So it begins! The European Union’s highest court has just ruled that Uber should be regulated as a transportation company — and not a tech firm. The ruling, which cannot be appealed, could have major implications for other companies that operate in Europe’s gig economy. The upstart firms have typically faced lighter regulation than their traditional rivals. This is a major legal blow for Uber after the highest court declared that the unicorn ride-hailing app company is not just a digital company and that it must comply with the EU’s transportation rules. It is a significant setback for a company already dealing with a string of scandals. Uber’s actual valuation is not known at this point. In November, SoftBank invested in Uber at a $48 billion valuation. That was a 30 percent discount to its most recent valuation of $68.5 billion. With this ruling, it remains to be seen whether Uber will be able to maintain its valuation.
In a ruling posted on the court’s website, the court said,
In today’s judgment, the Court declares that an intermediation service such as that at issue in the main proceedings, the purpose of which is 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 regarded as being inherently linked to a transport service and, accordingly, must be classified as ‘a service in the field of transport’ within the meaning of EU law. Consequently, such a service must be excluded from the scope of the freedom to provide services in general as well as the directive on services in the internal market and the directive on electronic commerce.
It follows that, 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.
The court went on to say that it finds that “the inter-mediation service must be regarded as forming an integral part of an overall service whose main component is a transport service and, accordingly, must be classified not as ‘an information society service’ but as ‘a service in the field of transport.”
The decision by the European Court of Justice is a major setback for Uber, which has long insisted that it should be treated as technology service that connects drivers and riders. The court rejected that argument in its landmark decision, ruling that Uber is at its heart a transportation company and should be regulated as such. Uber could now be subjected to the stricter licensing requirements that apply to traditional taxi operators. The startup could also eventually be asked to collect new taxes from customers.
Uber Technologies Inc. is a global transportation technology company founded by Travis Kalanick (also former CEO) and Garrett Camp in 2009. Kalanick later left the company in June after series of allegations of sexual harassment, gender discrimination, and a toxic work environment. Its headquarter is in San Francisco, California, United States. It currently operates in 633 cities worldwide.