Advocate General Szpunar considers that Uber’s activity should not benefit from the country of origin principle enshrined in the E-Commerce Directive

On 11 May 2017, Advocate General Szpunar delivered his opinion in the case between an association of Barcelona taxi drivers (Elite Taxi) and Uber Systems Spain SL (Uber Spain) (C-434/15).

Elite Taxi brought an action before the Commercial Court of Barcelona to impose penalties on Uber for engaging in acts of unfair competition, on the grounds that the latter allegedly infringes the city of Barcelona’s regulations which require intermediary platforms providing services in the transport sector to have the necessary licences and authorisations in order to perform their activities.

As the national court considered that an interpretation of provisions of EU law was required to rule on this litigation, it referred several questions to the Court of Justice for a preliminary ruling.

The issue at stake in this preliminary ruling procedure is to determine (i) whether the service provided by Uber constitutes an information society service and would thus benefit from the country of origin principle enshrined in the E-Commerce Directive or (ii) whether its service constitutes a service in the field of transport so that it would not benefit from the freedom to provide services guaranteed by the Services Directive and the TFEU provisions but would rather be subject to the sector-specific regulations in the transport sector in accordance with Article 58 TFEU and Articles 90 et seq. TFEU.

In the first case, the licences and authorisations required by the city of Barcelona’s regulations could be incompatible with the country of origin principle, while, in the second case, Spain (like any other Member State) would in principle be free to regulate Uber’s activity.

Advocate General Szpunar firstly noted that the service provided by Uber is a “composite service”, i.e. a service comprising a component provided by electronic means (the smartphone application) and a component provided by non-electronic means (urban transport).

In light of the rationale of the E-Commerce Directive, the Advocate General took the view that a composite service may be qualified as an information society service in two (alternative) situations:

• Where the component provided by non-electronic means is economically independent of the component provided by electronic means According to the Advocate General, the “economic independence” criterion is met where the offline activity may have a meaning and exist independently of the platform, so that the two components must be regarded as two separate services. By contrast, where the online platform exercises decisive influence over the conditions on which the offline activity must be exercised, i.e. where the platform controls the economically significant aspects of the offline activity (such as price, conditions and quality), the economic independence criterion is not met. In such case, the two components must be regarded as forming an inseparable whole and thus as a single service. As examples in which the economic independence criterion is met, the Advocate General cited platforms for the purchase of flights or hotel bookings, given that hotels and airlines can function independently of any platform. Firstly, such platforms are simply one of a number of ways for hotels and airlines to market their services. Secondly, it is the hotels and airlines – and not the platforms – that determine the conditions under which their services are provided (including their prices). Lastly, such platforms give users a real choice between several providers whose offers differ on a number of important points (such as flight and accommodation standards, flight times and hotel location) in contrast to a service whose aspects would be standardised by the platform (such as is the case for Uber, according to the Advocate General’s view).
• Where the two components form an inseparable whole, and the main component of the service is provided by electronic means The main component of the service is the component which gives it meaning in economic terms. As an example (influenced by the specific wording used in the E-Commerce Directive), the Advocate General referred to the online sale of goods, given that the essential components of the transaction (the making of the offer, its acceptance by the purchaser, the conclusion of the contract and the payment) are performed by electronic means, while the delivery of the goods purchased is simply the performance of the contractual obligations concluded online.

In the case in question, Advocate General Szpunar came to the conclusion that the service provided by Uber does not fall under either of these two situations and therefore does not constitute an “information society service”.

With regard to the first situation, the Advocate General observed that the drivers who work on the Uber platform do not perform an independent activity that exists independently of the platform, given that such activity exists solely because of the platform, without which it would have no sense.

The Advocate General also stressed that Uber controls the economically significant aspects of the transport service offered through its platform, in as far as it:

• effectively sets the price of the transport service (the price is calculated by the application of GPS, on the basis of the distance and the duration of the trip, with some adjustments made by an algorithm);
• imposes conditions that drivers must fulfil in order to take up and perform the activity (such as minimum safety conditions that set out prior requirements for drivers and vehicles);
• financially rewards drivers who accumulate a large number of trips and informs them of where and when they can expect a high volume of trips and/or preferential fares (so that Uber is able to tailor its supply to fluctuations in demand without exerting any formal constraints over drivers);
• exerts control, albeit indirectly, over the quality of the transport service through a ratings function which may result, where the average score of the driver falls below a given threshold, in exclusion of the platform.

With regard to the second situation, the Advocate General considered that it is undoubtedly the supply of transport which is the main component of the service and which gives it economic meaning. Users indeed look for drivers with one aim in mind, i.e. to be transported from A to B, while the connection stage is merely preparatory in order to enable the supply of transport to be performed in the best possible conditions.

On the basis of the foregoing, the Advocate General therefore concluded that the service provided by Uber does not constitute an information society service but rather a service in the field of transport. As a consequence, Uber’s service does not benefit from the country of origin principle enshrined in the E-Commerce Directive but can be regulated by the relevant Member State’s national law, i.e. it must comply with the City of Barcelona’s regulations in this case.

The position expressed by Advocate General Szpunar may be considered as providing a relatively narrow interpretation of the notion of “information society service” which deviates in some respects from the position expressed by the European Commission in its communication of 2 June 2016 on the collaborative economy.

Notwithstanding this narrow interpretation, the fact remains that the activities of many collaborative platforms are likely to meet the criteria laid down in the Advocate General’s opinion to be qualified as information society services, which has to be assessed on a case-by-case basis. It seems also that, in the first sentence of his opinion, the Advocate General stated that “Uber is a case apart”.

It also remains to be seen whether the Court of Justice will follow Advocate General Szpunar’s opinion (the judgment of the Court is expected later this year) and whether the latter will refer to additional elements in another pending case involving Uber France (C-320/16), where relatively similar questions about EU law will be raised (his opinion is scheduled for 4 July 2017).