Uber, The Court of Justice and the Shapeshifting Duck

Is uberPOP a transport service? Are Airbnb or booking.com hotel operators? Is Skype a telecoms service? The answer to these three questions is: no, no and no. These services, and many more that can be accessed on the Internet, are officially categorised under European law as information society services. As is often pointed out, they do not own and operate cars, hotels or telecoms networks.

This has not stopped some people from claiming that they should be regulated like taxi companies, hotels or telecoms companies, a claim that is not correct and does little to advance Europe’s economic and technological ambitions. Such claims illustrate, firstly, a reluctance to adapt and to invest and, secondly, a lack of imagination and understanding about how the world is changing.

This debate will be on show at the Court of Justice of the European Union (CJEU) on 29th November when it will hear arguments on a case that has been referred from Spain. The case is about whether ‘uberPOP’ is an information society service or a transport service.

‘uberPOP’ is one of the tiers of service available via the Uber application (several types of service are available via the Uber app from ordering a black cab in London, pooling with others to reduce costs, or even ordering food with UberEATS).

It is clear to me and to other commentators such as Damien Geradin that not only is uberPOP an information society service, but so are all its online intermediation activities.  However, that does not mean that no rules and regulations apply, or that none should apply in the future.

Information society services are regulated by a long list of European rules that provide for data protection, consumer protection, rules on financial transaction and much more. In the future we might diagnose the need for new rules to keep consumers safe or keep markets open, but those rules will almost certainly not be the old rules which have governed sectors in the pre-Internet age. In the past, rules have, for example, served to provide information to consumers on who is providing the service, what the tariffs are and some background on the company or individual. With a service available on every smartphone this information is easily available, with much more information on the track record of a buyer or seller: a key mechanism for trust in markets.  

This case has much wider implications. It highlights the clash between those who would regulate everything in the way we always have, industry by industry, and those who argue that new technologies, new services and new realities require new approaches. The outcome of that debate will decide how much Europe can profit from new technologies and how well our citizens will be protected from potential harm. To cite Damien Geradin again

The judgment of the CJEU will have significant implications on the way EU Member States are able to regulate Uber services, but also the services provided by other intermediation platforms in the future.

One fascinating element of this debate is regulatory capture. Sector regulators (e.g., taxi regulators, telecoms regulators, etc.) can end up being captured when they end up cooperating so closely with the players in that sector that they no longer advance the public interest, but instead advance the industry interest.

This has lead some regulators to believe that ‘if it looks like a duck, walks like a duck and quacks like a duck, then it must be a duck’. Quite soon everything starts looking like a duck.   What they miss is that in the world of software and online services, ducks can change shape very quickly, new features can be added and removed and new markets entered. They are in fact, ‘shapeshifting’ ducks. This leaves regulators thinking they know what the service is and how and why it should be regulated. In reality, the service has changed, will change again, has resolved problems that old regulation was designed to cure. Regulators are left scrambling for something to do: no regulation, no job.

As Alfonso Lamadrid over at Chillin’ Competition writes “I realise that I may have underestimated the power of regulators to adopt rules that harm users for no compelling reason”.  Regulators in several evolving markets have become obsessed with establishing a level playing field, code for helping established players, at the expense of other objectives such as protecting consumers, reducing prices, tackling climate change, increasing competition or deepening the single market.

In a world of shapeshifting ducks, where the pace of change will keep increasing, what is needed is a flexible and adaptable approach. This should put positive consumer and social outcomes first and should be done in a proportionate manner to solve real problems, not old or assumed problems.

As we have observed before on Project DisCo, European Commission proposals on telecoms also fail to appreciate this point and argue that online communications services should be governed by telecoms rules. This has been proposed under the same logic of needing to provide a level playing field and apparently without regard to the impact on consumers and on the digital single market.

Now the CJEU has an opportunity to lay down a marker and to remind those captured by traditional ways of thinking that Uber is an information society service that should not be subject to undue restrictions. Perhaps that will be an opportunity to begin to think anew about proportionate regulation in the public interest. I propose to make that our common resolution for 2017.