What does the ECJ’s decision on Uber say about the social role of digital platforms?

Expert comment by Kent Law School Associate Lecturer Dr Serena Natile

  "From cash to digital" by FamZoo Staff. CC BY-SA 2.0

Just before the holiday break the Court of Justice of the European Union (ECJ) in its first ruling on the gig economy decided that the global digital technology-enabled taxi company, Uber, is a transportation and not an information service and can be regulated by Member States (MS). This judgement has raised important questions regarding the regulation and social implications of digital platforms according to EU law and beyond. While the ECJ’s decision created more grounds to protect workers’ rights in the sharing economy and contributed to the debate on the allocation of EU/MS competences within the digital domain, it also offers useful insights to reflect on the social role of digital platforms more generally.

Uber: digital service v transportation company?

Following an action brought in 2014 by Asociación Profesional Elite Taxi representing taxi drivers in Barcelona against Uber Systems Spain, the Spanish commercial court referred a number of questions to the ECJ via the preliminary ruling procedure with the aim to clarify the classification of Uber’s activities under EU law. Uber is a digital platform which makes it possible via a smartphone-enabled app developed in San Francisco to order urban transportation services in the cities where Uber has a presence, currently 633 cities worldwide. Elite Taxi claimed that Uber’s activities, in allowing non-professional drivers to use their own vehicle to provide transportation services to the public without holding any administrative licence required under Spanish law, amounted to ‘misleading practices and acts of unfair competitions’.

Complaints against Uber are not new: last October Uber was banned in London because of non-compliance with transport regulations, misconduct of the drivers and a broader debate on drivers’ uncertain rights. Uber is a privately-held digital platform: it provides intermediation between different groups such as drivers, consumers, start-ups, advertisers, corporations, financial institutions and payment services. As Nick Srnicek explains in Platform Capitalism, platforms place themselves in a position in which they can monitor the interactions between these actors and control the terms on which their business is carried out. The question before the ECJ was precisely whether Uber Spain was merely functioning as an intermediary between drivers and passengers or whether the control was such that the platform had gone beyond intermediation.

The complicated aspect of the ECJ’s decision was to understand the point at which services like Uber are not longer to be considered ICTs services within the e-Commerce Directive, but under the Services Directive. The e-Commerce Directive constitutes the legal framework for online businesses and those providing some forms of intermediation services such as conduits, providers of caching services, and hosts. The Service Directive regulates a variety of services with the exception of transport including taxis, financial services, gambling activities, the audiovisual sector, healthcare and social services: these services may therefore be subject to more detailed regulatory systems in MS.

The ECJ confirmed that, in principle, a service providing information from one party to another would fall within the e-Commerce Directive as an information society service. However, the service provided by Uber is ‘an intermediation service consisting of connecting, by means of a smartphone application, a non-professional driver using his or her own vehicle with a person who wishes to make an urban journey’ (para 37). The Court concluded that neither the e-Commerce Directive nor the Services Directive was applicable to Uber’s platform sustaining that that the app was part of a transportation service which ‘includes not only transport services in themselves but also any service inherently linked to any physical act of moving persons or goods from one place to another by means of transport’ (para 41) and it is for the MS to regulate the conditions under which such intermediation takes place (para 47). A key reason for this decision is that Uber’s platform goes beyond providing intermediation and has a decisive influence over the conditions under which the transportation service is provided.

The categorisation of a service into a particular category affects the extent to which those services may be subject to regulation. The ECJ’s decision suggests that those providing apps to facilitate the provision of services may now need to comply with the regulatory framework for that particular service, rather than the regulatory framework for e-commerce. Indeed, the providers of electronic intermediation services have to date benefitted from an approach which has limited regulatory requirements, reduced the costs of running the services and contributed to developing the market in such hybrid services. This also demonstrates how this regulatory approach has legitimised a business model that relies on the expansionary power of digital infrastructure and users’ social and flexible work to produce actual and potential (e.g. in the form of data) profits for the platform owners.

Digital platforms before Uber: what can the EU learn from the Global South?

A similar logic has determined the expansion of digital platforms in countries of the Global South where not only platforms like Uber have been successfully imported, and praised particularly by Westerns travelling abroad, but a variety of local platforms have been also developed. Although digital platforms in countries like Kenya and Brazil have been conceived as development strategies, their regulatory dynamics are very similar to the ones described by the ECJ.

An interesting parallel can be drawn with mobile money platforms: money transfer services that function via the mobile phone infrastructure. One of the first and most discussed mobile money platforms to date is M-Pesa (M for mobile, pesa Swahili for money) in Kenya, which originated from the informal practice of transferring prepaid airtime and was institutionalised through a public-private partnership between Vodafone and the UK Department for International Development (DfID) in 2007. M-Pesa was initially thought to fill a niche in the market by serving the so-called ‘unbanked’, those excluded from conventional banking, but the service has been rapidly integrated into everyday activities across a variety of formal and informal sectors including commerce, healthcare, agriculture and education, reaching about 70 per cent of the Kenyan population.

As for Uber, the rapid growth of the M-Pesa platform has been facilitated by a light-touch approach to regulation which has allowed the Central Bank of Kenya, in agreement with the Kenyan government, Vodafone and its local partner Safaricom and various regulatory agencies to supervise the service while maintaining an openness to new providers and practices. This approach has been justified by the hybrid nature of digital platforms which reside at the intersection between ICT and the service they offer, transport in the case of Uber and finance in the case of mobile money. For mobile money in Kenya, there was also a strong political justification in addition to the uncertainty on how to regulate the new service: according to Financial Deepening Sector Kenya in 2006, before M-Pesa was launched, only 18.9 per cent of the Kenyan population had access to formal finance and this was used to encourage financial inclusion as a development strategy in line with the Millennium Development Goals (MDGs) first and the Sustainable Development Goals later (SDGs).

The regulatory practices of mobile money in Kenya, adopted since 2007, have been formalised in the National Payment System Regulations in 2014, which regulate mobile money as a payment and not as a banking service. This ‘test and learn’ approach has been acclaimed for facilitating access to financial services and providing employment and other opportunities to the so-called ‘unbanked poor’, by allowing providers to operate without the regulatory burden imposed on the banking industry and reducing the costs of the service. However, while these regulatory practices have contributed to the proliferation of opportunities for both providers and users, they have not been accompanied by corresponding measures to allow more precarious and vulnerable people to take advantage of these opportunities on fair terms. The ostensible one-fix-all approach is a problematic aspect of digital platforms, used as an easy substitute for more complex long-term reforms.

The social role of digital platforms: who benefits?

One of the main remarks that followed the ECJ judgement regarded the potential of the decision to improve the working conditions of platform workers. MS courts and Uber itself will now need to recognise Uber drivers’ employment status: while bus drivers, train drivers and a significant number of cab drivers are unionised and expect certain terms and conditions, including minimum wage, sickness and holiday pay, Uber drivers are considered as amateur instead of professional drivers and don’t have many of these rights. This is particularly promising for EU citizens, also in light of the Workers’ Rights Directive recently proposed by the Commission, which recognises the rights of platform workers.

However, although art. 31 of the EU Charter of Fundamental Rights states that ‘every worker has the right to working conditions that respect his or her health, safety and dignity’, the protection of platform workers remains more controversial for third-country nationals not fully protected under EU law. According to art. 67 TFEU the EU ‘shall frame a common policy on asylum, immigration and external border control, based on solidarity between MS, which is fair towards third country nationals’, but the conditions of this fairness need to be stipulated in legal documents such as for the Long-Term Residence, Single Permit, Intra-Corporate Transfer, Seasonal Workers or Blue Card Directives. Similar concerns in terms of workers’ protection can be expressed in relation to Brexit and the uncertainty regarding the status of EU citizens in the UK. There is no certainty regarding what EU laws regarding workers’ protection the UK will decide to transfer from the acquis communautaire to the UK acquis.

While the ECJ’s decision has created grounds for the protection of workers in the sharing economy, it is useful when discussing digital platforms to broaden this conversation beyond the EU jurisdiction. Digital platforms have created a variety of opportunities for the unemployed and the excluded, but also new categories of vulnerable workers, consumers and users across the Global North and the Global South. The technology behind digital platforms has demonstrated to have the potential to create an economy based on ideas of community and solidarity, but the business model that regulates these ideas has mainly benefited platforms’ owners framing a new sharing economy of precariousness. Besides the interesting legal questions that the ECJ judgement poses, it is important to understand the politics behind ubiquitous digital platforms and reflect on whether these platforms could be regulated in a way that allows all participants to share power and profits and not just the work.

Dr Serena Natile is a Postdoctoral Researcher at King’s College London and an Associate Lecturer at Kent Law School, where she is the module convenor for Law & Social Change and part of the Inclusionary Practices Project led by Head of Kent Law School Professor Toni Williams. Serena’s research interests lie in in the areas of law and development, feminist political economy, gender politics, financial inclusion and digital humanitarianism. She is currently completing a book based on her PhD thesis titled ‘Mobile Money, Gendered Walls: The Exclusionary Politics of Digital Financial Inclusion’. Besides her academic experience, Serena has worked for the Permanent Representation of Italy to the European Union (Migration and Asylum unit) and for the UNDP in Brussels and collaborated with various gender rights organisations in Italy, Kenya, Ghana and Uganda.