Outlining the future of the online platforms

The rise of the platform economy is quickly changing the market structure and presents a number of legal challenges which are yet to be solved. Often perceived either as a valuable innovation or as a threat to the existing economy, platforms such as Uber, Airbnb, eBay and Deliveroo generate controversies as to their place in the system and their regulation. Uber, as a platform that connects customers to non-professional drivers through an application in order to provide a transport service, poses questions concerning competition law, consumer protection and employment law, among others. How should Uber’s activity be regulated? Should it be levelled to that of the taxi sector? What is the legal situation of the drivers? What about consumers’ protection? Trying to answer these questions, it all comes down to the basic one: what is Uber, from a legal point of view?

In its Judgment of 20 December 2017, The Grand Chamber of the ECJ was confronted with this matter. The case originated from a request for a preliminary ruling from a Spanish Commercial Court in the course of an action on unfair practices brought by Elite Taxi, a professional organisation representing taxi drivers in that city, against the activities of Uber Systems Spain. The national Court considered it necessary to determine which kind of services are those provided by Uber; in this sense, four questions concerning Uber’s legal classification were referred to the ECJ. Its entire regulatory framework within EU law depends on its classification as an information society service or as a service in the field of transport: if Uber’s activities are regarded as transport services, they will fall under the local taxi regulation and thus require prior administrative authorisation; if they are ‘information society services’, they will be governed by the freedom to provide services.

The Grand Chamber evaluates Uber’s service, which is described as more than an intermediation one inasmuch as it consists in a composite service: connection between passengers and drivers is supplied, as well as the transport service itself. Uber selects its drivers and provides them with a mobile application, without which they wouldn’t be able to provide their services, and without which the passengers wouldn’t be able to use those services, and it determines the conditions of the service as well. All these characteristics lead the ECJ to the conclusion that the intermediation service forms an integral part of “an overall service whose main component is a transport service” and therefore Uber’s activity is a service in the field of transport. The conclusion is shared with Advocate General Szpunar, who bases his reasoning in the fact that the two activities developed by the company (the supply, through an application, whereby passengers and drivers get connected, and the actual transport of passengers), are inseparable. Therefore, as “a single supply comprising both the identification of an available driver and the trip booking as well as the supply of transport stricto sensu”, Uber’s activity is a “service in the field of transport”. The difference in the two arguments lies in the fact that the Advocate General considers Uber to provide a single supply consisting of two inseparable activities, which means that it is not an information society service but a transport one, while the Grand Chamber considers that the transport element is the main component of the overall service, and this main transport component makes the service a transport one.

The direct consequences of the ruling are clear: the services of Uber Spain are governed by national law. The referring Court is therefore to apply the pertinent Spanish law for the assessment of the alleged unfair practices and the rest of issues of the present case, namely the possession of administrative licenses or authorisations by Uber drivers.

The implications of this ruling are quite far-reaching. Its consequences are obviously not restricted to the activities of Uber in Barcelona, but the company’s services in all Member States are affected by the fact that they fall under the substantive rules governing transport services. The specific rules of each territorial area will have to be complied with. Nevertheless, it is important to highlight the fact that the business model analysed in this judgment was used by Uber in its first years operating within the European market. The company changed its operative rules in 2015, when passenger transport vehicle licenses were introduced by Uber Europe as a requirement for the transportation services. The old model is still used in Poland, Romania, Czech Republic and Slovakia, where its services will probably be affected by the ruling.

The judgment is also bound to influence other transport platforms. All business models connecting, through an application, customers to non-professional drivers without a transportation license fall within the scope of the present judgment. As to other fields within the platform economy, it is mostly Airbnb that will probably see its services affected by the ruling. Indeed, its services do not qualify as information society when applying the Court’s criteria: it is a composite service where the platform connects the users with the hosts, it sets up a number of rules for the service and without it the economic exchange wouldn’t happen. The application of the ECJ’s ruling to this sphere would imply major changes in a system that has reshaped the housing sector in the past years. The Airbnb accommodations would be subject to the local housing regulations, fulfilling the requests of many citizen demands asking for a regulation of the use of this platform, especially in big touristic cities such as Venice or Barcelona.

Luxembourg’s decision can be seen as a victory of the taxi sector against new business models and it is expected to shape, to a certain extent, the future of the platform economy. However, the role of courts will be vital for its eventual regulation while the legislators react to this phenomenon. Let us wait and see how the market structure develops and how the legal challenges are solved in this matter that affects us all in our consumption patterns.

Written by Juncal Montero Regules, image by ^{Flickr, Elliott Brown}