View from Brussels: Is Uber in danger of going under?

The Silicon Valley pioneer of the sharing economy is meeting fierce resistance from vested interests all across Europe.

Uber was always a name I thought tempted fate. In the American Hipster sense Uber means something super or extreme – a positive adjective that of course derives from the German language. But for Europeans, given our history, I would say Uber has superior and Teutonically dominant, controlling overtones - and its literal translation of “over” suggests somehow, above the law, or floating above the social and financial reality everyone else has to inhabit.

Uber is of course the American digital taxi service firm which uses private individuals as unlicensed drivers and links them via a smartphone app to customers who want a ride. Many hundreds of thousands of people in Europe absolutely love Uber.

It’s both cheaper and often more convenient for people out on the town as well as providing occasional extra income for members of the public with a car who register with the service as drivers. The company, which has an enormous market capitalisation despite its short history, is now encountering many problems with vested interests in many European countries. The latest blow is a ruling in an instance of the European Court of Justice which may hammer it completely.

Here is an issue that provides grist to the mill both for many British EU leavers as well as EU remainers. For the former, at least in the Conservative party, here is yet another piece of evidence that the European Union can’t see an innovation without strangling it with red tape - and thank God Britain is leaving that. Some remainers might feel that this is a sign of an EU that works, a union that can take some of the sharp edges off the global capitalist economy, the digital manifestation of which threatens to devastate whole industries. In this case Uber – started by a Silicon Valley geek – is undermining not only the regular taxi industry in many European cities but also raises issues of the taxability of firms in the globalised digital economy.

The Advocate General of the European Court of Justice – whose ruling is followed in about three-quarters of cases by the full European Court of Justice - has just decided that Uber cannot be classified as a pan-European digital services company, for which laxer regulations apply, but instead must be termed a national transport company (for each country it operates in), required to abide by national regulations on issues such as driver specialist licensing, driver social rights and safety regulations. This definitely brings Uber down to earth.

The ECJ’s rulings, as regular readers of this column will know, applies in all member states without question and its final decision is set to come in a few months and is likely to follow the Advocate General. The taxi drivers of Europe, who have been setting up NGOs and lobby groups in the best Brussels tradition to counter the threat to their livelihood provided by cheap unlicensed members-of-the public rides, are likely to be pleased. Since Britain is still in the EU, and presumably must abide by ECJ rulings, it would be interesting to see what British taxi drivers think. The London cockney cabbie doesn’t strike me as an instinctive EU enthusiast but maybe he would appreciate this ruling. (Of course, post Brexit, the British government will be able to roll back any ECJ rulings it likes.)

When the war against Uber is not taking place at a transnational level, it’s being carried out by the nation states and, unusually, includes such market liberals as Norway and Denmark. Uber Denmark closed in April this year after the government forced any member of the public who wanted to be an Uber driver to install a taxi meter. The country’s 2,000 registered Uber drivers obviously felt this was an onerous obligation and Uber, rather than see a business decline, shut its operations even though it maintains its commitment to its large software development centre in Århus.

And Norway is on the verge of banning Uber, according to reports in the Norwegian press, even though polls show the service is popular, which doesn’t surprise me at all. When I was in Oslo some years ago, the taxi meter was on £15 (150 kroner) before we had even left the maze of one-way streets around the railway station. The normally peaceable Norwegian authorities really seem to have been taking against the company, in this, the most expensive of European countries. According to Norwegian news websites, Norwegian Uber drivers have been harassed by the police, have seen cars confiscated, and tax authorities have pursued drivers, while the Oslo police had been looking into Norwegian Uber’s activities.

If by some chance the full ECJ disregards the recent ruling from the advocate general, there are still outstanding cases up before the ECJ from both France and Germany.

No wonder the Californian chief executive and founder of Uber, Travis Kalanick, 40, has taken time out. Kalanick has the impeccable excuse that his mother died earlier this month. And on top of that there are some outstanding cases in the US courts as well. If you take on powerful interests, as President Trump is discovering, you get many enemies.

There’s also the matter not only of a transport model which challenges the taxi industry with cheap fares and convenience but this: governments have a vested interest in keeping tabs on the ballooning platform economy, of which Uber and Airbnb (an website which links tourists with private home accommodation) are the most prominent examples.

France, which prides itself on a strong welfare state with taxes to match, is at the forefront of opposing the platform economy, on the grounds that it reduces the tax take of governments, because platform companies are often based in tax havens in Europe while operating in countries like France, as they are allowed to do under a piece of EU legislation called the Services Directive. So they pay taxes where they are headquartered. Or rather, no taxes. Which means they can offer very competitive fares.

One French senator said recently: “People speak of the digital revolution, but you also have to talk about the fiscal revolution”. Proposals which the French would like to expand to the rest of Europe include a central independent tax-raising authority that automatically raises taxes from pan-European digital companies and pays into the relevant government’s coffers. Another possibility is that taxes would be withheld from the taxi customer’s bank at the time of the transaction and paid directly to the relevant government. If the ECJ's national transportation requirement doesn't hobble Uber, this tax proposal could – or they could both act in unison.

Both the European Commission (and surprisingly some in the European Parliament) are hostile to these encroachments on the digital economy because the commission fears that the rules used to regulate Uber will be used to put a dampener on other digital service companies. And that could mean the effective end of this exciting new form of entrepreneurship.

The European commission is still staffed by many holdovers from the liberal, pro-market 2000s (the high tide of Blairism) when they aimed for the EU to be a borderless “innovation union.” But Britain’s withdrawal from the EU weakens the power of the largely still market-liberal European commission. But market liberalism has its sceptics: some people – like the French - might say it often fails to look after the interests of the little people stuck in the old economy, like taxi drivers.

So I guess there is more than one perspective to the campaign against Uber.

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