to deal with these novel developments.

“Companies such as Uber might have exploited regulatory blind spots by positioning themselves in a way that is of strategic advantage to them, so it is essential that courts and regulators address these cases in order to provide clarity.”

Bureaucracy moves much slower than the tech industry, Mohlmann added, but he said it is good ultimately that the EU courts are helping to clarify the issues.

Uber has also stressed the clarity that Wednesday’s ruling brings. A spokesman for the company noted in . a statement that the company already operates under transportation law in most EU countries, so the ruling will have no effect there.

While Uber’s services remain unavailable in Copenhagen and Budapest, it relaunched in Madrid and Berlin last year after extensive negotiations with authorities. Uber also operates under existing transportation regulations in France and the UK.

“However, millions of Europeans are still prevented from using apps like ours,” the spokesman said in a statement.

Talks with local authorities across the EU have led countries such as Finland and Estonia to introduce new ride-sharing regulations. Uber touts related benefits of its service as cutting congestion, pollution and parking by reducing private car ownership.

Elite Taxi, the group that brought the case in Spain, meanwhile boasted about its victory on Twitter. “Today, taxi drivers have beaten Goliath,” the company said, according to a translation of its post.

SBC Abogados Asociados, a Barcelona law firm that represented Elite Taxi, called the ruling a boon for consumer.

By “operating outside the law and all regulations,” the attorneys said, Uber offers no guarantees and “exempts itself from every type of liability to third parties.”

“According to them,” the statement continues, “the provider of service is the driver and it is he who has to respond to the user.”

Wednesday’s ruling means Uber can no longer cast itself as a mere intermediary, the attorneys added. They said the legal implications that the ruling carries for Uber’s business model can also be extrapolated “to other businesses that currently continue to try to avoid the legal responsibilities inherent to the service that
it lends.”

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