Uber’s global juggernaut has finally met its match.
Europe’s highest court on Wednesday dealt the ride-booking service a blow after judges ruled that it must comply with the region’s tough transportation rules.
The decision represents a significant setback for the company, which has faced a string of other legal woes across the Continent and farther afield.
It also follows a years-long battle between Uber and EU taxi associations, many of which claim that the American tech company flouts Europe’s transport rules and represents unfair competition for existing players. Uber denies the allegations.
“It’s a victory for Europe’s taxi companies,” said Damien Geradin, a partner at Euclid Law in Brussels. “Europe’s single market will now become very fragmented with different countries implementing different rules.”
In its decision Wednesday, the European Court of Justice placed itself on the side of traditional taxis, decreeing that because Uber held great sway over how drivers used its technology, the company must be considered a transport service.
That definition will require the company to use only licensed taxi drivers, as well as meet other strict regulations linked to health and safety and background checks on drivers on its digital platform.
“The service provided by Uber is more than an intermediation service,” the judges said in their ruling. “The ride-booking company must be classified as ‘a service in the field of transport.’”
No knockout punch
The decision is a blow to Uber’s future expansion plans across the EU but does not represent the knockout punch that many — including the Spanish taxi association that filed the original case that led to Wednesday’s ruling — had wanted.
The ride-booking company already operates, and will continue to do so, in many European countries where its digital platform connects traditional taxis and licensed minicabs with paying customers.
European countries also will still be allowed to pass legislation that gives Uber greater freedom to operate locally. That includes in the likes of Estonia and Finland, where lawmakers have been eager to embrace the ride-booking service and other digital upstarts, which have poured into the countries’ transport industries.
Not everyone, though, has been so welcoming. In Germany, Uber remains banned in most of the country, and France has also pushed to subdue the company’s often aggressive plans at national expansion.
While the American tech company has long since moved beyond its San Francisco roots to all corners of the globe, its European business still represents a key international market despite the ride-booking service jumping into emerging markets like India.
In particular, by ruling that Uber is a transportation service and not a digital one, Europe’s highest court has made it difficult, if not impossible, for Uber to develop so-called peer-to-peer services, which allow almost anyone with a car to use the company’s technology to collect paying customers.
Such services, which are available in the United States, are a major component of Uber’s future business plans as it looks to upend the traditional taxi industry — a strategy that, at least in Europe, will come to an end.
In a statement, Uber said the European court’s ruling would not alter its operations in most European countries where it already complies with existing transport rules.
The ruling also comes soon after the company was stripped of its license to operate in London and saw Travis Kalanick, its founder, resign amid an ongoing boardroom standoff. Dara Khosrowshahi, its new chief executive, also faces difficulties in changing the internal culture at the company, which is now worth an estimated $70 billion.
“It is appropriate to regulate services such as Uber and so we will continue the dialogue with cities across Europe,” said Marloes van der Laan, a company spokeswoman. “This is the approach we’ll take to ensure everyone can get a reliable ride at the tap of a button.”
Claims of unfair competition
The pan-European ruling against Uber is based on a complaint brought by a taxi group in Barcelona that was originally filed in 2014 and claimed that the ride-booking company represented unfair competition because it did not comply with the same rules that applied to existing taxis.
“We can’t allow for a business model to develop in Europe that could undermine the rights of consumers,” Montse Balagué, a lawyer for the Spanish taxi association, told the European Court of Justice last year when outlining the group’s complaints against Uber.
“We must not be misled by labels,” she added. “If there’s a transport service provided, then a company can’t hide behind a thin veil, calling itself a different service.”
The ruling is expected to set a precedent for how Uber will be allowed to operate across the EU, including in a separate pending case at Europe’s highest court involving a complaint by a French taxi association against Uber. A decision in that case is expected sometime next year, and it will likely cement demands that the ride-booking company comply with Europe’s transport standards.
Some European politicians welcomed Wednesday’s announcement, saying that for too long, Uber had thumbed its nose at the rules applying to competing taxi services.
“Uber has from the beginning exploited the gaps in European and national legislation to exempt itself from a number of economic obligations,” Karima Delli, a French MEP who chairs the European Parliament’s transportation committee, said in a statement.
The ruling against Uber had been expected after Maciej Szpunar, a senior adviser to Europe’s highest court, said the company should be viewed as a transportation service, according to a non-binding legal opinion published in May.
In its judgment on Wednesday, the court’s judges agreed with that assessment.
Europe’s highest court focused on how Uber’s digital platform was at the heart of how drivers and passengers connected through the company’s smartphone app.
The ride-booking service’s central role in helping to organize people’s journeys, the judges added, showed that Uber is not merely a digital service connecting people independently. Instead, its technology controls how much drivers could charge, how they are paid and who could use their digital platform.
Uber connects “a non-professional driver using his or her own vehicle with a person who wishes to make an urban journey,” the European Court of Justice said in a statement.
It should be seen as an “integral part of an overall service whose main component is a transport service,” the judges added, and not simply as a digital platform.
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