Online Platforms are bullish

On 13th June 2017, Mercantile Court number 12 of Madrid handed down a judgement that refutes the claim that Maxi Mobility Spain SL, owner of the Cabify platform, performs unfair practices by breaching the passenger transport rules for vehicles with VTC (vehicle with driver) licences and auto-taxi vehicles.

Three relevant sentences regarding online platforms have already been handed down in recent months.

Relevant sentences on platforms

  • The judgement of 29th November 2016 handed down by Contentious-Administrative Court no. 11 of Barcelona, that Airbnb emphasises that does not provide accommodation services, but only the mediation service or Information Society electronic service, as we explained in this post.
  • The judgement of 2nd February 2017, by Mercantile Court 2 of Madrid, that rejects the claim that BlaBlaCar competes unfairly on the transport market, as it does not provide the underlying transport service, and the only service it provides is the electronic information society service, as we already analysed in this other post.
  • And the third judgement is that regarding Cabify, handed down by Mercantile Court no. 12 of Madrid, on 13th June 2017, the magistrate goes beyond that and only states that its activity is inherent to that of an online platform and does not breach the transport regulations, but rather in hte case of holders of VTC licences breaching the rules, that would not affect the activity by the platform on the market with regard to its competitors, as these are not taxis, but rather the rest of telematic online platforms in operation.

Key points of the Judgement

(1) Definition of the activity and operating method of the Cabify platform

(2) Its interpretation of Article 15 of Act 3/1991, on Unfair Competition (LCD) and

(3) Resolution of the matter the debate concerns, as a “simple judgement”, in the words of the Mercantile Magistrate himself, that covers three points:

  • The rules infringed do not impose obligations on the platform, but on the providers of the transport service providers, who are the holders of the VTC licences.
  • There is no breach of the transport regulations by the VTC licence holders
  • and, even in the event of there being an infringement by the holders of the VTC licence, this would not provide the platform a significant advantage over their competitors on the market as these, in all cases, would not be taxis but rather other telematic applications that market transport services.

Summary of the Judgement

There are five grounds of law in this sentence:

GROUND OF LAW ONE concentrates on emphasising, as a proven fact (which is highly relevant) that the company that owns the CABIFY application is dedicated exclusively to management and operation of the CABIFY application or platform through a traveller transport commercialisation or intermediation activity based on VTC licences. It operates as follows: the users apply through the application to be provided transport services by drivers who hold VTC licences; the CABIFY application then assigns that service to a VTC licence holder who provides the service to the user who requested it following a route map, and lastly, Maxi Mobility Spain, the owner of Cabify, bills the user.

GROUND OF LAW TWO offers an interpretation of the two principles of land transport the compliance dispute concerns: Article 182 ROTT and Article 23 of order FOM/36/2008. Both principles prohibit, on one hand, holders of VTC licences from driving around public thoroughfares insearch of travellers, or to collect travellers who have not previously booked the transport service.

GROUND OF LAW THREE offers a highly interesting interpretation of Article 15 of the Unfair Competition Act (LCD), persuant to a judgement by the Supreme Court of 17th May 2017, by virtue of which (1) “the grounds of both sections of Article 15 LCD have a common principle: repression of obtaining significant competitive advantages by infringing the regulations”. (2) In particular, the object of Article 15.2 LCD would not be repression of actual breach of the actual regulations, but rather repression of the damaging effects that such infringements would have on the market. And (3) concerns  – as it cites the Supreme Court and records in this judgement – a restrictive interpretation that must be made of Article 15.2 LCD according to the specific circumstances of the case concerned.

GROUND OF LAW FOUR is the key one to reject and refute the claim of conduct causing unfair competition by the company that owns Cabify. This ground of law is based on evaluation of whether an offence of unfair practice by the platform arises and, in the words of the actual Magistrate, it is a simple judgement (which, however, clashes with ground of law five, as we shall see further on).

Three aspects come to light in this ground of law:

  • On one hand, it affirms that the regulations supposedly infringed do not impose obligations on the company that owns Cabify but rather on holders of VTC licences.
  • On the other hand, it emphasises that the sole proof is not conclusive regarding any infringement by holders of VTC licences, that is, that the drivers who hold VTC licences do not infringe the regulations.
  • And lastly, it emphasises that even in the event of there being conclusive proof regarding infringement by the holders of VTC licences that would not constitute any proof whatsoever of any advantage by Cabify over its possible competitors (which is what is of interest for the purposes of Article 15 LCD).

Regarding the first point, one must emphasise that the obligations are not imposed on the intermediation platform, but rather on the holders of the transport licences and literally “may not claim of the application attracts any liability due to the fact of holders of VTC licenses being able to breach administrative regulations”. “Even when the regulations may have been breached by the drivers, that would not cause the company that owns the platform to be charged with another administrative offence”. “No regulation governing intermediation activity, assignment of services or their billing has been breached directly”. This last reference covers everything that constitutes the definition of the online platform service, to conclude that the platform has not breached any of the regulations applicable to it.

With regard to the second point of failure to prove infractions by VTC drivers, the Judgement emphasises that “there is a lack of grounds, even of fact, in the claim” and in the words of the Magistrate himself “the proof is absolutely inconclusive with regard to the actual holders of VTC committing the administrative offences it is intended to charge the manager of the platform [Cabify] with”. “There is no proof of the offence of driving around to seek clients, nor of facilitating attraction of travellers by the holders of VTC licences, not even when they are not parked at the registered office of Cabify”. Article 23 of Order FOM/36/2008 does not mean that the parking place must be the tax domicile of the platform owner, nor that when one leaves the parking place, one need to carry a route map to provide subsequent services.

Thirdly, even if the holder of the VTC licence had committed a breach of an administrative regulation, it is not proven that Cabify has obtained any kind of competitive advantage over its competitors on the market. Thus, there is one of the essential findings of this judgement: Cabify’s competitors on the market are not holders of taxi licences but  – literally as stated by the magistrate – the telematic applications that act as intermediaries in discretional traveller transport.

However, GROUND OF LAW FIVE argues “serious legal doubts”, on the basis of a doctrinal article in the Journal of Mercantile Law that interprets that Uber, UberPOP (that has not been in operation since 2014) and Lyft (that does not provide services in Spain) would infringe competition activity, thus concluding that it is not appropriate to award specific costs to either of the parties.

We consider that pronouncement to be striking indeed, not just because the examples referred to are not practically applicable, in their majority, to the case (UberPOP, Lyft, …), but also as there at least three moments when the Magistrate warns, throughout the sentence, that it is a “simple judgement”, that “grounds are lacking, even those of fact, in the claim”, or that “the proof is absolutely inconclusive regarding any illicit act having been committed”.

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Rosa Guirado

Lawyer & Economist .Founder of Legal Sharing
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