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4th December 2020
Data, Tech & IP Internal Market

Op-Ed : “Member States may subject the activity of ride-hailing platforms in their territory to prior authorisation: Star Taxi App (C-62/19)” by Augustin Chapuis-Doppler and Vincent Delhomme

On 3 December 2020, the Court of Justice of the EU delivered a significant judgment regarding a Romanian authorisation scheme contested by Bucharest-based ride-hailing mobile application operator Star Taxi App. In the wake of Airbnb Ireland (C-390/18), it upholds and clarifies the legal framework governing (ride-hailing) platforms and information society services (ISS) in the EU Single Market.

The facts of the case and the questions referred to the Court of Justice are somewhat reminiscent of that of the landmark Elite Taxi case (C-434/15), in which the Court held that UberPop is a service in the field of transport. Star Taxi App operates a smartphone application which allows users to choose a driver from a list of authorised taxi drivers available for a journey. It does not forward bookings to drivers and does not set the fare, which is paid directly to the driver at the end of the journey. The service is free of charge for users, but drivers are charged a monthly fee.

Star Taxi App contested, before a regional Romanian tribunal, a decision by the city of Bucharest extending the scope of a pre-existing authorisation scheme, applicable to the activity of traditional taxi dispatching, to cover operators of IT applications. This tribunal referred the case to the Court of Justice.

The legal classification of the service provided by Star Taxi App lies at the heart of the judgment, for the applicable EU law provisions depend on it.

There was little doubt that Star Taxi App was a service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services (Article 1(1)(b) of Directive 2015/1535). On this point, the Court recalled the long-standing principle that the concept of remuneration does not require that services are remunerated by those who receive them (Star Taxi App, paragraph 45; see also Bond 352/85, paragraph 16; Deliège C-191/97, paragraph 56 and recital 18 of Directive 2000/31).

However, it is clear since Elite Taxi that an intermediation service satisfying those conditions cannot be classified as an ISS if it forms an integral part of an overall service whose main component is a service coming under another legal classification (Elite Taxi, paragraphs 34,40; see also Airbnb Ireland, paragraph 50 and Star Taxi App, paragraph 49).

In Star Taxi App, the Court logically applies the test devised in Elite Taxi (paragraphs 38-39) to determine whether the service at stake forms part of such an overall service.

First, it holds that, unlike UberPop, Star Taxi App does not create, and make accessible, a supply of urban transport services provided by non-professional drivers that were previously ‘absent from the market’. It only works with authorised taxi drivers whose activity already exists and for whom Star Taxi App is only a means among others for attracting customers. Furthermore, drivers are not forced to use Star Taxi App to provide their services (Star Taxi App, paragraph 52).

Second, the Court states that Star Taxi App does not exercise control or decisive influence over the conditions under which the taxi drivers operate. It does not set or collect the fare, does not select drivers and does not control either the quality of the vehicles and their drivers or the drivers’ conduct (Star Taxi App, paragraph 53).

The Court concludes that Star Taxi App’s service does not form an integral part of an overall urban transport service, reaching the same conclusion as Advocate General Szpunar, but offering a much clearer reasoning (Opinion of AG Szpunar, Star Taxi App, points 42-49).

After Elite Taxi, this judgment makes perfect sense. The Court strictly stuck to the ‘Uber test’. Its consistency with Airbnb Ireland, however, is to be commented on.

Unlike in Airbnb Ireland, the Court does not rely on the fact that the ‘essential feature’ of the service at stake relies on the creation of a list of available service providers that ‘cannot be regarded as merely ancillary to an overall service’ (Airbnb Ireland, paragraphs 51-53). This is to be commended since this observation sat uncomfortably with Elite Taxi and made the applicable standard obscure.

Like in Airbnb Ireland (paragraphs 51-53), and despite the argument made by Advocate General Szpunar in this case that the first criterion of the ‘Uber test’ should only constitute ‘an indication that a service provided by electronic means forms an inseparable whole with a service having material content’ (paragraph 65), the Court relied equally on both criteria of the ‘Uber test’. Consequently, the Court does not allow it to be ascertained what many platforms currently active in the EU must be classified as. This is true, in particular, of many ride-hailing and food order and delivery platforms, such as UberX, which appear to exercise decisive influence on the underlying transport services but work with professional drivers and riders that certainly have ‘a number of other, sometimes long-standing, channels at their disposal’ (Airbnb Ireland, paragraph 55). Should UberX be classified as an ISS just because, unlike UberPop, it relied on professional drivers, even though most of them were ‘absent from the market’ before Uber was launched?

Having ascertained that the Star Taxi App service is an ISS, the Court went on to examine the lawfulness of the authorisation requirement. The approach of the Court is threefold.

First, it examined if this requirement constituted a ‘technical regulation’ within the meaning of Article 1(1)(f) of Directive 2015/1535, which ought to have been notified to the Commission under Article 5 of that directive. A ‘rule on services’ under Article 1(1)(e) constitutes a ‘technical regulation’ if it is ‘specifically aimed’ at ISS, which is the case where the specific aim and object of the rule is to regulate such services ‘in an explicit and targeted manner’ and where the rule does not only affects an ISS ‘in an implicit or incidental manner’.

It was clear that the Romanian provisions existing before the extension decision by the city of Bucharest did not regulate ISS in an explicit and targeted manner since they did not contain any reference to such services (Star Taxi App, paragraph 64). These provisions had been in force even before the creation of applications such as Star Taxi App and was only recently amended to cover such applications. Hence, the rule did not need to be notified to the Commission under Directive 2015/1535. This solution flows logically from the facts of the case but seems however to stand in opposition to the recent judgment in VG Media (C-299/17, paragraphs 37-38).

Second, the Court analysed whether the provisions of Directive 2000/31 or 2006/123 relating to establishment forbade such an authorisation requirement, the provisions on services not being applicable to a purely internal situation such as this one. Article 4(1) of Directive 2000/31, which is a lex specialis to Directive 2006/123, prohibits Member States from subjecting the provision of ISS to prior authorisation or any other requirement having equivalent effect. Article 4(2) however specifies that Article 4(1) does not apply to requirements that are not ‘specifically and exclusively targeted at information society services’.

The Court acknowledged that the decision extending the scope of the pre-existing authorisation scheme was targeted principally if not exclusively at an ISS. Unbothered by the wording of Article 4(2), it swiftly considered that the prohibition contained in Article 4(1) did not apply since the decision did not create a new authorisation regime that targets ISS specifically and exclusively but merely extended an existing scheme to such services (Star Taxi App, paragraphs 81-83).

The Court refers to the Opinion of the Advocate General, who had explained precisely why this interpretation was warranted by the rationale underlying Article 4(2), which is to prevent unequal treatment between ISS and other services without enabling ‘economic operators to evade all legal obligations solely because they operate online’ (Opinion of AG Szpunar, Star Taxi App, points 68-70). The Court confirms that Member States may adapt their existing legislation laying down authorisation schemes to the digital era by means of legal acts aimed specifically and exclusively at ISS.

Third, since no provisions of Directive 2000/31 applied to the requirement at stake, the Court assessed the applicability of the provisions of Directive 2006/123. Articles 9 and 10 of the Directive subject authorisation schemes applicable to services to a number of conditions. Notably, these must be justified by an overriding reason relating to the public interest and proportionate, which the Court clarified in Cali Apartments (C-724/18 and C-727/18).

It remains for the referring court to verify if these conditions are fulfilled in the present case (Star Taxi App, paragraph 89), but the Court provided it with clear guidance, hinting at the unjustified and disproportionate nature of the authorisation scheme. It noted that in order to obtain an authorisation, applicants must satisfy a number of requirements designed for radio-based taxi booking centres (have a two-way radio, a secure radio frequency, staff holding a radiotelephony operator certificate and a licence to use radio frequencies), which imposes unjustified burdens and costs on digital services such as Star Taxi App (Star Taxi App, paragraphs 90-92).

After Star Taxi App, it is clear that Member States may, under certain conditions, subject to prior authorisation not only the accommodation services provided by Airbnb hosts and services, such as UberPop, which classify as services in the field of transport, but also the services offered by platforms, such as Star Taxi App, that fall within the coordinated field of Directive 2000/31.

It remains to be seen, however, if Article 4 of Directive 2000/31 will be overhauled by the new Digital Services Act (DSA) expected on 15 December 2020.

 

Augustin Chapuis-Doppler currently serves as a legal adviser at the French Competition Authority and teaches EU law at the Catholic University of Paris.

Vincent Delhomme is a PhD candidate at UCLouvain. 

Augustin and Vincent co-authored the recent paper ‘Regulating Composite Platform Economy Services: The State-of-play After Airbnb Ireland’ (2020 European Papers).

The views expressed are solely those of the writers.

 

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