Uber Technologies Inc. will be regulated in European Union countries as a transport company after the bloc's top court on Wednesday rejected its claim to be a digital service provider.
The decision stands to increase legal risks for other "gig-economy" companies -- including Airbnb -- a growing part of the workforce, in which people operate as freelancers or on short-term contracts as opposed to holding permanent jobs.
While the EU Court of Justice's ruling covered UberPop -- which used drivers without taxi licenses and has already been shuttered in many countries because of the legal issues -- it's a real blow as the first definitive finding that Uber must be regulated by transport authorities.
The decision clarifies for the first time that connecting people via an app to nonprofessional drivers forms an integral part of a transport service. It rejects Uber's view that such services are purely digital and could fuel further scrutiny of other gig-economy companies. Paris regulators are already clamping down on Airbnb, treating the home-rental service more like a hotel, and British food-delivery startup Deliveroo is in the spotlight for its treatment of workers.
In the EU judges' view, "the most important part of Uber's business is the supply of transport -- connecting passengers to drivers by their smartphones is secondary," said Rachel Farr, senior employment lawyer at law firm Taylor Wessing. "Without transport services, the business wouldn't exist."
The decision stems from a complaint by a Barcelona taxi drivers association, which wanted to prevent Uber from setting up in the Spanish city. The taxi drivers said Uber drivers should have authorizations and licenses, and accused the company of engaging in unfair competition.
Taxi drivers in Barcelona's streets honked their horns in victory.
"It was about time to put an end to the unfair competition of the gig-economy companies that are no more than killer whales in a fish tank," said Raul Lopez, a taxi owner who has been driving the streets in the Mediterranean port city for 17 years.
Uber has argued that it's a technology platform connecting passengers with independent drivers, not a transportation company subject to the same rules as taxi services. The case has been closely watched by the technology industry because of its precedent for regulating the gig economy, where freelancers make money by plying everything from spare rooms to fast-food deliveries via apps on smartphones and PCs.
"After today's judgmentb innovators will increasingly be subject to divergent national and sectoral rules," said Jakob Kucharczyk, of the Computer & Communications Industry Association, which speaks for companies like Uber, Amazon.com Inc., Google and Facebook Inc. "This is a blow to the EU's ambition of building an integrated digital single market."
While the ruling is valid EU-wide, it remains limited to Uber's services and won't directly affect other disputes Uber is facing over how its drivers are treated. One such case is pending at the U.K. court of appeal.
"This ruling will not change things in most EU countries where we already operate under transportation law," Uber said in a statement. "However, millions of Europeans are still prevented from using apps like ours."
Wednesday's case centered on UberPop, an inexpensive ride-hailing service in several European cities that allowed drivers without a taxi license to use their own cars to pick up passengers. Legal challenges have forced Uber to shutter UberPop in most major European countries in favor of UberX, which requires drivers to get a license.
Also Wednesday, Barney Harford, the former chief executive officer of online travel site Orbitz, was named chief operating officer at Uber Technologies Inc., making him the second-highest ranking executive at the company.
Harford, who sits on the board of airline company United Continental Holdings Inc., will oversee global ride-hailing operations, marketing, customer support, and the company's food-delivery business. It's the second major hire by Uber's new CEO, Dara Khosrowshahi, who in October appointed Tony West -- PepsiCo Inc.'s general counsel and a former U.S. Justice Department official -- as chief legal officer.
"There is a broader societal benefit here and fundamentally that's the kind of thing I'm attracted to," Harford, 45, said. "It is very clear that the way the company was run before is not acceptable and we absolutely need to change. I know Dara's way of operating and he knows mine."
Harford has worked for and competed with Khosrowshahi, 48, in the online travel business. In 2004, Harford became president for Asia Pacific at Expedia Inc., where Khosrowshahi became CEO in 2005. When Harford took over troubled, debt-laden Orbitz Worldwide Inc. in 2009, he became one of his former boss's chief rivals.
Information for this article was contributed by The New York Times and by The Associated Press.
Business on 12/21/2017