Taxi battle clarifies regulatory hurdles for online services

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Published 03 November 2020
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A recent judgment from a Norwegian appeal court is bad news for online services that put taxi passengers directly in touch with taxi drivers.

Borgarting Court of Appeal confirmed in its judgment of 26 August 2020 that the taxi app "Prai" was in violation of the taxi regulations in Oslo. The reason for the case was that Oslo municipality had banned the app. The company behind the app denied that the online service was in violation of the taxi regulations and that a ban was in any case in violation of the E-commerce Act (2003).

Background

An online service falls within the definition of 'information society service' in the E-commerce Directive 2000/31/EC if the service is provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services. According to the E-commerce Act section 5, a service provider established in another state within the EEA has, without prejudice to Norwegian rules, the right to offer information society services to service recipients in Norway.

The company behind "Prai" argued that it provided an information society service and thus had the right to offer the service without prejudice to the taxi regulations in Oslo.

The parties' arguments before the appeal court were based on case practice from The European Court of Justice (ECJ), more specifically C-434/15 (Elite Taxi) and C-320/16 (Uber France), as well as C-390/18 (Airbnb Ireland).

Elite Taxi

The ECJ ruled in Elite Taxi that Uber's service consisting of connecting, by means of an app, a non-professional driver using his own vehicle with a person who wishes to use a Uber vehicle, shall be considered a transport service and not an information society service according to the Services Directive (Directive 2006/123/EC) and E-commerce Directive.

Uber offered a service linked to an online platform or intermediation service. The service was based on the selection of non-professional drivers using their own vehicle, to whom Uber provides an application. Uber exercised decisive influence over the conditions under which that service was provided by those drivers.

The ECJ found that Uber's intermediation service and the service offered by the non-professional drivers through the Uber app were in principle separate services. However, the transport service depends on the intermediation service as without Uber's intermediation no service could be provided and the people willing to travel will have no means to contact the drivers.

Thus, the ECJ ruled that even though Uber offers an online service, the main element of this service was the provision of transport services and thus Uber services must be regarded as being inherently linked to transport services.

The consequences of Uber's classification as a transport service were very important due to the fact that, according to the Services Directive, the transport sector is excluded from the freedom to provide services, which means that Member States are able to limit the conditions under which such services are to be provided.

This was a crucial judgement for Uber due to the fact that Uber could now face restrictions to the provision of its online services.

Uber France

The ECJ ruled in Uber France that French authorities may prohibit and punish the exercise of a transport activity such as UberPoP.

Uber France provided, by means of an app, a service called UberPop, through which it puts non-professional drivers using their own vehicle in contact with persons who wish to make urban journeys. Uber France fixed the rates, collected the fare for each journey from the customer before paying parts of it to the non-professional driver and prepared the invoices.

Criminal law proceedings were brought against Uber France for having organised this service. According to Uber France, it provided an information society service which was outside the competence of French authorities to penalize.

Recalling its judgment in Elite Taxi, the ECJ observed that the intermediation service provided by Uber France was inherently linked to the offer of non-public urban transport services, since without the app the drivers would not have been able to provide transport services, and the persons who wished to make an urban journey would not have used the services provided by those drivers.

Moreover, Uber France exercised a decisive influence over the conditions under which services were provided by those drivers. Thus, according to the ECJ, the main component of the intermediation service is a transport service and, accordingly, the intermediation service has to be classified, not as an ‘information society service’ but as a ‘service in the field of transport’ within the meaning of the Services Directive.

The judgment was another setback for Uber.

Airbnb Ireland

The ECJ held in Airbnb Ireland that an intermediation service which, by means of an electronic platform, is intended to connect, for remuneration, potential guests with professional or non-professional hosts offering short-term accommodation services, while also providing a certain number of services ancillary to that intermediation service, must be classified as an ‘information society service’ under the E-commerce Directive.

The outcome of the case was that local authorities could not require Airbnb to hold an estate agent's professional license.

So why did ECJ come to a different conclusion in Airbnb Ireland than in Elite Taxi and Uber France?

The reason for the case was that Airbnb did not merely connect two parties through its platform of the same name; it also acted as an estate agent without holding a professional licence, in breach of local regulations.

The ECJ stated in its judgment that it is an ‘information society service’ if the online service is distinct from the subsequent service to which it relates. However, this will not be the case if it appears that the intermediation service forms an integral part of an overall service whose main component is a service coming under another legal classification. The ECJ found that Airbnb's intermediation service satisfied those conditions, as it was separate from the accommodation service to which it relates.

The ECJ also pointed out that Airbnb's intermediation service was in no way indispensable to the provision of accommodation services, since the guests and hosts have a number of other channels in that respect. Further, the ECJ stated that there was nothing to indicate that Airbnb sets or caps the amount of the rents charged by the hosts using that platform.

In addition, the ECJ stated that, unlike the intermediation services at issue in Elite Taxi and Uber France, neither the intermediation service nor the ancillary services offered by Airbnb made it possible to establish the existence of a decisive influence exercised by Airbnb over the accommodation services to which its activity relates, with regard both to determining the rental price charged and selecting the hosts or accommodation for rent on its platform.

Norwegian case - "Prai"

Borgarting Court of Appeal stated that since the company behind the app "Prai" was established in Norway and hence subject to the E-commerce Act section 4, the appeal court did not assess the implications of the ECJ's case practice regarding information society service. The appeal court mentioned that their interpretation on this issue may have been different if the company behind the app was established outside Norway.

The E-commerce Act section 4 reads: "A service provider with a place of establishment in Norway shall within the coordinated regulatory area comply with Norwegian law regardless of whether the service is wholly or partly directed towards recipients of the service in another state within the EEA".

On this basis, the appeal court simply concluded that the company behind the app needed to comply with the taxi regulations in Oslo.

What's next?

A new case with similarities to the Uber and Airbnb judgments will soon be tried before the ECJ.

Case C-62/19 relates to Star Taxi, a Rumanian company that operates an app that places users of taxi services directly in touch with taxi drivers. The app makes it possible to run a search that displays a list of taxi drivers available for a journey. The customer is then free to choose a particular driver from the list. Star Taxi does not forward bookings to taxi drivers and does not set the fare, which is paid directly to the driver at the end of the journey.

According to AG Opinion of 10 September 2020 regarding Star Taxi, an online service that puts taxi passengers directly in touch with taxi drivers constitutes an information society service. The AG Opinion's presumption is that the online service is not inherently linked to the taxi transport service so that it does not form an integral part of such taxi transport service. It remains to be seen whether the ECJ will follow the AG Opinion. Further, it is yet unknown whether the principles laid out in the ECJ's practice concerning information society service may be transferred to other sectors than transport and accommodation.