Taken for a Ride? Advocate General Szpunar’s Opinion on Uber’s Status

By Andrew Murray

Case C-434/15 Asociación Profesional Elite Taxi v. Uber Systems Spain SL, Opinion of the Advocate General, 11 May 2017

Introduction

Uber is among the best known sharing economy services offering what Uber would call a platform that allows the introduction of people offering ride shares to those seeking lifts to their destination. Uber have been clear and single minded in their legal status in a number of cases around the globe: they’re not a taxi firm they are a technology company.  This position has been challenged by AG Szpunar in his recent opinion in the case of Asociación Profesional Elite Taxi v. Uber Systems Spain SL. His position that “it is undoubtedly the supply of transport which is the main supply and which gives the service economic meaning” is being seen as a major setback for Uber.

Uber Platform or Transport Company?

Uber’s argument that it is merely a technology platform and not a transport company was discussed in the Illinois Transportation Trade Association case heard in the US 7th Circuit Court of Appeals (even though Uber was not a party in that case). In a case remarkably similar to the Asociación Profesional Elite Taxi case Judge Richard Posner CJ noted, “Uber, at its core, is just an app that you download to your smartphone and use to get a nearby Uber driver to come pick you up.” This ethos is repeated in a number of cases involving Uber including Aslam & Ors v. Uber Technologies, Inc (currently under appeal), an Employment Tribunal case from the UK. Here Uber argued that it was merely a platform for drivers to find rides and as such was not their employer. Judge Snelson was quite scathing of this position, stating, “the notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our minds faintly ridiculous.” In so doing he drew upon another case from the United States: O’Connor v. Uber Technologies. Again, and following the established pattern, Uber claimed that it was “a technology company, not a transportation company, and describes the software it provides as a lead generation platform that can be used to connect businesses that provide transportation with passengers who desire rides.” District Judge Chen, in a decision not dissimilar to the Advocate General’s opinion in Asociación Profesional Elite Taxi, ruled that “Uber is no more a technology company than Yellow Cab is a technology company because it uses CB radios to dispatch taxi cabs, John Deere is a technology company because it uses computers and robots to manufacture lawn mowers, or Domino Sugar is a technology company because it uses modern irrigation techniques to grow its sugar cane. Indeed, very few (if any) firms are not technology companies if one focuses solely on how they create or distribute their products. If, however, the focus is on the substance of what the firm actually does (e.g., sells cab rides, lawn mowers, or sugar), it is clear that Uber is most certainly a transportation company, albeit a technologically sophisticated one.”

Thus it is clear that there is a prevailing pattern, with the exception of the Illinois Transportation Trade Association case, that Uber argues it is merely a platform or technology company and the Courts disagree.

Asociación Profesional Elite Taxi – Facts

As already noted the Asociación Profesional Elite Taxi case is not dissimilar in factual background to the Illinois Transportation Trade Association case. The case was brought before the Spanish courts by Barcelona’s licensed taxi association, Elite Taxi. They argued that the UberPop service (which in some countries is known as UberX) was unlawful as it was being operated without the necessary licenses required of private taxi service operators. Uber again argued they were a mere intermediary or technology platform and, as such, could benefit from the Services Directive and/or the E-Commerce Directive to allow Uber BV, the Netherlands based subsidiary which directs all European Uber operations, to operate the Uber service in Spain without a local license.  Uber Spain claimed that it only performed advertising duties on behalf of Uber BV and the operation was actually a Dutch operation.

Essential to Uber’s case therefore was the classification of their business.  Uber BV would only be able to operate in Spain under the provisions of the E-Commerce Directive without license if they could show they were an “information society services”, while the Services Directive has an exception for “Transport services, including urban transport, taxis and ambulances.”

Advocate General Szpunar’s Opinion

AG Szpunar found first that the respondent in the case should be Uber BV, as operators of the app in the EU, rather than Uber Spain, concluding also that Uber BV could take advantage of the provisions of the E-Commerce Directive to operate the app throughout the EU (at para. 79). This though was probably the highlight of the AG’s opinion for Uber.

With an appeal pending in the Aslam case Uber must have been nervous about the AG’s short excursus into the relationship between Uber and its drivers.  He noted a number of factors which Judge Snelson noted in Aslam, including “it is apparent that most trips are carried out by drivers for whom Uber is their only or main professional activity” (para. 47 and “the fare is set by Uber” – para. 50). He was at pains to point out that “[t]he above finding does not mean that Uber’s drivers must necessarily be regarded as its employees” (para. 54) but noted “[w]hile this control is not exercised in the context of a traditional employer-employee relationship, one should not be fooled by appearances. Indirect control such as that exercised by Uber, based on financial incentives and decentralised passenger-led ratings, with a scale effect, makes it possible to manage in a way that is just as — if not more — effective than management based on formal orders given by an employer to his employees and direct control over the carrying out of such orders” (para. 52). This view is likely to hold influence in forthcoming employment rights cases including the Aslam appeal.

The main thrust of the case was whether Uber were a provider of an information society services as defined in Art. 2(a) of the E-Commerce Directive. This legal provision sends the reader to the pre-existing definition in Art. 1(2) of the Technical Standards Directive as amended by Art. 1(2) of the Technical Standards (Amendment) Directive, which defines an information society service as “(1) any service normally provided for remuneration, (2) at a distance, by electronic means and (3) at the individual request of a recipient of services.”

The AG quickly honed in on the second leg of the test as key. He dismissed the first and third legs as being “not appear[ing] to be problematic. However, the same cannot be said of the test as to whether a service is provided at a distance by electronic means” (para. 27). The problem, he explained, is that the Uber service appears to be a “composite service” (para. 28) where part of the service – the location of nearby cars and the ordering and payment for carriage  – is provided electronically and at a distance, the remaining part, the ride itself, is not.

The AG placed great weight onto the definition of an information society service, as found in the amended Technical Standards Directive, being a service ‘entirely transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means’ (para. 29, AG’s emphasis). Thus the AG saw an important distinction between a pure information society service and a service that makes use of information society technology, which may be seen to be a composite service (paras 30-31). This is not to say that a composite service can never be an information society service. The AG indeed saw two situations where a composite service may also qualify as an information society service.

The first is where “the supply which is not made by electronic means is economically independent of the service which is provided by that means” (para. 33). Such situation “arises, in particular, when an intermediary service provider facilitates commercial relations between a user and an independent service provider (or seller)” (para. 34). Examples of the kind of service which would qualify are “platforms for the purchase of flights or hotel bookings (…) In those cases, the supply made by the intermediary represents real added value for both the user and the trader concerned, but remains economically independent since the trader pursues his activity separately” (para. 34).

The second situation, where, contrary to the first, the “provider of the service supplied by electronic means is also the provider of the service not supplied by such means”, is when the “main component” (that is the component which “gives it meaning in economic terms”) is performed by electronic means (para. 35). In describing the type of service this would cover the AG seems to have services such as Amazon in mind. Citing the CJEU’s ruling in Ker-Optika, he suggested, “[t]his is the case, for example, with the online sale of goods. In online sales, the essential components of the transaction, namely the making of the offer and its acceptance by the purchaser, the conclusion of the contract and, more often than not, payment, are performed by electronic means and fall within the definition of information society service” (para.  36).

So vitally did Uber, as a composite service, fall within these classifications? It appeared that Uber did not operate a service where the app was economically independent from the ride element. The AG noted, “Uber exerts control over all the relevant aspects of an urban transport service” including “over the minimum safety conditions by means of prior requirements concerning drivers and vehicles, over the accessibility of the transport supply by encouraging drivers to work when and where demand is high, over the conduct of drivers by means of the ratings system” (para. 51). This finding led him to conclude that this “prevents Uber being treated as a mere intermediary between drivers and passengers. Drivers who work on the Uber platform do not pursue an independent activity that exists independently of the platform. On the contrary, the activity exists solely because of the platform, without which it would have no sense” (para. 56).

Before leaving this point the AG made two further observations which will no doubt have pained Uber’s legal team. The first is that, unlike a hotel or airline booking service which offer “a real choice between several providers whose offers differ on a number of important points from the users’ perspective”, Uber requires “as a general rule, [that] the passenger will accept the service of the most quickly available driver” (para. 60). The AG notes this raises separate issues not referred to in this case “classifying Uber as a platform which groups together independent service providers may raise questions from the standpoint of competition law” (para. 62).

Was Uber’s service therefore one in which the “main component” was to be found in the electronic service? The AG did not think so. Although noting that the Uber platform was innovative in its use of smartphones and GPS, he also noted that there was a difference between Uber and smartphone applications like Hailo/MyTaxi that allow you to electronically hail a licensed cab.  Uber had not only innovated in the technology to allow you to book transport, it had also changed the urban transportation system itself by using its own drivers and cars. This leads him to conclude “within the context of this service, it is undoubtedly the supply of transport which is the main supply and which gives the service economic meaning” (para. 64). Therefore, the AG concluded that Uber do not operate an information society service in terms of the E-Commerce Directive (para. 90).

There was a final analysis as to whether Uber qualified for protection under the Services Directive.  This was quite simply disposed of as Uber were excepted from the Directive as “recital 21 of the directive leaves no doubt as it states that the services in question include ‘urban transport [and] taxis’. It is therefore not necessary to enter into discussions as to whether Uber’s services constitute a kind of taxi service: all forms of urban transport are mentioned and Uber is certainly one of them” (para. 68).

Concluding Remarks

This opinion is a blow for Uber in a number of ways and could be crippling if upheld by the Court. The AG found Uber to be predominantly an urban transportation company not a platform or app. He was clearly not convinced by the Commission proposal on a European agenda for the collaborative economy, considering that “ownership of key assets” was a key determinant when answering the question of whether a collaborative platform also provides the underlying service. Instead the AG found that “[t]he fact that Uber is not the owner is, in my view, irrelevant, since a trader can very well provide transport services using vehicles belonging to third persons” (para. 55). Of concern for Uber, and embarrassing for the Commission given its heavy reliance on the terms of the Services Directive in its communication, was the way this was swept quickly aside by AG Szpunar.

Equally worrying for Uber will have been some of the obiter remarks made surrounding the employment status of Uber workers, which may prove influential in upcoming hearings, and the competition law point made, but not expanded.

Finally it should be noted that Uber will soon have another date in Luxembourg. Currently pending before the Court is a reference from France concerning the imposition of penalties on Uber for running an unlicensed taxi service. This case also raises the question of whether France should have notified its rules as a technical regulation under the Technical Standards Directive. This clearly is not the end of the road for Uber or the CJEU.

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