information society services / Internet intermediaries

The politics of online platforms: when AG Szpunar converses with the EC in Elite Taxi v Uber.

Uber CJEU 1

Advocate General Szpunar (AG) delivered yesterday his opinion in the highly political and much awaited case C‑434/15 Asociación Profesional Elite Taxi v Uber Systems Spain SL. In a nutshell, the AG was asked to answer four questions concerning two important milestones of the European Union (EU) acquis: the E-commerce Directive of 2000 and the services Directive of 2006. Here are the first two questions, to which the AG devotes most of his energy:

“(1)      Inasmuch as Article 2(2)(d) of [Directive 2006/123] excludes transport activities from the scope of that directive, must the activity carried out for profit by the defendant, consisting of acting as an intermediary between the owner of a vehicle and a person who needs to make a journey within a city, by managing the IT resources — in the words of the defendant, “smartphone and technological platform” interface and software application — which enable them to connect with one another, be considered to be merely a transport service or must it be considered to be an electronic intermediary service or an information society service, as defined by Article 1(2) of [Directive 98/34]?

(2)      Within the identification of the legal nature of that activity, can it be considered to be … in part an information society service, and, if so, ought the electronic intermediary service to benefit from the principle of freedom to provide services as guaranteed in [EU] legislation — Article 56 TFEU and Directives [2006/123] and … [2000/31]?”

As reformulated by the AG, the first two questions concern “whether Uber’s activity falls within the scope of Directives 2006/123 and 2000/31 as well as the provisions of the FEU Treaty on the freedom to provide services.” [23].

The AG’s answer is that Uber’s activity must be classified as a “service in the field of transport” within the meaning of Article 2(2)(d) of Directive 2006/123. Uber’s activity should not be classified as an information society service within the meaning of Article 1(2) of Directive 98/34, a definition to which Article 2(a) of the E-commerce Directive refers.

What does Uber really do?

Para. 13 of the AG opinion says it all:

“With the aid of a smartphone equipped with the Uber application, the platform allows users to order urban transport services in the cities covered by it. The application recognises the location of the user and finds available drivers who are nearby. When a driver accepts a trip, the application notifies the user of such acceptance and displays the driver’s profile together with an estimated fare to the destination indicated by the user. Once the trip has been completed, the fare is automatically charged to the bank card which the user is required to enter when signing up to the application. The application also contains a ratings function, enabling drivers to be rated by passengers and passengers to be rated by drivers. Average scores falling below a given threshold may result in exclusion from the platform.”

How does Uber make money?

“The fare is calculated by the application and charged automatically by the platform operator, who withholds a proportion in respect of its fee, usually between 20% and 25%, and pays the remainder to the driver.” [25].

How does the AG reach this solution?

Uber’s service can be described as composite in nature since “since part of it is provided by electronic means while the other part, by definition, is not.” [28].

Yet, “Information society services are, inter alia, ‘entirely transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means’.” [29]

Still, two types of situations (which can lead to the characterisation of information society service) must be distinguished:

  • When the supply which is not made by electronic means is economically independent of the service which is provided by that means” [33].
  • “where the provider of the service supplied by electronic means is also the provider of the service not supplied by such means or where he exercises decisive influence over the conditions under which the latter service is provided, so that the two services form an inseparable whole”. In this case, the AG states that “it is necessary to identify the main component of the supply envisaged, that is to say, the component which gives it meaning in economic terms. For a service to be classified as an information society service, this main component must be performed by electronic means.” [35]

According to the AG, Uber’s activities do not fall into either of these two scenarios. Therefore, Uber is not supplying an information society service.

Why? For several reasons:

  1. Uber creates the supply of taxis.
  2. Uber adapts the supply to fluctuation in demands.
  3. Uber indirectly controls the quality of the supply.
  4. Uber sets the fare.
  5. The service provided by the drivers is not economically independent from the service provided by Uber (i.e. the platform).

To conclude, “Uber exerts control over all the relevant aspects of an urban transport service” and the other aspects are of “secondary importance”. [51]. Uber should not, therefore, be conceived as “an intermediation platform,” adds the AG. [57]. Para. 52 is even more eloquent: the AG does not want readers [and perhaps the Court of Justice of the European Union as well] to be fooled. Uber’s indirect control is potentially more effective than control exercised in the framework of a traditional employer-employee relationship.

Finally, Uber is “an organiser of transport services,” and is therefore providing “a service in the field of transport.”

Is the AG fully convinced by his solution?

Well, “maybe” or “maybe not entirely” [or, maybe he really wants to convince others!]. Why? Because the AG takes the time to examine in his “further remarks” the consequences of adopting an alternative solution, which seems to be the one preferred by the European Commission (EC) (see below). So, let us assume that part of Uber’s activity could be characterised as an information society service. What would the consequence be?

A distinction should then be drawn between two types of requirements:

  1. Requirements pertaining to the supply of the information society service as such and in particular authorisations. “the requirement to have authorisation in order to provide intermediation services in the conclusion of urban transport contracts on demand, if it is still in force and in so far as it applies to the connection service provided by the Uber platform, would fall within the scope of the coordinated field and would therefore be caught by the prohibition laid down in Article 3(2) of Directive 2000/31.” [81].
  2. Requirements pertaining to drivers. “By contrast, all the requirements applying to drivers, as regards both the taking up and pursuit of the transport activity, fall outside the coordinated field and, consequently, the prohibition, since the transport service, by its very nature, is not provided by electronic means.” [81]. Therefore for these requirements, Member States’ remain competent.

Would the European Commission (EC) agree with the AG?

The short answer is “most likely NOT!” In its Communication on the collaborative economy of 2 June 2016, the EC had written:

  1. Most likely, collaborative platforms provide information society services. “Whether or not – and the extent to which – collaborative platforms can be subject to market access requirements depends on the nature of their activities. As long as collaborative platforms provide a service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services, they provide an information society service.” [p. 5].
  2. But they can also offer other services in addition to information society services. “However, there may be cases in which collaborative platforms can be considered as offering other services in addition to the information society services that they offer to intermediate between the providers of underlying services and their users. In particular, in certain circumstances, a platform may also be a provider of the underlying service (e.g. transport or short-term rental service).” [p. 6].
  3. Even if collaborative platforms exercise significant control over users, they should still be considered as providing information society services on top of other services. “When these three criteria are all met, there are strong indications that the collaborative platform exercises significant influence or control over the provider of the underlying service, which may in turn indicate that it should be considered as also providing the underlying service (in addition to an information society service).” [p. 6. The adverb “also” is key here]. See also p. 7. “Yet, generally speaking, the more collaborative platforms manage and organise the selection of the providers of the underlying services and the manner in which those underlying services are carried out — for example, by directly verifying and managing the quality of such services — the more apparent it becomes that the collaborative platform may have to be considered as also providing the underlying services itself.”

But why does the AG find it difficult to follow the EC’s position?

Because, he says it creates legal uncertainty and from a regulatory standpoint, it is not entirely robust. In his terms, [i]t would be pointless only to liberalise a secondary aspect of a composite supply if that supply could not be freely made on account of rules falling outside the scope of the provisions of Directive 2000/31. Not only would such apparent liberalisation fail to attain its objective, it would also have adverse consequences, leading to legal uncertainty and diminished confidence in EU legislation.” [31]. Besides, Uber has not always been a fair competitor! [see 66].

So, who is right?

This is not an easy question, and maybe more a political question than a purely formal, legal one.

What can be said at this stage, however, is that although the AG found that Uber’s activity is composite in nature, he decided not to dissect Uber’s activity and not to apply different qualifications to its different segments. One key question that arises in this context is whether this approach is fully compatible with the spirit of the E-commerce Directive. It is true that the AG is not trying to interpret the notion of intermediary service provider for the purposes of applying Articles 12 to 15, but “simply” to derive the core meaning of the expression “information society provider.” Even so, however, would it not have been more appropriate to undertake a granular examination of the different segments of the activities pursed by the service provider? This discussion is reminiscent of another debate held in the aftermath of the Delfi v Estonia case [see my post here], involving a completely different service. In this case, the European Court of Human Rights (and not the Court of Justice of the European Union) had been criticized for not distinguishing between the media-related and the user-generated-content-related segments of the activity of the service provider (i.e. the article and the comment sections).

What do readers think? Who has adopted the best approach?

Sophie Stalla-Bourdillon

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One thought on “The politics of online platforms: when AG Szpunar converses with the EC in Elite Taxi v Uber.

  1. Pingback: Law and Media Round Up – 15 May 2017 | Inforrm's Blog

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