Published Wednesday, December 20, 2017 5:46AM EST
BARCELONA, Spain — Ride-hailing service Uber suffered a new blow Wednesday as the European Union’s top court ruled that it should be regulated like a taxi company and not a technology service, a decision that crimps its activities around Europe and could weigh on other app-based companies too.
Taxi drivers honked in celebration while Uber — which is wrapping up a particularly punishing year — sought to play down the ruling Wednesday by the Luxembourg-based European Court of Justice. The decision might only affect its operations in four countries, and the company said it will try to keep expanding in Europe anyway.
The decision in theory applies to ride-hailing services around the 28-nation EU. But the ruling leaves it to national governments to decide how and whether to change the way they regulate Uber and similar services, which have expanded rapidly in recent years.
Uber has gained a strong foothold and customer base in most European countries, adapting its multiple services time and again to bend to local rules when faced with legal challenges. In many places its hallmark “peer-to-peer” service is already banned, and instead Uber’s services are much like taxis, just more flexible and sometimes cheaper.
But many taxi drivers saw Wednesday’s court decision as an important symbolic victory. And some other internet-based businesses fear it could pave the way for other new regulation, as European authorities look for ways to regulate companies that operate online and outside traditional sectors and don’t fit in with existing laws.
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.
Arguing its case, San Francisco-based Uber said it should be regulated as an information services provider, because it is based on an app that connects drivers to riders.
The court said in a statement that services provided by companies like Uber are “inherently linked to a transport service” and therefore must be classified as “a service in the field of transport” within EU law. It says the EU directive on electronic commerce does not apply to companies like Uber.
Uber said in a statement that the ruling “will not change things in most EU countries where we already operate under transportation law” and that it will “continue the dialogue with cities across Europe” to allow access to its services.
The company has already been forced to adhere to national regulations in several EU countries and abandon its hallmark “peer-to-peer” service that hooks up freelance drivers and riders.
Poland, Czech Republic, Slovakia and Romania are the only countries where the company still offers such peer-to-peer services, and where Wednesday’s ruling might have a direct impact.
In France, Uber’s low-cost service involving independent, unregulated drivers is already banned as the result of legal challenges, but Uber operates a popular ride service involving licensed drivers that competes with traditional taxis and charges similar but more flexible rates.
In Spain, the company operates through tourism transportation licenses issued in some cities, but its peer-to-peer service that prompted the lawsuit is banned.
Taxi drivers honked their horns in central Barcelona to celebrate the 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.
The Barcelona-based law firm representing Elite Taxi, the association that filed the lawsuit, also hailed the ruling. SBC Abogados said in a statement that the ruling’s consequences “can be extrapolated to other businesses that keep trying to avoid legal responsibilities in the services that they provide.”
And the European Trade Union Confederation said in a statement that the judgment will help drivers get fair wages and conditions. It said the ruling “confirms that Uber does not simply exist ‘on the cloud’ but is well established with its wheels firmly on the road.”
However, an association representing online companies warned that the ruling goes against EU efforts to encourage innovation and help European entrepreneurs compete with U.S. and Asian rivals.
“It’s a precedent and a door-opener for online innovators to be to be subjected to national or sectoral rules in the future,” said Jakob Kucharczyk of the Computer and Communications Industry Association. He said it is too early to say which other companies might be affected but called the overall message from the ruling worrying for startups.
Uber has had a roller-coaster year that also included the ouster of its CEO, sexual harassment allegations and the revelation that it covered up a massive breach of customers’ data.
The EU ruling is separate from a string of ongoing legal challenges Uber has faced around Europe and the world, including in Britain.
In the U.S., Uber and competitors such as Lyft are governed by a patchwork of state and city regulations. Generally, Uber has been successful in getting its way, leveraging its popularity to lobby governments. More than 40 states have enacted statewide ride-hailing regulations.
Charlton reported from Paris. Tom Krisher contributed from Detroit