Uber Suffers Major Setback In Efforts To Conquer European Market
For years Uber has been battling with Barcelona taxi drivers who have argued that UberPOP engages in unfair competition by using unlicensed drivers that are not subject of the same regulatory hurdles as a regular “transport company.” And while Uber has historically taken the approach of just entering new markets and sorting out the regulatory hurdles later, it looks like those hurdles are finally catching up with them in the European Union…which we suspect will not be well received by Uber’s private investors that recently dumped money into the company at a modest $68 billion valuation.
As Reuters noted today, the Court of Justice of the European Union’s (ECJ) Advocate General Maciej Szpunar has just issued a preliminary opinion that Uber is actually a “transport service” and not just an app. Of course, the ruling is significant because, if it stands, it would require Uber to operate effectively as a taxi company and thus provide insurance to drivers and guarantee that they are properly licensed and complying with all safety regulations. Per Reuters:
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.
If the ECJ does rule that Uber is a transport service, this is likely to have an impact on the Silicon Valley firm’s operations in Estonia, Poland, Czech Republic, and Finland where it still runs UberPOP, using amateur drivers to pick up riders.
The ECJ’s final ruling cannot be appealed by Uber
While Uber has repeatedly argued in similar cases that they are merely a ‘market maker’ matching taxi demand with supply, the ECJ’s Szpunar saw it differently finding that Uber “does much more than link supply and demand: it created this demand itself” adding that “Uber can thus be required to obtain the necessary licenses and authorizations under national law.”
However, the ECJ’s Szpunar said that Uber’s argument that it merely matches supply and demand between drivers and passengers was a “simplistic view of its role.”
“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,”
“In effect, Uber does much more than link supply and demand: it created this demand itself,” Szpunar wrote.
The service provided by Uber amounts to the “organization and management of a comprehensive system for on-demand urban transport,” the ECJ said.
Regulating the software company as a “new economy” information service meant treating Uber as if it was simply an air traffic controller or market maker connecting drivers to passengers.
Instead, by forcing Uber to comply with myriad local transportation regulations – some dating back as long as a century – it must take more responsibility for certifying, insuring and paying its drivers, as taxi firms now do.
Meanwhile, Uber representatives were dismissive of the initial ruling saying that such decisions only serve to “undermine the much needed reform of outdated laws…”
A spokeswoman for Uber said it would await the ECJ’s final ruling, but added it “would not change the way we are regulated in most EU countries as that is already the situation today”.
And a ruling against it would “undermine the much needed reform of outdated laws which prevent millions of Europeans from accessing a reliable ride at the tap of a button,” she added.
Of course, the real question is just how long the negative news can continue to pile up for Uber before all those investors who just added nearly $13 billion to company coffers at a $68 billion valuation start to get a little nervous that the company is still burning a couple billion dollars a year. Do we smell a dreaded “down round” coming up?