The Spanish Supreme Court overrides the restrictions imposed on ride-hailing services (¨VTCs¨)

By Patricia Linan, Candela Sotés

08-2020

The ongoing conflict between ride-hailing services (known in Spain as "VTCs"), such as Uber, and the taxi sector has led to a new ruling from the Spanish Supreme Court that confirms the view of the Spanish Competition Authority (the "CNMC") that the restrictions imposed on the VTCs are unjustified and disproportionate.

This dispute began with the approval of the Spanish Royal Decree 1076/2017, of 29 December, which established additional measures to limit and control the use of licenses to operate ride-hailing services. In 2018, the CNMC filed an appeal against the Royal Decree after publishing an official report where it stated that the obligations contained therein constituted a restriction on effective competition in the market. In particular, the CNMC argued that the prohibition of transferring licenses within two years established in Article 1 was an unjustified entry barrier. The CNMC also held that the obligation to communicate in advance each service to be performed set forth in Article 2 was an administrative burden contrary to the principles of necessity and proportionality.

On the other hand, the taxi sector argued that similar limitations had been implemented in different cities and that the restriction on the transferring of licenses is the general rule. In addition, they claim that the obligation to inform in advance of each service is not a new requirement, given that such an obligation was contained in previous rules to keep the "roadmap" of the drivers, and it just has been modernized by the use of electronic means.

The Supreme Court sided with the CNMC and Uber - who also appealed the content of the Royal Decree – in a judgement that orders to override the restrictions imposed on the VTCs. This decision is based on the application of Spanish Act 25/2009, of 22 December (known as the "Omnibus Law"), on the liberalization of various service markets, which removes the limitations and restrictions provided, unless they are established for an urgent reason of general interest. The Spanish Supreme Court has concluded that the aim of preventing speculation regarding licenses cannot be considered as justified on the grounds of general interest. In fact, the Court affirmed that the objective of the Royal Decree is not even to prevent speculation but to mitigate it from the years when licenses were granted without any restriction. Thus, there is no justification based on urgent reasons of general interest and the need for this measure and its proportionality cannot be established. 

Regarding the obligation to inform of each service in advance, the Supreme Court argued that even if such an obligation was provided by a previous rule, the measure cannot be justified if it is contrary to law. Furthermore, it concludes that although the public administration must control that the licenses are executed within the territory in which they were granted, it is disproportionate and unnecessary to require data of the users, which may negatively affect the protection of personal data.

Certainly, the liberalization of this sector is not being easy in Spain. There have been several appeals filed against regulations approved, which have led to different rulings regarding this issue, not all of them, perfectly consistent. Now, this judgement seeks to clarify some of the hottest issues in this conflict. 

For further information on this topic, please refer to the March 2019 edition of our Newsletter, where we analysed another report published by the CNMC about further restrictions imposed on Uber and other ride hailing companies.

The Spanish Supreme Court ruling of 10 March 2020, published this month, is available here (in Spanish).

For more information please contact Patricia Liñán and Candela Sotés.