The Government of Catalonia regulates cab commercialisation services

10 November, 2016

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Rosa Guirado

The merger between mytaxi and Hailo, pending approval by the European Commission, was announced on 26th July this year.

They aim to create the largest company in the taxi sector in Europe (with 70 million passengers and 100,000 registered cab drivers in more than 50 cities in nine different countries). The operation plans to integrate both applications under the sole brand of mytaxi. However, the merger will probably be slower in Spain precisely due to it being the only country in which both companies were already operating.

But an added obstacle to services being provided by platforms such as mytaxi and Hailo has appeared today, at least in Catalonia: the Government of Catalonia has enacted a Decree, Decree 314/2016, of 8th November, that regulates the specific conditions for taxi service hiring and commercialisation.

The fact is that the taxi “brokerage” or commercialisation service that had been provided under free competition up to present, pursuant to the free service provision guaranteed by the European Sole Market, is now subject to regulation.

It shall thus be necessary for companies providing this service to prove to the Government of Catalonia that they comply with the requisites it has imposed on them.
An “adaptation” term of one year is foreseen for that purpose.
Should the requisites set not be fulfilled, it shall be considered a severe offence, for which the Taxi Act of Catalonia foresees fines of up to 6,000 euros.

Juridical valuation

Some legal considerations regarding the matter:

What general interest do the recently approved regulations pursue? Is this justified?
May the Government of Catalonia regulate commercialisation of taxi services? Does it have the competence to do so?
Does the decree comply with the European Services Directive, which prohibits establishment –in general terms–, follow prior authorisation mechanisms to provide services within the European territory?

(1) With regard to the general interest, the Government of Catalonia states the following in the Recital of Motives of the regulation:

That it is precisely “the growth in hiring taxi services through mediation services, and most especially the progressive presence of means of telematic mediation” that make administrative intervention necessary.
That the high volume of hiring such services by these means makes it advisable to deploy regulations that protect the rights of the users and establish guidelines for hiring behaviour to incentivise transparency and “avoid proliferation of intermediaries and commission agents who do not operate pursuant to the legal terms, make the service more expensive and whose practices are objectionable”.
All this has “the aim of an unquestionable public interest, which is to guarantee the rights of the users, and to avoid action by organisations that, without fulfilling the necessary requisites of professional and technical solvency, may give rise to a certain risk of fraud or breach of the obligations acquired”.

That is to say, that when faced with economic growth of a sector, this Public Administration favours intervening in the market, establishing regulations that establish prior requisites, instead of allowing free exercise of service provision within the territory of Catalonia and encouraging growth thereof.

It is indeed true that the regulations state that such intervention shall take place – as could not be otherwise – pursuant to the principles of need and proportionality, as is required by the European Service Directive. The question is raised in a prior point: could mere intervention of the market, under a doubtful entitlement to competence, as we shall see, not amount, in itself, to said principles being breached? Is this really justified?

(2) With regard to whether it is within the remit of the Government of Catalonia to regulate the matter, the argument provided, both in the Recital of Motives, as well as in the Report by the Advisory Juridical Commission that validates the Decree is as follows:

2.1. The Government of Catalonia has competence to regulate passenger land transport by road, among others, by virtue of Article 169 of the Statute of Autonomy, as was recognised by the Constitutional Court in Judgement 118/1996.

Two points in that regard:

The actual Constitutional Court Judgement (STC) 118/1996 recognises the constitutionality of Articles 3 and 4 of the Land Transport Act (LOTT), recognising the legitimacy of the State to “implement a common economic policy (STC 96/1984), and adapt the “economic facts” of transport to the demands of the national economy unity required by a common market (STC 64/1990)”.

The doubt might arise as to whether the Government of Catalonia adheres to STC 118/1996 to defend its title of competence to regulate the physical activity of transport (as the basis on which it may defend its competence over the “accessory activity” of commercialisation), but that it might, in turn, ignore what is stated by said STC 118/1966, regarding state competence in economic matters, in order to guarantee market unity.

One must at least bear in mind the terms foreseen in STC 118/1996 in economic matters, to value whether a State regulation must prevail (such as, for example, Act 17/2009, that transposes the Services Directive) that might allow, where appropriate, a limitation of the economic conditions of commercialisation of the taxi services, by regional Decree.

That is to say, the question would be: should one bear in mind Articles 3 and 4 LOTT to appraise whether an Autonomous Community may limit the commercialisation conditions of a transport service and thus limit the freedom of provision of services, without the State law that recognises such a right prevailing?

And beyond this, in the event of all the above being possible: would the Central Administration really have an interest in encouraging growth of the collaborative economy?

On the other hand, what is subject to discussion here is not a matter that affects the “physical” transport market, but rather the “virtual” market of commercialisation system, by any telematic means whatsoever. Due to this, it is necessary to justify that the Government of Catalonia has competences to also regulate that matter.

2.2. To that end, the argument provided by the Advisory Judicial Commission of the Government of Catalonia, that validates the Decree, is – to sum up – as follows:

The activity of remote commercialisation (by web, telephone, etc.) is an “accessory” activity to another main one, such as transport.
Pursuant to the Judgement by the Constitutional Court, STC 180/1992, the Government of Catalonia has competences to regulate travel agencies, because it is precisely an “accessory activity” to that of transport.
That would suffice, according to the Government of Catalonia, to apply that parallelism and affirm that it would also have competence to regulate taxi commercialisation services, as they are precisely that: an “accessory activity” to the transport service.

Three matters in this regard:

Does web commercialisation of taxi services fall within the scope of the “physical” service of transport (and thus does it suffice to have competences to regulate transport) or does it lie within the “virtual” scope of information society services?

Here one must remember the European Commission directives on the collaborative economy, emphasising precisely that distinction: collaborative platforms do not provide any physical services at all, but rather “web” or telematic services.

Are type of accessory services provided by travel agencies, with regard to transport, of the same kind as accessory commercialisation of taxi services by web or telephone? And then, why are they regulated in such a different manner (and we are not referring simply to different regulations)?

The fact is that while travel agencies “may carry out any kind of activity of advice, mediation and organisation with regard to tourist services”, online platforms provide information society services, that is, “services normally provided in exchange for remuneration, remotely, by electronic means and on individual request by the intended user of the services”.

Do they sound similar, or is the accessory nature of one service and the other such that they do not appear to be comparable?

That is, both activities might indeed be in some way accessory to the activity of transport, although concentrating on very different objectives, and with quite different juridical natures: (i) travel agencies, concentrating on brokerage for “physical” tourism services that affect transport; and (ii) platforms, that provide “virtual” remote services, by web or telephone, whatever the physical service concerned.

Lastly, it may be interesting to point out that telematic hiring is a means of remote hiring, that is regulated under the Civil Code within the general contracts theory (Article 1,262), as a “mode” of contract formalisation. While travel agencies would not be a general “mode”, but rather a specific type of “accessory contract” to the main contract, which is that of transport. The juridical nature might thus be different, although both services may have an accessory nature with regard to such transport.

(3) With regard to the third matter, due fulfilment of the European Service Directive on the interior market, the Government of Catalonia imposes a series of requisites, that we are not going to analyse in depth now. It shall suffice to state that it requires, among others, that a civil liability insurance policy be held, or justify the link between the company and the holders of a minimum number of licenses.

The question raised in this case is: is there sufficient justification of the need and proportionality of the Decree, for the purposes of its feasibility, or instead of that, does the regulation amount to a de facto entry barrier to the market?