EU Court of Justice – Uber is not a digital service

The Court of Justice of the European Union (CJEU) ruled, on December 20, 2017, that the service provided by Uber cannot be regarded as a digital service.

The question raised

The request for preliminary ruling was referred by a decision made by the Juzgado de lo mercantil de Barcelona relating to a dispute between the Asociacion Profesional Elite Taxi and Uber where the first considers that the second offers a paid service consisting of connecting non-professional drivers with persons who wish to make urban journeys, without holding any local administrative license nor authorization.

The question at stake was clearly set by the Court. The starting point is the principle of freedom of services (article 56 TFUE) and its implementation by two directives: the 2000/31 Directive on e-commerce and the 2006/123 Directive on services in the internal market. On the other side, in each of these three set of rules (TFUE, 2000 and 2006 Directives), an exception is made for “transport services”. The question at stake was to know whether the service offered by Uber could be qualified as a digital service (subject only to the national law of establishment of the service provider) or as a transport service (which must comply with the 28 national laws on transport).

The decision of the Court

The Court first stated (i) that “an intermediation service consisting of connecting a non-professional driver using his own vehicle with a person wishes to make an urban journey is, in principle, a separate service from a transport service“, and (ii) that a transport service is defined as “the physical act of moving persons or goods from one place to another by means of a vehicle“. With this fine line between the two types of services, the Court then concluded that the hereabove intermediation service “meets, in principle, the criteria for classification as an “information society service” within the meaning of the Directive 2000/31“.

The CJEU ruled however that the very activity conducted by Uber is “more than an intermediation service consisting of connecting, by means of a smart phone application, a non-professional driver using his or her own vehicle with a person who wishes to make an urban journey“. The Court then explained that Uber “simultaneously offers urban transport services, which it renders accessible, in particular, through software tools such as the application (…) and whose general operation it organizes for the benefit of persons who wish to accept that offer in order to make an urban journey“.

The Court grounded its reasoning with the two following features to qualify Uber’s service as a transport service:

• This intermediation service is “based on the selection of non-professional drivers using their own vehicle, to whom the company provides an application without which (i) those drivers would not be led to provide transport services and (ii) persons who wish to make an urban journey would not use the service provided by those drivers“.
• “Uber exercises decisive influence over the conditions under which that service is provided by those drivers” (e.g. the maximum fare fixed by Uber, the amount cashed in first by Uber and then repaid to the drivers, the quality control of the vehicles and of the drivers by Uber with possible exclusion as a sanction).

 The impact for startup using intermediation platforms

Although the Court mentions that the service of Uber is “more” than an intermediation service, and that the provider of this intermediation service “simultaneously offer” urban transport services, which imply that this intermediation service does however exist, the Court judged that specific features should invalidate this intermediation service as a digital service.  A more up-to-date approach of what is today the Digital Single Market could have led the Court to choose another solution and stay on the digital side.

The reasoning of the Court does not really constitute a guideline for other intermediation platforms. The shortness of the reasoning might convey a more political decision applying to a US giant like Uber. The briefness of the reasoning may also show the inadequacy of the current EU regulation vis-à-vis the new trends of digital economy, specially the large variety of intermediation platforms business models (the « digital service » to which the Court referred has been defined in the 1998 directive).

It seems that this ruling will not materially impact Uber which is already subject to local transport rules in several EU countries.

This ruling will impact European Uber-like businesses as they will have to take into consideration this decision to build their offer: they will deal with 28 local regulations if they cannot qualify as a digital service. But should they fall into the transport service rules, intermediation platforms will have anyway to control whether national political and judicial authorities implement local transport rules in compliance with the general principles of the TFUE.

As regards service providers dealing with non-transport services, it is difficult to anticipate the real impact of this decision since this ruling is highly focused on the relation between liberalization of services and specific rules applicable to transport.

The author of this post is Christophe Héry.