Uber goes to Luxembourg
An obvious indicator of how Europe is lagging behind American economic performance is the prevalence of innovative enterprise. Despite constituting a larger and overall wealthier market than the US, the EU/EEA countries spawn less high-tech, internet- and software-oriented companies valued at one billion dollars, commonly referred to as unicorns. Certainly, less economic freedom – more and heavier regulation in Europe is what keeps the European start-up sector behind.
So when American high-tech companies establish their European operations, they often deal with unprecedented obstacles. Take Uber, the American ride-hailing startup. As Uber entered the markets of European countries, it had to comply with diverging national regulations and faced a legal and political backlash. This included protests, even violent ones, by taxi drivers and trade unions in France, Italy, Germany, Belgium, Spain, Poland, and the UK, police raids on Uber’s premises in France (including arrests of Uber’s local representatives) and the Netherlands, criminal convictions for running an illegal taxi service (France, Sweden), as well as bans or fines by courts and legislators in Germany, Belgium, France, Hungary, and Spain.
The contentious question? Does Uber, more specifically it’s ride-sharing app UberPOP, provide transport or a digital service to connect the consumers and the drivers? If Uber is to be a transportation company, it needs to be subject to licenses as well as national labor law provisions. That would curtail one of Uber’s competitive advantages: not having regular workers-drivers on constant payroll. Indeed, Uber was already ordered to pay holidays, sick pay, minimum wage etc. by a London court (a recent judgment also demands English language tests for Uber’s drivers).
Not all of Europe has been so hostile, for sure. My point here is not to show which European countries are more favorable to start-ups and the sharing economy. What I want to show is that, in specific circumstances, there is a fundamental distinction between the European (as in, individual member states) economic orientation and that of the EU institutions. The EU institutions, either independently or when they serve as an inter-governmental forum for member states, act as a force of economic liberalization on the continent. How is this evident in the case of the sharing economy and Uber in particular?
The dissonant welcome of Uber and other such sharing companies across Europe compelled the European Commission to issue guidelines on the sharing economy. In these guidelines the EU Commission calls on the member states to embrace the sharing economy and to administer a light-handed regulation on its various forms. In order to distinguish between a digital platform and a conventional transport provider, the Commission proposes a set of criteria, among others the application of thresholds. This means that regular labor law would apply to Uber’s drivers only if they earn a certain sum while driving for Uber. When it comes to market access, the Commission advises against bans and reiterates that demands for market access such as licenses should be non-discriminatory and reasonable.
Eventually, the Uber case has been taken to Luxembourg where the EU Court (Court of Justice of the European Union) will later this year deliver a verdict on whether or not Uber is a taxi firm. A Spanish court, following a complaint by the taxi association of Barcelona, has demanded a preliminary ruling. Meaning: if there are doubts to Uber’s status under EU law, the EU Court shall make it clear once and for all. And this is where things take a strange turn.
Many of the EU member states, alongside EFTA states and the Commission, have argued before the Court in favor of a digital-platform approach to Uber and if the Court follows their suggestions, Uber will be allowed to operate much more easily within the European Single Market and under a lesser regulatory burden. In fact, if Uber will be recognized as a digital platform it will fall under the E-Commerce Directive and the Technical Standards and Regulations Directive (2015/1535/EU) and the introduction of any and all relevant national regulations would have to be notified to the Commission – otherwise, such regulation (hindering the free flow of ‘information society services’) would be rendered ineffective. Quite laissez-faire, no?
On a side note, this wouldn’t be the first time that supranational institutions have specifically targeted the crony taxi sector as an example of government-given privileges. Think the troika and Greek taxis in 2011. Neither it would be the first time for the Court to overrule national protectionist measures and barriers to competition – or even national criminal law penalizing peaceful commercial activity (see the Corbeau case). It has been doing so nearly all of its existence.
If denied their digital-platform status, companies of the sharing-economy like Uber don’t have much to lose – they will return to the ‘regulatory competition’ between member states and operate more freely within one or another. Anyway, the modernizing of Europe’s regulatory approach would benefit not only American corporations but European start-ups and consumers, too. I cross my fingers for the Court to do the right thing (if you want to follow this issue more closely, watch out for the Advocate General’s opinion to be issued on April 6 – it might predict the Court’s decision).
Jernej Kosec is a libertarian with a law degree from the University of Ljubljana. He is currently working as full-time viking in Northern Norway. As a nomad, he is particularly interested in freedom across Europe. He also likes to eat whales.
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