Taxis are a fixed feature of the urban landscape, whether hailed on the street, ordered by phone, or, back in communist days, lined up at taxi ranks. In pop culture, the taxi serves as an icon of the city—think of New York’s yellow cabs or London’s black cabs.

For several years, taxis have had to compete with a new phenomenon, part of the philosophy of the “sharing economy”: cars summoned through an app installed on the user’s smartphone. This service, pro­vided by the California-based Uber, is cheaper for the passenger than a traditional taxi, but the ride is pro­vided by a driver who does not hold a cabbie’s licence. The competition from Uber has sparked protests by cab drivers all over Europe and resulted in a ban on Uber services in Belgium, France, Germany and Italy.

It was no surprise when the attempt to launch Uber on the passenger transport market in Barcelona in 2014 was met with firm resistance from the taxi drivers there. They demanded a ban on Uber services, claiming unfair competition, and sought to block Uber’s digital platform in Spain.

In response, Uber asserted that it does not provide transport services. It defined its service as offering an application to smartphone users, and thus as informa­tion society service, and more specifically e-commerce, which does not require any licence. The free flow of information society services in the EU is protected by the Treaty on the Functioning of the European Union as well as EU directives.

After considering the arguments of the parties, the court in Barcelona applied to the Court of Justice of the European Union for a preliminary ruling on four questions, finding that it could not decide the case without first obtaining an interpretation of EU law from the Court of Justice. The case was filed on 7 August 2015 as Asociación Profesional Élite Taxi v Uber Systems Spain, S.L. (Case C-434/15).

Transport service, electronic intermediary service, or information society service?

The issue presented to the Court of Justice for resolution is whether Uber’s acting as an intermediary between the owner of a vehicle and a person who needs to make a journey within a city, by managing IT resources (smartphone and technological platform interface and software application) enabling them to connect with one another, should be considered a transport service, or rather an electronic intermediary service or an information society service.

The classification of the service performed by Uber will enable a determination of the requirements the member states may impose on the provision of the service and how the need for such requirements must be justified. Then it will be possible to decide whether the prohibitions on Uber’s activity imposed by the member states comply with EU law.

Transport services, including taxi services, are excluded from the application of the Services Directive (2006/123/EC), and thus are excluded from the scope of the directive’s provisions guaranteeing the freedom to provide services. The rule laid down in the directive is that provision of services in EU territory cannot be conditioned on any authorisation scheme unless it is based on criteria that are non-discriminatory, justified by overriding reasons of the public interest, and proportionate.

If the Court of Justice holds that Uber’s activity is a transport service for purposes of the Services Directive, then the member states would be free to introduce regulations and requirements for provision of that service. But if it finds that Uber is not providing a transport service, then the service will have to be classified further, but in principle it would be covered by the free flow of services guaranteed by TFEU Art. 56, the Services Directive, and the E-Commerce Directive (2000/31/EC).

Moreover, if the Court of Justice finds that Uber is providing an information society service—and thus, for purposes of the E-Commerce Directive and the Technical Standards and Regulations Directive (2015/1535/EU), a service provided for remuneration, at a distance, by electronic means and at the individual request of the recipient—plans for introduction by the member states of any barriers on the free flow of such services must be notified to the European Commission, under the sanction of the ineffectiveness of such regulations enacted without technical notification.

Another request for a preliminary ruling was filed with the Court of Justice in October 2015 in Uber Belgium BVBA v Taxi Radio Bruxellois NV (Case C-526/15). There the Belgian court asked whether the term “taxi services” also applies to unpaid individual carriers who are involved in ridesharing (shared transport) by accepting ride requests which they are offered by means of a software application of an Uber company established in another member state.

Analysis by the European Commission

It is clear that Uber’s business presents a huge challenge for regulated taxi services in Europe and around the world. Uber now operates in hundreds of cities in the Americas, Europe, Asia, Africa, Australia and New Zealand.

In September 2015 the European Commission launched an extensive study of the markets for taxi services and private hiring of cars with a driver. The study also covers the effect on the market for innova­tive new services, including peer-to-peer services and the sharing economy. These are solutions that provide increased access to services but raise doubts in terms of protection of consumers and competition. The rulings issued by the Court of Justice will undoubtedly influence the Commission’s ultimate decision, which is expected to be issued in the second half of 2016. The classification of services of the type provided by Uber will influence the Commission’s decision on regulation of these services at the European level.

It should also be pointed out that in January 2015, the Court of Justice held in Eventech Ltd v Parking Adjudicator (Case C-518/13) that a policy allowing London’s black cabs to use lanes on public roads normally reserved for buses, while prohibiting private-hire vehicles from using the same lanes, did not constitute a form of state aid.