Advocate General: Uber is a transport company

The great debate about the regulatory regime applicable to the sharing economy business model, has finally reached the Court of Justice of the European Union (CJEU). The debate was triggered back in 2015 when a Spanish judge asked the court to rule on whether Uber is a transport company or an information society company. Even though the final ruling has not been made, on 11 May, the Advocate General gave his opinion on the matter, stating that Uber is a transport company.

Due to the unclear legal regulations, Uber is currently involved in numerous court proceedings worldwide (see our Uber map). These proceedings are related to numerous issues, from licensing, to consumer protection, employment, unfair competition, etc. However, the importance of the ECJ’s decision is not just about solving the legal controversies surrounding the sharing economy, but more importantly, about the economic implications of this business model.  According to the World Economic Forum, in the United States, the social value of Uber in 2015 was the equivalent of giving every resident USD$20. Airbnb has built an inventory of 600 000 rooms in just a few years while the Hilton needed 93 years to reach that number. The positive impact of the sharing economy on the world economy and GDP is indisputable, and includes other positive ‘side effects’, such as the better use of environmental resources, personal well-being, higher option value and consumer surplus, and many other uncounted economic gains.

However, we should not forget that these new sharing economy services are competing with traditional services, like taxi drivers, hotels, etc. In order to start their businesses, traditional services need to conduct many procedures with respect to registration and licensing, incurring significant costs. Moreover, most of their workers are registered as employees, which requires the companies to pay for their employees social security and other benefits. This being the case, the central question here is: can traditional services and the sharing economy be seen as interchangeable within the definition of competition law, thus making the sharing economy unfair competition? Despite the many benefits to the global economy brought by the sharing economy, the negative impact on traditional services should also be measured, in order to clearly establish whether a new value has been created owing to the sharing economy, or whether it is just a transfer of value from one sector to the another. 

In spite of the statement made by Uber’s representatives, that the Attorney General’s position will not have great effect on their business, since in most countries they already fulfil all the formal requirements for transport companies, if the ECJ adopts this position, the landscape for the whole sharing economy will be severely changed. For today’s Uber that has USD$6.5 billion revenue and USD$2.8 billion net income, it might not be a problem to adapt to these new requirements; but for Uber from a few years ago, when it had just started as a business, it is questionable whether it would have succeeded in that kind of regulatory environment. This means that, not only will this decision clarify one of the biggest legal controversies in recent times, but it will also determine the future of the sharing economy. This is definitely a heavy task for the ECJ that has to balance the conflicting interests of new age economies and traditional services. Their decision will have far-reaching implications.

Uber has been involved in legal action over several issues, and in more than 25 countries. View the interactive database which describes the court cases and other rulings, and include details such as the court or authority passing the ruling, dates, and status of the case. Visit the Mapping Uber page on the GIP Digital Watch observatory.