Is UberPOP a transport service? A new reference to the CJEU

Like it or not, we have entered the age of Uber -- the love-it-or-loathe-it ride-share scheme which has caught not only the imagination of the public but the attention of the lawyers.  In this guest post, Katfriend Revital Cohen (Baker & McKenzie, Barcelona) tells us all about a legal development that may have major repercussions in Europe not just for our understanding of the concept of a "transport service" but for our attitude towards new web-based business models that do not fit neatly within the concepts and classifications found in European Union regulatory and competition law up to the earlier years of this century,  Revital explains:

Is UberPOP a transport service? A new reference to the CJEU 

Many readers will be familiar with Uber, the on-demand ride-sharing platform which has revolutionised the concept of urban transport. Launched in San Francisco in 2009, it has quickly expanded all over the world and it is now currently available in 57 countries. 

Uber offers a range of different services. From UberBLACK, a professional limousine service, to UberPOP, an informal ride-sharing service connecting passengers with drivers of private cars through a smartphone application. The GPS location sharing, the pick-up timing and the payment are all performed online. UberPOP drivers are not required to have a licence to pick up the passengers and are not bound to regulations that apply to taxis. 

UberPOP's undeniable success has nevertheless shaken the heavily regulated taxi industry. In Europe, following taxi associations’ protests and claims, UberPOP has been restricted in Germany, Belgium, the Netherlands, France and Italy. In some of those countries, courts have taken the view that Uber operates as a conventional transport company and that it is breaching licensing regulations governing professional taxi drivers, as well as local laws on passenger transportation since the activities of UberPOP drivers do not fall within the scope of the relevant licences. 

Asociación Profesional Élite Taxi on Twitter 

In Spain, UberPOP has been temporarily suspended since December following an injunction issued by the Commercial Court of Madrid. This is not the only court dealing with Uber in Spain since, on 29 October 2014, Profesional Élite Taxi filed a claim before the Commercial Court of Barcelona alleging that Uber’s activities constituted acts of unfair competition. Six months after the injunction issued by the Madrid Court, Judge José María Fernández Seijo, who is handling the Uber case in Barcelona, decided to stay the proceedings and seek guidance from the Court of Justice of the European Union (CJEU) as regards the legal nature of the services offered by Uber.  

The Order for Reference, which was issued on 17 June, is available here in Spanish. Paragraph 9 of the Order can be translated as follows:

"In order to determine whether Uber is engaging in acts of unfair competition under Spanish law, I consider it necessary to determine before whether or not [Uber] requires a prior authorization; the authorization will depend on the nature of services which are carried out [by Uber], by establishing whether it is a transport service, an information society service, or a combination of both things."

In greater detail, the questions which are referred to the CJEU are:  

1. Does Article 2(2)(d) of Directive 2006/123 ... on services in the internal market [the “Services Directive”] exclude from the scope of the Directive the lucrative activities of intermediation between the owner of a vehicle and a person needing transportation within a given city, [where that intermediation consists in] providing the digital means – interface and software application – allowing them to connect, as that service is deemed a transport service? [Article 2.2 of the Services Directive expressly excludes a number of services from its scope, including "(d) services in the field of transport, including port services, falling within the scope of Title V of the Treaty". Recital (21) of the Services Directive also establishes that transport services, including taxis, should be excluded from the scope of the Services Directive].  

2. Should the service carried out by UBER SYSTEMS SPAIN, S.L. not be considered a transport service but fall within the scope of the Services Directive, is Article 15 of the Unfair Competition Act  – which refers to the infringement of any laws having as their object the regulation of trade – contrary to the Services Directive, namely Article 9 on the freedom of establishment and authorization scheme, when the reference to internal laws or rules is made without taking into account that the authorization, permit, and license regime cannot be in any way restrictive, that is, cannot unreasonably hinder the principle of the freedom of establishment? [In accordance with Article 9(1) of the Services Directive, authorisation schemes may be maintained by Member States only if they are non-discriminatory, justified by an overriding reason relating to the public interest and proportionate, that is, that the objective pursued cannot be attained by means of a less restrictive measure]. 

Those questions might still be not final as the parties had five days in which to submit comments. The final questions, though, have not been reported yet. 

Licensed to purr ...

The CJEU answers could have a huge potential impact on the legal challenges that Uber is currently facing in Europe. Indeed, should the CJEU rule that Uber is not a transport service and that the Services Directive applies, the legality of the restrictions imposed by the Member States under the current regulations will have to be assessed under the principles enshrined in the Services Directive, namely the principle of non-discrimination, the principle of proportionality and freedom of establishment, to the pleasure of Courtney Love. 

Be that as it may, the Court of Barcelona’s reference may shed light on the wider, international debate over the sharing economy versus traditional services. On one hand, new services such as Uber have completely changed perception of transportation, accommodation, advertising, food services and so on. As this case study published by the Business Innovation Observatory highlights, the growth of the internet and of the information technology has created value and opportunity without resorting to traditional industry, by facilitating

“a match between a consumer owning a certain resource (property or skill/competence) and a consumer in need of that resource, at the right time and against reasonable transaction costs”.

While they present substantial differences compared to traditional industry, in some cases they share the same “traditional” public or, anyhow influence, the way consumers enjoy “traditional” services (think, eg, to over-the-top video platforms providing user generated contents compared to traditional broadcasters that choose their programmes). 

Sharing can be fun ...

Is that enough to justify the application of laws and regulations designed for conventional industry to new platforms? The answer to this question is far from easy, given the different (and sometimes diverging) interests involved. On the one hand, traditional industries should be put in the position to play in a balanced and non-discriminatory competitive environment. On the other, new-economy enterprises deserve a legal framework that values their peculiarities, allowing them to exist and keep innovating. Last but not least, consumers' right to choose and to benefit of new economy's added value shall be safeguarded. 

Inasmuch as new and traditional services actually compete one with the other, a reasonable balance could be found by providing light regulation for the first and a substantial de-regulation for the latter. Ultimately a less-is-more legal framework for all could be another added value brought by new economy.

Says the IPKat, apart from its obvious challenge placed by Uber to traditional transport service licensing and regulation, the use of the word "Uber" within the context of an intermediation between consumers (passengers) and the service providers (drivers) raises questions for intermediation activities that address trade mark law too. These affect the correct classification of services as well as trade mark use: whose use is it and what is its effect, whether for the purposes of acquiring distinctive character, of establishing genuine use, or of infringement?