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EU Court Rules Against Uber, Mercedes Invests In Rival

The European Court of Justice has ruled that Uber is a transportation company, not a tech company. The ruling may subject Uber to more regulation in European markets.

Three years ago, the city of Barcelona decided that Uber was a taxi service and needed to comply with the same regulations that applied to taxi companies. Uber, following the combative, in-your-face tactics preferred by then CEO Travis Kalanick, vehemently disagreed. It argued that it is nothing more than an information society service and took the city to court. This week, the European Court of Justice — the highest court for such disputes in the European Union — disagreed with Uber’s position and ruled that Uber is a transportation company, not a tech company.

Uber ride hailing competition

Photo credit: Chauffeur Privé

After the ruling, a spokesperson for the company made the following statement, according to the BBC: “This ruling will not change things in most EU countries where we already operate under transportation law. However, millions of Europeans are still prevented from using apps like ours. As our new CEO has said, it is appropriate to regulate services such as Uber and so we will continue the dialogue with cities across Europe. This is the approach we’ll take to ensure everyone can get a reliable ride at the tap of a button.”

The new CEO of Uber is Dara Khosrowshahi, He was hired by the board of directors after it moved Kalanick aside after a number of complaints about sexual harassment were leveled against him personally and Uber in general. Khosrowshahi was previously CEO of Expedia. Since moving to Uber, he has tried hard to smooth over the ruffled feathers left behind by his predecessor, who once bragged that he should have called the company “boober,” in honor of the number of sexual conquests a stupid white man with way too much money could claim.

In its opinion, the Court ruled that a service whose purpose was “to connect, by means of a smartphone application and for remuneration, non-professional drivers using their own vehicle with persons who wish to make urban journeys” must be classified as “a service in the field of transport” according to EU law. “As EU law currently stands, it is for the member states to regulate the conditions under which such services are to be provided in conformity with the general rules of the treaty on the functioning of the EU.”

Under Kalanick, Uber adopted the position that it had an obligation to reform outdated laws, like those requiring taxi companies to be licensed and drivers to be subject to criminal background checks. Its new CEO is taking a far more collaborative approach. The company took such a combative approach with the city of London that its license to operate was revoked and an infuriated mayor Sadiq Khan threatened that getting it reinstated could take years.

Frances O’Grady, the general secretary of the Trades Union Council it the UK, was pleased by the ruling, telling the BBC that Uber will now have to “play by the same rules as everybody else. Their drivers are not commodities. They deserve at the very least the minimum wage and holiday pay. Advances in technology should be used to make work better, not to return to the type of working practices we thought we’d seen the back of decades ago.”

Rohan Silva, a tech entrepreneur and former adviser to former conservative UK Prime Minister David Cameron, has a different perspective. He says Uber has forced competitors to raise their game. “Millions of people use these ride hailing apps every day — not just Uber, but dozens of others, too. They have brought real benefits, making it cheaper, easier and more convenient to get around the city. There has also been a benefit in incumbent London taxi cabs, which are now taking credit cards, which they resisted for years. That is a response to competition.”

Daimler, the parent company of Mercedes-Benz, announced today that it has acquired a controlling interest in Chauffeur Privé, a French company that provides ride hailing services in Paris, Lyon, and the Côte d’Azur, according to TechCrunch. Daimler says it intends to complete its acquisition of the company by 2019. It has been moving aggressively to acquire ride hailing services in the Middle East/North Africa area as it positions itself to be a major playing in the ride hailing industry in coming years.

The ruling by the European court may have ramifications beyond ride hailing and car sharing. In the so-called gig economy, there are lots of app-based companies like Airbnb that bend the current rules of traditional business. The decision could make them subject to closer scrutiny from regulators. Companies who are hoping for uniform standards throughout the EU may be disappointed, however. Portugal is supportive of companies like Uber and Airbnb, for instance, while France is much more restrictive in its approach.

Andre Spicer, a professor at the Cass Business School in London, welcomed the ruling. He told The Beeb, “Many people see the EU is actually leading the way in pushing back the almost unlimited power of tech firms and beginning to provide some limits around that. We also claim this fosters competition, but what Uber’s model is based on is pricing, so much that they basically drove everyone else out of the market. This judgement will allow normal competition, so what we will see is lots of other smaller apps appearing around Europe.”

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Steve writes about the interface between technology and sustainability from his home in Florida or anywhere else The Force may lead him. 3000 years ago, Socrates said, "The secret to change is to focus all of your energy not on fighting the old but on building the new." Perhaps it's time we heed his advice.


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