The European Court of Justice (ECJ) is Europe's highest court and decides all Union law cases. It is not a national court, but its decisions are usually adopted by most European Union Members. So, it is obvious that Uber is fighting a strong legal battle to decide whether the court will consider Uber a taxi service or a rideshare service.
Uber's main claim is that its app is a connectivity platform for independent contractors to reach Uber customers and offer them rides at Uber rates. Which is not the same as a Taxi service that is a centrally operated fleet of cars driven by employees or rented out to drivers that work for licensed taxi car owners. The decision that the EJC will reach will affect all gig economies since it will impact them in 28 countries. More so, the precedence it will set can be used against all gig economies in other countries, possibly ending the "gig economy" sprint that has grown exponentially across the world
The case came to light after Uber tried out UberPop, which was a hybrid service they offered in some European countries. UberPop is a cheaper UberX, where a car owner can use a smaller car, sometimes for only two passengers. This worked well in many countries, although it was stopped in Scandinavia since it was deemed illegal and drivers there could lose their licenses and their cars.
As Reuters noted in May 2017, the ECJ Advocate General Maciej Szpunar issued a preliminary opinion that Uber is a "transport service" and not an app. This ruling was significant because, if it is upheld, it would demand that Uber operate as a taxi company making sure drivers were properly licensed and insured
Although the opinion of the Court of Justice of the European Union's (ECJ) Advocate General Maciej Szpunar is non-binding, its judges usually follow such advice and are likely to reach a final ruling in the landmark case in the coming months. Szpunar stated that Uber's argument is a "simplistic view of its role." And "The Uber electronic platform, whilst innovative, falls within the field of transport: Uber can thus be required to obtain the necessary licenses and authorizations under national law,"
Another important fact us that the ECJ's final ruling cannot be appealed.
UberPop drivers are required by many European countries to get a professional driving license, which is what UberX drivers have before they can join UberX in Europe. UberPop was Uber's way to circumvent this issue, but it backfired.
Everyone is now waiting for the judgment, if it comes back negative, then Uber will have to be classified as a transportation company in all 28 countries, and new regulations and fees will have to be created to cover the new emerging rideshare market. If the judgment is positive, then Uber will face a severe problem, in fact, all rideshare companies will face the problem. They will be considered to be no different than taxi services and will have to comply with all rules and regulations that all member states demand. While the UK is still in the EU, it applies to them too, although it is expected that the UK will consider their current Brexit situation as a tool to leverage an internal decision that suits them.
The main issue that faces the EJC is how they will classify the services, and what will be the clear distinctions between ridesharing apps and taxi service operations. A ruling that goes against Uber will most probably mean the end of Uber type apps in Europe.
What is the Gig Economy?
"A gig economy is an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements." http://whatis.techtarget.com/definition/gig-economy
Ubers meteoric rise, mainly due to its founder's megalomaniac push for global rideshare domination, created a whirlwind effect that took regulators by surprise. The speed at which private car owners hooked up to the new source of income was not expected by regulators, although there were many signs showing that "gig economies" were coming of age. Airbnb, Zimcars (Lyft) and various apps that appeared on the scene at the same time that Uber appeared were all precursors of where the new service sector was pointing to.
The questions that arose from Uber’s rise were around two issues:
- Is it a taxi service?
- Are driver's employees or contractors
Uber has been fighting an uphill battle for years, and in the US, has succeeded in persuading most states as well as the government of their cause and the fact that their model is dependent on car owners being either private self-employed independent contractors or corporate sub-contractors such as fleet owners providing UberBlack services.
Ubers biggest detractors have been their drivers and other tax services and regulators. Drivers have been arguing that the restrictions imposed by Uber negate the independent contractor status and as such are more in line with being fully employed. As such, they deserve to receive full employment packages and coverages. Uber counters this with the fact that vehicles are privately owned, and the vehicle owner is contracted to provide a service to Uber customers only, they are not forced to work beyond certain basic requirements that are set to assure a serviceable level of drivers (saturation) that will provide a good service all the time.
Taxi companies and drivers claim that Uber drivers are offering a professional service identical to taxi drivers, the fact that they are not allowed to be flagged, but must only take requests via the app does not change the nature of their work, which is essential, driving for a living. The ownership of the car is not the issue, according to taxi companies, it is the nature of the work that determines the service.
Regulators have been in the middle of the battle between professional driving associations and unions and the gig economies. Where they have slowly been losing ground to the overwhelming support Uber, and Lyft receives from their thousands of drivers that wish to work without going through rigorous licensing procedures. This is true especially since most of the drivers are using ridesharing as a secondary source of income to their day jobs.
Maintaining Status Quo or Evolving?
Gig economies include any sharing service that offers an app to coordinate its sales. AirBnB is one of these companies. It offers apartments for short-term rent, and at first, was used to circumvent regular income tax from renting by homeowners. Over time, regulators came on the scene to sort out the income issues. This was not the end of the story, hotels and other professional services were feeling the crunch when more and more homeowners would open their homes and investment properties to tourists. Some cities have made Airbnb illegal due to this issue.
The question arises, when will conventional business trends change to accept the new concepts that have emerged due to smartphones. I am sure that Steve Jobs never envisioned his iPhone promo leading to billion-dollar industries built on this technology.
The biggest issue facing the EJC is whether they can evolve or will they continue to stand by the century old transportation laws that became outdated with the interdiction of the internet and smartphones.
The EJC might just be that final decision maker that will either prolong the final war for evolutionary economics or bury the old giving way for gig economies to emerge and flourish. Perhaps when we study the evolution of transportation we can see similar lines in development and how the world took each step in its stride, for instance, canals were created to ease transport for goods across the UK. The railway changed the way mass transportation happened around the world, and in fact was the main reason for American success in conquering the West and growing into the economy it became before the first world war. This led the way to the car, as an individual means of transport that removed horses from the streets. Now we are faced with gig-economies that are transforming the way we view driving.
A two-decade decision
The next step will be the introduction of autonomous vehicles. Just wait till that one hits the roads. If you think that this court case is important, then believe me, once AV's emerge the real problem will emerge too. AV's mean the removal of drivers and the end of a means of employment. Based on current research and reviews, AV's will be on the market in a couple of years, and in about 20 years it is possible that over 80%of the streets of the world will be populated by driverless cars. This means that no matter what the EJCs ruling, it will be irrelevant in two decades.