In Europe, Is Uber a Transportation Service or a Digital Platform?

http://www.nytimes.com/2016/11/27/technology/uber-europe-court-ecj.html

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Ever since Uber showed up in Europe in late 2011, the American ride-booking service has faced vocal opposition.

Some of its drivers have been attacked by angry taxi drivers in Paris. Two of the company’s most senior European executives have stood trial on charges of running an illegal transportation service in France. And taxi associations from London to Frankfurt have accused Uber of flouting local rules and undermining European rivals. The company denies the accusations.

These heated battles will culminate on Tuesday in arguments before the European Court of Justice, the region’s highest court, which will most likely determine how Uber can operate across the European Union, one of the company’s largest international markets.

At stake is the ride-booking service’s often aggressive worldwide expansion. Uber has opened in more than 300 cities on six continents. That has helped the American tech company reach an eye-popping valuation of $68 billion, making it one of the most successful start-ups ever to come out of Silicon Valley.

Such rapid growth has often pitted Uber against traditional taxi services and local labor unions, which have accused the company of disregarding working standards and transportation rules.

“We will fight against Uber in Germany and across Europe,” said Hermann Waldner, the head of a taxi dispatch center in Berlin. “We will try to do what we can to defend ourselves through the law.”

But as people increasingly turn to services like Uber and rivals like Lyft, policy makers worldwide are starting to question how such businesses in the so-called sharing economy should be governed.

“Our role is to encourage a regulatory environment that allows new business models to develop,” Jyrki Katainen, the European Commission vice president for jobs, growth investment and competitiveness said this year, before adding that a critical priority was “protecting consumers and ensuring fair taxation and employment conditions.”

For Uber and its rivals in Europe, the court case represents a watershed moment for how ride-booking companies will be able to operate in the region.

The hearing relates to a standoff between Uber and a Spanish taxi association, which filed legal proceedings in 2014, claiming unfair competition.

Later that year, Uber suspended its services in the country, including its low-cost UberPop offering, which had allowed almost anyone — after some basic security checks — to use the company’s platform to pick up passengers. Uber recently returned to Spain, this time in partnership with licensed taxi drivers.

In July 2015, a judge in Barcelona referred the case to the European Court of Justice, asking the Luxembourg-based court to determine whether Uber should be treated as a transportation service or merely as a digital platform.

If the court decides that Uber is a transportation service, the company will have to obey Europe’s often onerous labor and safety rules, and comply with rules that apply to traditional taxi associations. Though Uber already fulfills such requirements in many European countries, the ruling could hamper its expansion plans.

But if the judges rule that Uber is an “information society service,” or an online platform that merely matches independent drivers with potential passengers, then the company will have greater scope to offer low-cost products like UberPop and other services that have been banned in many parts of Europe.

“This case should show that European laws fully support the development of a digital single market,” Gareth Mead, an Uber spokesman, said in a statement, referring to efforts to reduce barriers that currently restrict the access Europeans have to digital content, e-commerce products and other online services.

Asociación Profesional Élite Taxi, the Spanish group that brought the case, did not respond to repeated requests for comment.

A ruling is not expected before March at the earliest. The judges may decide to consider Uber a transportation service, an online platform, or a combination of the two, further complicating the legal standoff.

Other European taxi associations are keeping a close eye on the outcome, which will apply across the 28-member bloc.

“Uber is appealing to Europe at the very moment when Europe is starting to seize upon problems linked to the web,” said Séverine Bourlier, secretary general of the National Taxi Union in France. “You can sense that countries are worried, so I think Europe is starting to think about this problem and ways to regulate it.”

The future of Uber’s European operations has become increasingly important for the company since it sold its fast-growing Chinese unit this year to Didi Chuxing, a local rival, after a lengthy price war between the two companies.

While Travis Kalanick, Uber’s chief executive, had targeted China for major expansion, the company settled for a minority stake in a combined Chinese operation with Didi Chuxing that is valued at roughly $35 billion.

As Uber has grown beyond San Francisco, where it was founded in 2009, it has become embroiled in a number of legal disputes around the world that have challenged its business model and some of its working practices.

Last month, for instance, New York State regulators ruled that two former Uber drivers were eligible for unemployment payments, finding that they should be treated as employees rather than independent contractors, as the service had maintained. A British court also recently made a similar ruling, saying that Uber drivers should receive a minimum wage and vacation pay.

Mr. Kalanick has been charged in South Korea with running an illegal taxi service, an accusation the company denies, while in India, a former Uber driver was sentenced last year to life in prison for the rape of a passenger.

Other sharing-economy businesses like Airbnb, the vacation rental site, have also been targeted for legal action, particularly in Europe, where traditional hotels have viewed such competition with skepticism.

Last week, the city government in Barcelona — one of Airbnb’s largest markets — fined the company and its rival, HomeAway, a combined $1.2 million for advertising and operating vacation rentals without appropriate licenses. BlaBlaCar, a French ride-sharing service, also was ordered to pay almost $10,000 to Madrid’s regional authorities for operating without required authorization. The companies deny the allegations.

Uber’s European legal woes have often set governments against one another, as countries have taken opposing views on how the company should operate.

The European Commission, the executive arm of the European Union, and countries like Finland and Portugal have supported such new digital services, often proposing new legislation to help them grow locally.

But in other countries, notably France and Germany, national politicians have favored rules that have either banned some of Uber’s services or required the company to operate within existing transportation rules.

“We’re focused on working within the regulatory environment,” said Andrew Pinnington, chief executive of MyTaxi, an Uber rival owned by Daimler, the German automaker. “We want to be seen as a constructive disrupter of the industry, not a destroyer of it.”