Fierce or Unfair Competition in the Road Passenger Transport Sector?

  • Fierce or Unfair Competition in the Road Passenger Transport Sector?

    Authors: Prof. Maria Victoria Petit Lavall, Dr. Achim Puetz

    Key words:  carriage of passengers by road, shared economy, unfair competition

    In recent years, new internet service providers in the field of road passenger transport such as BlaBlaCar, Uber or Cabify have emerged in many countries, including Spain. These service providers act as intermediaries between users, who are interested in being carried, and drivers, who perform the transport with their own vehicles. Thus, practically anyone who owns a vehicle and is willing to do so, can operate as a carrier across these platforms.

    Such service providers mainly perform the following functions: they connect drivers and users through their website; they have created specific tools, such as applications for smartphones and tablets, both for drivers and for users; and, although initially the intermediation of some of the providers was apparently free of charge, at a given time they started to centralize payments, which now have to be made through the platforms, and obtain a percentage of the remuneration earned by any one of the drivers.

    The professional transport industry has reacted to the emergence of this new source of competition that combines technology, private transportation and a variety of car sharing options, especially because of the latter’s lower costs for users compared to those charged by official means of public transport (taxis, buses, etc.).

    Admissibility is the main issue at stake when analyzing the new platforms. The arguments adduced against their activities are diverse, but they are mostly grounded on the repression of unfair competition. Indeed, carriage of passengers is subject to strict regulations in virtually any country in the world, and the liberalization process is slow. Conversely, the new transport service providers and car-drivers are not subject to the legal rules on access to the profession and its exercise that govern the market as of today; and non-professional car drivers do not pay the taxes that do charge professional transport (informal economy).

    Service providers (and drivers and users who are associated with them) contested this argument stressing that this is a manifestation of the so-called shared economy or collaborative consumption: they connect private individuals (consumers) who share a vehicle to save costs, giving the vehicles a more efficient use. Furthermore, by reducing the traffic in the cities, the environment does also benefit therefrom. Ultimately it is not possible to foreclose new business opportunities that result in more competition that is fruitful and beneficial to consumers, due to an increased availability of vehicles, the reduction of waiting times, lower prices, better quality and furthering of innovation. It is, however, highly debatable whether we are dealing with a true case of collaborative consumption, where the only aim is to share transport costs among individuals.

    The controversy is served. As regards Spain, the Competition and Markets Authority sees value in the liberalization of the sector, although its report on the “New models of service providers and shared economy”, published on 11 March 2016, has been heavily criticized by representatives of the regulated sectors. In the meantime, the matter is before the courts: on 9 December 2014, the Commercial Court No. 2 of Madrid ordered the closure of the Uber website as an interim measure and its decision was confirmed in 2015, precisely on grounds of unfair competition. Similarly, several lawsuits are pending against BlaBlaCar and Cabify. It seems, however, that their final destiny is in the hands of the European Union, as the Judge of the Commercial Court No. 2 of Madrid has decided to suspend the trial and raise a preliminary question to the Court of Luxembourg.

    Adequate legislative intervention is thus imperative, and it would be desirable to count on a European regulation rather than a national one, since the issue eventually affects basic freedoms, such as the freedom of establishment and that of services.