Uber debate highlights need to tackle collaborative economy challenges

Tackling challenges related to the collaborative economy appears to be a priority for the European Commission as it seeks to strengthen the EU’s Internal Market.

A section on “enabling the balanced development of the collaborative economy” features prominently in the Commission’s Internal Market Strategy published October 28. In it, the Commission quotes a recent study suggesting global revenue from the five main collaborative economy sectors – peer-to-peer finance, online staffing, peer-to-peer accommodation, car sharing and music video streaming – have the potential to reach €300bn by 2025.

The Commission launched a public consultation in September that deals, in part, with the regulatory environment for the collaborative economy. It aims to develop a European agenda for the collaborative economy that will include guidance on how existing EU law applies to collaborative economy business models.

For these initiatives to be successful, the Commission will require input from stakeholders to develop a European approach for tackling some of the tricky issues raised by the new business models.

The collaborative economy offers clear benefits in terms of jobs, competitiveness and consumer choice. However, it also raises uncertainties in areas such as consumer protection, labour laws and potentially unfair competition with traditional service providers. There is considerable divergence in national regulations covering the sector.

Competition law can be invoked by both new collaborative economy operators using digital platforms and traditional service providers. The former may argue current regulatory measures hamper effective competition; the latter will contend that fierce competition is unfair because the new businesses models are not subject to the same regulatory rules imposed on traditional services.

From both point of views, it is the regulation that seems problematic. Member states’ reactions differ. Several wonder about the legality of companies operating under these new business models.

The Uber saga illustrates this situation very well. In France, UberPOP has been banned since July following violent protests from taxi drivers claiming the new service represented unfair competition. The French Constitutional Court upheld the ban in September on the basis of a law banning services that use private car owners without a formal license or training. Similar bans are in force in Germany and Spain.

Uber has complained to the European Commission that Germany’s law on taxis and other competition rules violate EU legislation. These rules date back 50 years and are no longer adequate for covering new services being made available to consumers. A similar complaint was launched against France.

Uber’s supporters ask why there are bans on a service that is more effective and beneficial to consumers in order to preserve traditional taxis from competition.

In response to the complaints, the European Commission has opened probes into whether French and German laws respect general principles on freedom of establishment. By doing so, the Commission has answered Uber’s call for help against national regulators and reiterated its will to embrace the opportunities of the collaborative economy.

In Spain, a national court has referred several questions on Uber to the European Court of Justice. If it is considered a transport company, the main question will be whether Uber will be subject to the regulatory regime applied to the provision of public services. If it’s considered a digital service it will be difficult for national regulators to impact upon Uber’s activities.

In Italy, while UberPOP faced a court ban based on passenger safety, the Transport Regulation Authority and the Competition Authority have advocated reducing differences among the various non-scheduled transport services.

Increased competition between traditional taxi services and car-and-driver hire and technology mobility services would respond to demand from consumers for greater flexibility and more price competition between service providers.

It is clear from the Internal Market Strategy, that the Commission does not intend to oppose collaborative economy business models, but rather wants to create a level playing field so they can compete fairly and effectively with traditional providers for the benefit of consumers.

This is a difficult challenge. It is crucial all relevant operators engage in dialogue with decision-makers to find a way for these different business models to compete fairly for the benefit of citizens.