EU ruling is a setback for Uber
European court says ride-hailing company should be regulated as a transport firm, not a tech intermediary.
SAN FRANCISCO — Uber was dealt another blow in Europe on Wednesday when the European Union’s highest court ruled that the ride-hailing company is a transportation service and should be regulated as such.
Uber, founded in the United States and headquartered in San Francisco, had argued that it was simply an intermediary technology company that should not be subject to transportation regulation, which could entail additional permit requirements for the company, licensing requirements for drivers and caps on the number of vehicles it puts on the road.
The European Court of Justice’s ruling will apply to all 28 countries in the European Union, although it remains unclear how much it will affect Uber’s operations. Many European markets already regulate Uber as a transportation service: In London, drivers are required to have a private hire license before they can drive for Uber. In the Netherlands, Uber drivers need to have a taxi license.
“This ruling will not change things in most EU countries where we already operate under transportation law,” an Uber spokeswoman said in a statement. “As our new CEO [Dara Khosrowshahi] has said, it is appropriate to regulate services such as Uber, and so we will continue the dialogue with cities across Europe.”
In its ruling, the court said it will be up to the EU member states to determine how they regulate transportation services, which means there could remain wild variations in how Uber is treated in each market.
Business experts said it is hard to argue with the ruling because services like Uber fundamentally provide transportation. But the way member states respond to the ruling could be a problem for Uber.
“I’d be concerned about the potential for over-regulation,” said Charles Skuba, a senior associate dean at Georgetown University’s McDonough School of Business. “Brussels more so than the U.S. has a penchant for red tape proliferation, and the more regulation the gigdriven companies face, the less competitive they will become.”
Until Wednesday’s ruling, Uber received different classifications across the EU, and in some markets wasn’t recognized as a transportation company, which allowed it to use the regulatory blind spot to its advantage, according to Mareike Möhlmann, an assistant professor at Warwick Business School in Britain.
“Before, everything was very scattered,” said Möhlmann, whose research has focused on the gig economy. “With this new ruling, there’s more clarity about how Uber should be classified.”
The ruling’s ramifications could extend beyond Uber and app-based transportation, though. The fact that a company as high-profile as Uber — which has long asserted that it is a technology company — is being recognized by the EU’s highest court as a transportation company could invite harsher scrutiny for other start-ups that market themselves as technological intermediaries, Skuba said.
It’s not hard to imagine, then, Airbnb eventually being classified as a hotel company, or delivery start-ups being classified as couriers.
“As a business person, that’s what frightens me,” Skuba said, referring to the potential for new businesses to be entangled in red tape. “But as a member of society, I believe we also have to walk the fine line of making sure that these companies treat employees and consumers properly.”
The EU has already shown that it doesn’t pull any punches when it comes to regulating technology companies. It slapped Google with a record $2.7-billion fine in June, saying it violated antitrust rules; fined Facebook $122 million in May for misleading the union’s governing body about its 2014 acquisition of WhatsApp; ordered Apple in August to pay $14.5 billion in back taxes; and demanded in October that Amazon pay $295 million in back taxes after the e-commerce giant was found to be unfairly benefiting from special tax conditions.
Uber has also faced a string of challenges in Europe, including bans in markets such as Barcelona, Copenhagen and Budapest, Hungary. The company had its license revoked in London this year, and a labor panel in Britain ruled that its drivers are employees that are entitled to wage guarantees and benefits. The company is appealing both decisions.
Uber has also had a rough year back home: 2017 was punctuated by a string of sexual harassment and discrimination scandals, criminal probes, lawsuits alleging trade secret theft, and the resignation of its cofounder and chief executive, Travis Kalanick.
The company appointed a new chief executive, former Expedia CEO Khosrowshahi, in August. In his three months in charge, he has taken a markedly conciliatory approach to working with regulators, and on Wednesday announced the hiring of former colleague Barney Harford, who was chief executive of the Expedia-owned travel site Orbitz, as Uber’s chief operating officer.
“The @Uber team clearly wants to turn a corner,” Harford said in a tweet. “Am honored to have the opportunity to play a role in making this important and much needed transition.”