Tech Transformers

Uber is a transportation service and could need new licenses in Europe, top court advisor says

Key Points
  • Uber is a transportation service rather than just an intermediary connecting passengers to drivers, an adviser to the European Court of Justice (ECJ) said.
  • It is the latest blow to Uber in its struggles with regulators in the European Union (EU).
Uber victim to the latest attempt by EU authorities to thwart digital economy: Pro

Uber suffered a setback Thursday with an advisor to Europe's top court stating that the ride-hailing app is providing transportation services, and not merely connecting drivers to passengers via technology which the U.S. firm which has previously argued.

"The Uber electronic platform, whilst innovative, falls within the field of transport: Uber can thus be required to obtain the necessary licences and authorizations under national law," the European Court of Justice (ECJ) said in a statement.

It is a non-binding opinion but the judges in the court tend to follow the advisory.

In 2014, a group called Elite Taxi in Barcelona asked a court in the city to impose penalties on Uber's operations in the country. The association claimed that Uber was engaging in unfair competition towards Elite Taxi's drivers, particularly with its UberPop service, which allowed non-licensed drivers to pick up passengers via the app.

Travis Kalanick.
David Orrell | CNBC

The case was escalated eventually to the European Union's highest court – the ECJ – for advice.

Advocate General Maciej Szpunar said, in his opinion, Uber is not an "information society service". To be considered such would mean the part of the service which is not made by electronic means is "economically independent" of the service. In Uber's case, the drivers would need to be "economically independent". Another criteria to be considered such a service is that Uber provides the entire offering. For example, an online retailer has a website or app as well as shipping the goods it sells. In Uber's case, this would mean it essentially employs the drivers. Uber has said that its drivers do not work for the company and are independent.

The ECJ advisor said that Uber does not meet either of these two conditions and is therefore a transportation company.

"The drivers who work on the Uber platform do not pursue an autonomous activity that is independent of the platform. On the contrary, that activity exists solely because of the platform, without which it would have no sense. The Advocate General also points out that Uber controls the economically important aspects of the urban transport service offered through its platform," the statement said.

Uber facing criminal probe by Justice department

"It is undoubtedly transport (namely the service not provided by electronic means) which is the main supply and which gives the service meaning in economic terms," the ECJ added.

'Outdated laws'

It is now up to the court in Barcelona to decide what to do with Uber later this year. It could mean that the company would need to get additional licenses. But Uber said it's unlikely to change the way it operates in the EU.

"We have seen today's statement and await the final ruling later this year. Being considered a transportation company would not change the way we are regulated in most EU countries as that is already the situation today," a spokesperson for the company said in an emailed statement to CNBC on Thursday.

"It will, however, undermine the much needed reform of outdated laws which prevent millions of Europeans from accessing a reliable ride at the tap of a button."

Uber's Europe woes

Uber launched in Europe five years ago and has since had a number of clashes with regulators as well as traditional taxi companies which have protested against the U.S. firm, which is worth around $66 billion.

In London, U.K., for example, Uber lost an appeal to a court which said that drivers on the platform must pass a strict English language test. In Italy, a court in Rome decided to suspend the app, but this injunction has been halted for now by a higher court. And in Denmark, Uber said in March it would shut down its operations in the country thanks to new rules.

The company has made strides to work with regulators however. It is still operating in most EU countries and last year relaunched UberX in both Berlin and Madrid after being banned in the country, after it complied with local laws.