Received: November 17, 2019, Date of acceptance: April 2, 2020, Date of publication: May 19, 2020, DOI: https://doi.org/10.26826/law-in-context.v36i2.97 Incumbent Strategies against Collaborative Platforms: Lessons from the Battle between Taxi Drivers and Uber in Spain By Carlos Górriz (Associate Professor in Business Law at the Universitat Autònoma de Barcelona), Orcid: https://orcid.org/0000-0001-6555-6251 Universitat Autònoma de Barcelona, Spain ABSTRACT The purpose of this article is to analyse the strategies that incumbent market participants are using to fight collabora- tive platforms. Due to space limitations, the focus is on the battle between taxi drivers and Uber in Spain. The first strategy is imitation. Established operators try to copy technological advances to increase competitiveness. It is the most desirable strategy, because it improves competition and encourages innovation. Besides, some incumbents are collaborating with the platforms. Although the assessment of this strategy is positive, it is not easy to achieve due to the lack of willingness of incumbents. Traditional operators have confronted collaborative platforms through dif- ferent channels. The two most important are judicial and legislative. Regarding the former, incumbents have based the lawsuits on unfair competition. The Spanish experience shows that this strategy is not efficient, as the result is conditioned by several uncertainties. Concerning the second channel, traditional operators put pressure on legisla- tive powers, demanding laws that forbid or restrict the activities of collaborative platforms. The Spanish experience is that this strategy works. Nonetheless, success is not guaranteed, as the outcome relies heavily on the political conjuncture. In addition, it is detrimental to the economic and legal system. Keywords – Collaborative economy, unfair competition, regulatory capture, Uber, Airbnb Acknowledgements. I would like to express my gratitude to Savitri Taylor for her excellent editing work and valuable suggestions. Disclosure statement – No potential conflict of interest was reported by the author. License – This work is under Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0) https://creativecommons.org/licenses/by-nc-sa/4.0/ Suggested citation: Górriz, C. (2019). “Incumbent Strategies against Collaborative Platforms: Lessons from the Battle between Taxi Drivers and Uber in Spain”, Law in Context, 36 (2): 73-89. DOI: https://doi.org/10.26826/law-in-context.v36i2.97 Summary 1. Introduction 5. Regulatory capture 1.1 The threat of collaborative platforms 5.1 Introduction 1.2 The Spanish taxi services market 5.2 The urban passengers transport market 1.3 Collaborative economy 5.3 The touristic rental market 2. Imitation 3. Collaboration 5.4 Critical assessment 4. Litigation strategy 6. Conclusions 4.1 Introduction 7. References 4.2 Unfair competition lawsuits 4.3 Critical assessment 73 Law in context, Vol 36, Issue 2; 2019 ISSN: 1839-4183 1. INTRODUCTION this business model. Their funding allows platforms not only to increase their presence in traditional markets and to confront 1.1 THE THREAT OF COLLABORATIVE PLATFORMS incumbents, but also to be more innovative and venture into The purpose of this paper is to analyse the strategies used new markets and experiences. by traditional operators to fight against collaborative platforms. The collaborative economy has a dark side too. On the one The effectiveness of the strategies is being assessed because hand, it can create negative externalities. For instance, taxi they are shifting the economic, social and legal situation. All driver organisations criticise it, saying that it increases the around the world incumbents are undertaking hostile meas- number of vehicles on roads and streets. Thus, congestion and ures against platforms because they feel threatened by the pollution increase. The expansion of the collaborative economy disruptive force of the collaborative economy. This business in the tourist market boosts the number of private houses model is characterised by the intervention of intermediaries addressed to tourist use. Among the various consequences, (collaborative platforms) which, thanks to digital technologies, there is an increase in the price of housing, a decrease in the facilitate firms, professionals and consumers (i.e. prosumers) supply of long-term rental properties and an increase in its to provide services related to (theoretically) underutilised prices, as well as neighbourhood conflicts (Barron et al. 2018; goods. Car-sharing is an illustrative example. Although cars Comisión Nacional de los Mercados y la Competencia 2018, p. 5 have been shared for a long time, today it is easier for a driver ff.; García-López et al. 2019 and Felgueroso 2019). Nonetheless, to find people willing to share a trip, and the expenses gener- some of the existing studies have been criticised because they ated. The reason for this is that there are software tools that do not prove the cause-effect relationship (See Llobet 2018). match drivers and passengers. Traditional operators also suffer negative consequences. Their The collaborative economy is more appealing than the tra- products lose appeal, their profits decrease, and their future ditional one and is attracting the interest of consumers. The darkens. Taxi drivers are a good example: the increasing appeal reason for its success is using digital technologies to improve of Uber, Didi Chuxing, Lyft, Grab and Cabify reduces the market the ways of offering products and services or to create new value of their licences, which most of them had considered as markets that challenge the established ones (cf. Lobel 2016, retirement insurance. Therefore, it is logical that they react and pp. 15-55; Edelman and Geradin 2016, pp. 3-36; Hatzopoulos use all the available tools to defend their interests. My goal is to and Roma 2017, pp. 4-37; Codagnone and Martens 2016, p. 18 analyse them and assess their impact because society may be f.; Palienko 2019; PricewaterhouseCoopers 2015, p. 15 ff. and paying an excessive price to defend the interests of outdated critically Schor 2014, p. 11 ff.). Thanks to these technologies, business models. providers of products and services can reach more people, more directly, in less time (European Commission 2016a, p. 3). In 1.2. THE SPANISH TAXI SERVICE MARKET other words, the technologies escalate the volume of what was The collaborative economy is present in many areas (housing, already being done and allow “instant gratification” (consumers transport, food delivery, recirculation of products, exchange of get what they want as soon as possible). Hence, they can reduce goods and services, optimisation of active usage, the building of transaction costs and diminish the price or increase profits (Lobel social connections, etc.). Due to space limitations, they cannot all 2018, p. 67 ff.). Secondly, due to the growing interest in staying be examined in this article. Hence, I focus on urban passenger connected and belonging to social networks, they can collect transport in Spain. There are two reasons for this. The first is that more information and make it available to those who are con- I have direct and comprehensive information about the battle nected (Möhlmann et al. 2018, p. 27 ff.). Thus, they can reduce between taxi drivers and Uber. The second and main reason is information asymmetries and increase consumer trust. Thirdly, that it is a very complete scenario: taxi drivers have resorted their offer connects better with the interests and needs of new to all kinds of strategies to expel Uber from the market. They generations: it is more sustainable, as it replaces property with have succeeded, at least for the time being. Nonetheless, some access (Kelly 2009 and Acquier et al. 2018, p. 51 ff.). It allows references are made to other fields in which the collaborative individuals to increase the utilisation of underused products, economy is active, such as tourist rental. and participating in it does not require as many resources. The urban passenger transport market is highly regulated Besides, the purchasing experience can be customised. Lastly, in Spain. One of the reasons for this is the political structure: the success of the collaborative economy among young people Spain is divided into regions (rectius, Autonomous Communi- enlarges its power of attraction. On the one hand, platforms ties) that share powers with the (central) State. Articles 148 are enhancing their market scope and growing among other and 149 of the Spanish Constitution establish the rules relating consumers. On the other, investors are firmly committed to Law in context, Vol 36, Issue 2, 2019 74 ISSN: 1839-4183 to the distribution of competences. According to them, both the intruding on privacy (Elliott 2016, pp. 9-30). Moreover, they central State and the Autonomous Communities have compe- could be of little use in solving security risks. Therefore, the tences to rule on carriage services (Quintana et al. 2014, p. 489 purpose of the legal requirements needs to be examined and ff. and Cano 2014, p. 766 ff.). Traditionally, the central State has only those that respond to security needs that cannot be satisfied passed the general rules regarding the Planning of Land Trans- with technological measures should be maintained. Last, the port (essentially, Spanish Act 16/1987, 30 July, on Planning of justification for fixing taxi fares was to avoid the abuse of taxi Land Transport and Royal Decree 1211/1990, 28 September, drivers’ market power. Since traditionally they were hired on approving the Regulation on Planning of Land Transport) and the street, consumers did not have the opportunity to compare some Autonomous Communities have approved rules regarding or negotiate prices. Nowadays, the internet, virtual platforms, the routes that lie exclusively within their territory. In addition, and mobile devices mean consumers can know the prices in there are also municipal rules regarding urban transport, due advance, compare them and decide which option is best. Nev- to the delegation of legislative powers from the Autonomous ertheless, these technologies may constitute a threat to price Communities. competition (Erzachi et al. 2015). Among other reasons, they The urban transport services market is the battlefield for the make it easier for competitors to agree to restrict competition. confrontation between taxi drivers and Uber. The applicable laws establish several requirements, limits, and conditions, which 1.3. COLLABORATIVE ECONOMY can be grouped into three areas. First: access requirements. An To finish this introduction I will include a section on the administrative authorisation (licence) is necessary to provide definition of the collaborative economy. There is no single public transport services. To obtain this, certain requirements definition or universal understanding of it. On the contrary, the must be met regarding both the vehicle and the licence holder. academy has held several and varying conceptions (Codagnone In addition, administrations can establish quantitative thresh- et al. 2016, p. 6 ff; Hatzopoulos et al. 2017, pp. 5-37; Lobel 2016, olds, which allow them to deny applications when limits are pp. 4-55 and Alfonso 2016, p. 17. See a more informative but exceeded. Second: the provision of services is not free. Legal less academic exposition in Botsman 2013). Initially, some rules establish multiple requirements, limits, and restrictions authors stressed the idea of ‘collaborative consumption’. As that suppliers must meet, for instance, geographic restrictions. this conception proved to be inaccurate, others emphasised Last: the remuneration of some services is restricted. The most the direct link that was created between the provider and the illustrative example is the taxi: municipal administrations fix consumer (peer-to-peer economy) or the fact that the former the rates that must be respected by all drivers. simply responded to the demands of the latter (gig economy or The problem is that most of these requirements, limits, access economy). Some authors have highlighted the key role and charges are outdated. They were introduced a long time played by the platforms (platform economy) and the fact that ago to solve market failures (Domènech 2015, p. 83 ff.; Velasco they facilitated the meeting of a large number of bidders and 2015, pp. 7-14; Botella 2002, p. 215 and Tarrés 2006, p. 48). clients (crowd-based economy). Nevertheless, none of these Although they achieved their goals, they have had a perverse proposals wholly embraces the wide reality covered by this consequence: they have prevented or restricted competition, phenomenon. For this reason, we take the European Commis- with the consequent damage for consumers. Nowadays, tech- sion’s definition as the starting point. Among other reasons, it nological development provides less aggressive measures that may be the seed of future legislation (European Commission could lead to similar results. For instance, the requirement of 2016a, p. 8). authorisation was justified to fight against negative external In the document A European agenda for the Collaborative environmental factors and traffic congestion. Today, software Economy, the Commission gives the following definition: “…the applications and virtual platforms could help to adjust the sup- term ‘collaborative economy’ refers to business models where ply and demand of urban transport. Secondly, the requirements activities are facilitated by collaborative platforms that create demanded of drivers or vehicles were based on information an open marketplace for the temporary use of goods or services asymmetries and security reasons. Again, technology helps to often provided by individuals”. It can be criticised because of its reduce the former. Such is the case of online rating and review tautology, as it does not define collaborative platforms, although systems. Their use would eliminate, or at least reduce, the they are a crucial element of the definition. Nonetheless, through- need for requirements to be imposed on drivers and vehicles. out the document, it refers to entities that use information and The European Commission (2016b, p.10 f.) praises them in communication technologies to create marketplaces or improve its Communication: A European agenda for the collaborative existing ones, where enterprises or individuals offer goods or economy. Nonetheless, they generate other problems, such as services. Hence, it essentially connects the offer with the demand; 75 Law in context, Vol 36, Issue 2, 2019 ISSN: 1839-4183 although it also considers the possibility that the providers are and traditional taxi drivers does not only lie in hiring services workers of the platform, which will provide the services. This online. Customers highly appraise some features and quali- definition – and the characterisation of the platforms – lacks ties of Uber’s service, such as security, the car’s cleanness, the the desirable precision, but it has the advantage that it does politeness and proper dress of the drivers, the possibility of not differentiate the collaborative economy and the platforms knowing the exact price in advance and prepaying it. Hence, it either according to the size of the platforms or suppliers, or to is not surprising that, after protests by taxi drivers, although the profit; all of them are included. This all-encompassing scope not a necessary consequence of them, the regulation changed. fits the Spanish battleground: established market operators are Some regional and local authorities have allowed customers attacking all types of collaborative platforms. Although they to share taxis, the possibility of fixed prices and imposed dress publicly charge against the big or best-known ones (Uber and codes (sportswear, shorts, and flip-flops are forbidden). Airbnb), they have also taken small and national platforms to Imitation is the best strategy from a neutral perspective the courts. They have sued all those they consider a threat and and taking into consideration the interests of consumers and the pressure they have put on the legislative power and public the economic system. It maintains competition in the market, administrations has affected all kinds of platforms. as it allows incumbents to continue offering their services However, when preparing future legislation, the legislator without losing ground to newcomers. Besides, it allows them should reflect on the changes that the collaborative economy to modernise and improve their offering. If traditional opera- is experiencing and the role of platforms in the so-called infor- tors have reacted to the pressure of collaborative platforms, mational capitalism (Cohen 2017, p. 143 ff.). Although at the it is because their services were less attractive. Imitating the beginning it was something altruistic and non-profitmaking, newcomers’ offering seems to be an appropriate measure to the most popular platforms are now multinational enterprises try to satisfy the wishes of consumers and recover their inter- that move millions and practise corporate and financial engi- est (Vega-Redondo 1997, p. 375 ff. and Friedman et al. 2015, neering. Hence, not all the players of the collaborative economy p. 185 ff.). Hence, imitation does not only mean maintaining deserve the same rules (Aloni 2018, 143 ff.). It should be taken competition in the market, but it also improves it qualitatively. into consideration that the difference in economic power can On the other hand, it forces newcomers not to be complacent lead to advantage-taking, whether of the consumer or of the with themselves. They may feel pressurised by the reaction person providing the service. And here lies one of the most of incumbents and keep on innovating, improving services or serious criticisms of collaborative platforms: their greatest reducing prices. competitiveness is based on precarious work and tax avoidance. However, imitation is not always possible or easy to carry out. Some hindrances discourage traditional operators or 2. IMITATION prevent them from reproducing the novelties. First, there can Imitation is one of the first strategies that traditional op- be material or social obstacles. Incumbents might not have the erators undertake to challenge newcomers. When they feel knowledge, ability, time or conditions to develop apps that can threatened, they try to replicate the factors of success to avoid compete with those of collaborative platforms (for instance, re- losing customers. In the case of the collaborative economy, it garding the “impossibility” of imitating Silicon Valley’s success, is essentially the app. Such has been the case of taxi drivers. see Jaruzelski et al. 2012). On the other hand, leader operators Although there were software tools via which their service used to have problems with disruptive technology. Normally could be hired online, they were not widely used: taxi drivers big firms that are ahead of their industries do not properly and customers did not pay them much attention. But when react and end up succumbing to revolutionary changes (see Uber arrived in Spain and landed in the main cities, taxi drivers Christensen 2016, xvi f., 4, 225 ff. and Bower et al. 1995, p. 43 and their organisations began to use, promote and improve the ff.). If we look at the brokerage service in the Spanish taxi mar- existing apps. In a short time they have evolved, changed and ket, we can see that only two new apps seemed to have some joined. For instance, two of the most popular apps were Mytaxi success: Mytaxi and Hailo. However, the success was minimal: and Hailo. In 2016 they merged. And in 2019 they became Free they only worked in Madrid and Barcelona, less than 30% of Now, which was announced with the novelty of offering fixed taxi drivers used them, and they represented less than 10% prices (for the moment only in Madrid), car-sharing and scooter of the taxi intermediation services in 2016 (Source: Comisión sharing services (for the time being not in Spain). Nacional de los Mercados y la Competencia. 2016b, p. 13). On Nonetheless, the difference between the Uber service, as the other hand, the fact that older consumers cannot or do not the paradigm of a platform offering “collaborative” carriage, want to use new technologies can be a disincentive to change and modernise the service. Law in context, Vol 36, Issue 2, 2019 76 ISSN: 1839-4183 Another important obstacle could be the pioneer advan- value and the owner takes measures to keep it secret, they tage. Although economists have intensely argued on this topic enjoy the protection of the law on trade secrets. (Gómez-Villanueva et al. 2013, p. 31 ff. See also Golder et al. Second, unfair competition is another threat. The unfair 1993, p. 158 ff.), early entrants can enjoy some advantages over competition laws of the European countries do not forbid their competitors (Lieberman et al. 1988, p. 41 ff. Regarding imitation, as a rule. Nonetheless, it can be deemed unlawful the factors that can influence the result, Suarez et al. 2005). when there are improper circumstances. For instance, article Consumers may prefer early entrants to later ones, especially 11 of the Spanish Act 3/1991, 10th January, on Unfair Competi- if the latter are incumbent operators who had not improved tion (UCA) states that imitation is free. However, it is unfair: i) their services because they had felt protected by restrictive when an exclusivity right protects the imitated object; ii) when legislation. Second, the products and services of the pioneers it creates a risk of association for consumers or it allows the can become the standards that consumers will use to evaluate imitator to have an illegal advantage over the reputation or ef- competing products. Third, pioneers can erect entry barriers fort of the competitor; and iii) when the imitation is systematic by acquiring scarce assets or tying suppliers. For instance, im- and its purpose prevents a firm from becoming established in agine the consequences in the food delivery service market if a market or expels it. one collaborative platform could hire the services of all riders Third, regulation can be an obstacle when it is so restrictive on an exclusivity basis (European Commission 2016a, p. 15). that it limits the freedom of operators. This is what happens Lastly, if the pioneers keep innovating, traditional operators with taxi services in Spain. Legal rules impose access require- may not be able to keep pace. This probably happens if their ments and conditions to provide the service and they limit the attractiveness “persuades” investors to bet on them and inject activity of taxi drivers. For instance, they are not free to cut funds. Nevertheless, first-movers also encounter some disad- fares or to offer fixed prices. Hence, if they want to compete vantages, such as the ability of late-movers to “free-ride”, the with newcomers, they should ask the competent legislator to need to face some technological or market uncertainties, or introduce the necessary changes in the law. Sometimes there the incumbent inertia. is no need to ask, because legislators modify, on their own The law can also become an obstacle. First, imitation will be initiative, the regulation to improve the service and enhance considered illegal if the thing copied is protected by an exclusiv- the competitiveness. ity right; for example, a copyright or a patent. Nonetheless, it is There is another impediment; perhaps the most important doubtful that intellectual property laws provide high protection. one: the lack of willingness to compete. Fighting against newcom- In the case of collaborative platforms, the key element is the ers is not easy or comfortable; it requires effort and sacrifice algorithm. Most legal systems do not give it substantial protec- and there is no guarantee of succeeding. Hence, it is preferable tion. Such is the case of Spain and the European Union (EU). It to forbid them from entering the market or to drive them out. cannot be the object of a patent as it is not an invention. Article This is what has happened in Spain between Uber and 4 of the Spanish Act 24/2015, 24 July, on Patents establishes taxi drivers. Before the collaborative platform landed, the that mathematical methods and computer programmes are economic life of the latter was easy, in the sense that there not patentable inventions. It might seem that copyright law was no competition in the market. They were all exposed to could protect it. Article 10 of the Spanish Intellectual Prop- the same conditions and prices. Hence, they did not need to erty Act (Royal Legislative Decree 1/1996, 12 April) protects worry about competition, just about finding passengers. The original literary, artistic and scientific creations. The letter i) fact that the number of cab licences has not increased during of its paragraph 1 includes computer programmes. However, the last twenty years in Spain seems quite revealing (Figure an algorithm is not a computer programme and, according to 1). Uber’s appearance changed the scenario: taxis had to cope the European IP Helpdesk, it is not an intellectual creation, but it has a factual nature (see the answer to a question on the protection of an algorithm that controls the management of hardware equipment: http://www.iprhelpdesk.eu/news/ copyright-or-patent-how-protect-my-software). On the other hand, protecting an algorithm through patent or copyright has a considerable inconvenience: the information will be disclosed. Hence, it will probably be better to rely on contractual or trade secret protection (Cohen 2017, p. 154 f.). If the algorithm’s FIGURE 1. Source: Spanish National Statistics Institute (https://www.ine.es/jaxi/Tabla. information is not generally known, and it has a commercial htm?path=/t10/p109/l0/&file=00001.px) 77 Law in context, Vol 36, Issue 2, 2019 ISSN: 1839-4183 with a new competitor, whose offer was very attractive for it is very difficult for cooperation to work in the field of col- consumers. The taxi drivers’ reaction was litigation and social laborative carriage. On the one hand, taxi drivers do not wish protest. They never asked for a more flexible legal regime or to know anything about collaborative platforms. On the other for freedom to fix prices. Their only concern was to shut the hand, according to the press, the collaboration offer of these collaborative platform out of the market. platforms is highly unattractive. Another important obstacle is exclusivity. On the one hand, 3. COLLABORATION it can create a bottleneck and hinder the provision of services. Imitation has not been the only non-conflictual strategy On the other, it demands that the choice be adequate: if tradi- employed. On some occasions, incumbents prefer collabora- tional operators can bind only one platform, they should make tion. Such is the case of restaurant and food delivery services. sure that it is best suited to their interests and that it has the In recent years, it has become fashionable to order meals and potential to compete with others on a lasting basis. Choosing have them delivered, instead of going to a restaurant. Nowa- the wrong one will be a failure that can put the firm’s survival at days, it is normal to see young people, provided with bikes and great risk. However, exclusivity could be considered illegal as it cubic backpacks, queuing at the doors of restaurants to pick can represent an agreement between enterprises that restricts up orders and take them to the customers’ houses. Most of competition; i.e. an anti-competitive behaviour. Hence, it could these riders have been hired by collaborative platforms (Glovo, be deemed null and void and the parties could be punished. Deliveroo, Just Eat, Uber Eats, etc.), that offer their services to restaurants and customers. If restaurants see that they are los- 4. LITIGATION STRATEGY ing competitiveness because of this new fashion, they have two alternatives: imitate or collaborate. They can create their own 4.1. UNFAIR COMPETITION LAWSUITS delivery service and compete not only with other restaurants Collaborative platforms have been taken to Spanish courts but also with collaborative platforms. Alternatively, they can several times for different reasons. Incumbents have sued them join one or several of the latter and collaborate with them. As for committing acts of unfair competition. They have also de- the saying goes “if you can’t beat them, join them”. nounced them for crimes against tax authorities, crimes against This strategy also works in the opposite direction: newcomers workers’ rights, fraud, money laundering and manipulating can use this strategy to overcome the opposition of traditional prices. Besides, they have challenged the laws that ease the operators. This is what has happened in the collaborative carriage service of collaborative platforms or liberalise sectors. Persons market. Cabify is a Spanish transportation network company who provide services through their apps have demanded to be that has always offered vehicle rental services with a driver. recognised as “workers”, instead of “self-employed persons” as It lived harmoniously with taxi drivers until Uber changed the contracts tend to specify. strategy and entered the same market. Taxi drivers united and We focus here on the first topic because unfair competition began fighting them. One of the defensive tools used by Cabify has been, and continues to be one of the favourite weapons of has been collaboration. It has offered taxi drivers the possibil- Spanish traditional operators to challenge collaborative plat- ity of using its app, so consumers could book a taxi (or hire a forms in the urban passenger transport market: Uber, Cabify, Cabify car) through it (See “Cabify no cobrará comisión durante Blablacar and Mytaxi Spain. It seemed to succeed at first: some tres meses a los taxistas que usen su ‘app’.” Expansión, 29 June courts, not only in Spain but also in Europe, have provisionally 2019). According to newspaper reports, Uber is following the prohibited Uber from continuing to provide carriage services same strategy (for instance, De Las Heras 2019). in their countries (Hatzopoulos et al. 2017, pp. 9-37 and Górriz Collaboration deserves a positive assessment. As with imi- 2015, p. 80 ff.). However, this strategy is failing in Spain: first tation, it has the advantage of allowing traditional operators instance judges have dismissed cases. Appeal courts seem to to continue in the market, competing with their peers. It helps be doing the same, but it will be wise to wait until the Supreme them to improve their performance too, because they go hand Court decides. in hand with newcomers. However, there are some obstacles The first issue that deserves attention is the scope of appli- that hinder or prevent collaboration. The main one is willing- cation of the law. The essential rule is the Spanish Act 3/1991, ness. It is essential that traditional operators and collaborative 10th January, on Unfair Competition. Article 2 establishes that platforms wish to collaborate in order for their relationship it rules all the acts carried out in the market and for concurrent to thrive. Thus, the collaboration conditions or offer should purposes. In turn, article 3 says that natural or legal persons be sufficiently attractive. These requirements explain why participating in the market are subject to the law. The topic has Law in context, Vol 36, Issue 2, 2019 78 ISSN: 1839-4183 raised little concern regarding collaborative platforms. Although requested a preliminary ruling regarding the services of Uber. they stress they are intermediaries, it is obvious that they offer In Judgment 20.12.2017 (C-434/15), the European Court of services in a market and compete with other operators. None- Justice (ECJ) gave a general answer but qualified the decision theless, the issue can raise doubts regarding those persons who in the particular case. It maintained that, as a rule, an interme- offer things or services through apps of collaborative platforms. diation activity that merely connects non-professional drivers On the one hand, the Unfair Commercial Practices Directive with persons who want to make an urban journey is a separate restricts its application to business-to-consumer commercial service from transport. However, this was not the case with practices. Hence, a consumer-to-consumer relationship would Uber, because the collaborative platform had created the market fall outside of its scope of application (cf. Judgment of the Euro- and controlled the carriage services provided by the drivers. pean Court of Justice 4 October 2018 (C-105/17), Kamenova). Because of this decision, or despite it, Spanish courts have On the other hand, article 34(2) UCA establishes that when a rejected the argument that collaborative platforms have com- worker commits the unfair act, the legal action must be brought mitted an act of unfair competition because they did not have against the employer. an administrative authorisation to provide carriage service. The most important act of unfair competition, for our case, Regarding Blablacar, an originally French app for carpool- is violation of the law: it is the legal basis on which the courts ing, the Commercial Court 2 of Madrid (Judgment 30/2017, of Germany, Italy and Spain base the interim measures that 2 February, confirmed by the Appeal Court of Madrid in the forbid Uber from providing carriage intermediation services. Judgment 86/2019, 18 February) based its decision on two Nonetheless, it is possible that different national laws add arguments. The first is that the owners of the app did not pro- other considerations. For instance, article 15 UCA requires the vide carriage service. They were just intermediaries, so they advantage to be significant and presumes that the perpetrator performed information society services. The second reason was took advantage when the purpose of the breached law is to the qualification of the carriage: according to the law, it was regulate the concurrent activity (I analysed its application to not a “public” service but a “private” one (cf. article 62 of the Uber in Górriz 2015, p. 77 ff.). Spanish Act 16/987, 30 July, on Planning of Land Transport). Spanish plaintiffs have alleged three other unfair competi- The activity was not performed by professional drivers, but by tion acts. The first is the act of deception. According to article private individuals who accepted people willing to share car 5 UCA, it is unfair to provide false or misleading information, and travel expenses. Thus, according to transport regulations, as it may alter the economic behaviour of its addressees. The no authorisation was needed. second is price below marginal cost. Article 17 UCA recognises The solution was similar in the case of Cabify, a Spanish the freedom to set prices. Thus, they do not need to cover pro- app that provides vehicles for hire with a driver service. In a duction costs. Nonetheless, in this case, they are unfair when judgment given before the decision of the ECJ on Uber, the Com- i) they can mislead consumers, ii) their effect is to discredit a mercial Court 12 of Madrid maintained that the owner of the product or commercial establishment, or iii) they are part of app was just an intermediary: Maxi Mobility Spain SA was not a strategy to eliminate a competitor. The third and last unfair the provider of the carriage services performed through the app competition act is an act contrary to good faith. Article 4 uses it (Judgment 159/217, 13 June). Besides, it had not been proven as a closure clause. Spanish courts have constructed its mean- that the drivers or the collaborative platform had breached the ing based on the principles of own effort, transparency and law and acquired a significant advantage. At the appeal stage, consumer sovereignty (for instance, Judgment of the Spanish the provincial court of Madrid upheld the decision but changed Supreme Court 628/2008, 3 July. Also, Judgments of the Span- the grounds (Judgment 14/2019, 18 January). First, the facts of ish Supreme Courts 64/2017, 2 February; 468/2013, 15 July the Uber and Cabify cases were different. Second, Maxi Mobility and 395/2013, 19 June). Spain SA received authorisations to provide services when the The solution to most of the cases depends on the qualifica- Spanish 2009 Omnibus Act deregulated carriage. tion of the activity of the collaborative platform. If it provides The solution of the Uber case was restricted by the ECJ’s carriage services, it is subject to transport regulations that answer to the preliminary ruling. Nonetheless, the Commer- normally require administrative authorisation to access the cial Court 3 dismissed the claim. First, it expressed its doubts market and impose several duties on the operators. Neverthe- regarding the necessity of authorisation. The reason was that, less, if it provides information society services, the EU Directive due to several legislative changes, it was not clear whether or on electronic commerce does not allow requirements to be not carriage intermediaries needed a licence to provide their accessed – only exceptional cases- and establishes a special services. However, the main reason was that the defendant legal regime. The Commercial Court number 3 of Barcelona was not the owner of the app. The plaintiff sued Uber Systems 79 Law in context, Vol 36, Issue 2, 2019 ISSN: 1839-4183 Spain SL, which is a subsidiary of Uber Technologies Inc. The established by the UCA are the cessation of the illegal conduct former did not create the market or control the drivers, it did and prohibition of its future reiteration (article 32). Besides, not own the vehicles, it did not hire the drivers and it did not it also means asking for the removal of harmful effects and, of fix their prices or the conditions of the service. Hence, the judge course, compensation for damages. In addition, it is possible dismissed the claim. that the decision will become law and receive a larger applica- The same reasons led to the dismissal of Uber Systems Spain tion – not just between the parties to the lawsuit. This is what SL having committed an act of deception. The taxi drivers’ as- is happening in California with the presumption that persons sociation that brought the claim maintained that it had misled who provide services in return for payment are workers and consumers by advertising its activity as lawful. The Commercial not self-employed people (AB-5 Worker status: employees and Court repeated that the defendant did not own the app, did not independent contractors). Section 1 explains that the aim is hire the drivers and was not responsible for the advertisements. to modify the legal definition of “worker” to incorporate the The unfair competition act of breaching the law also raises doctrine of the case Dynamex Operations West, Inc. V. Superior other questions regarding the app Cabify. An organisation of Court of Los Angeles (2018) 4 Cal.5th 903 (Zaller 2019; De Silva taxi drivers complained that its owner had committed two et al. 2019 and Lake 2019). Besides, the judiciary expenses are breaches. The first referred to hiring services. According to prima facie reasonable and lawsuits are quite fast. Court fees the law, vehicle rental with driver services can only be hired are not disproportionate and the same is the case with lawyers’ online; they cannot be contracted while the cars are on the road remuneration, due to the competition that exists in Spain. or at taxi ranks. The second breach was that Cabify’s drivers Regarding the time, it takes less than five years to have a final have not documented the trips as prescribed by legal rules. The judgment. According to statistics, lawsuits last between one Commercial Court 12 of Madrid dismissed the claim. First, the and two years (18.7 months in 2018 and 21.5 in 2017) at first prohibition and the obligation did not fall on the collaborative instance. The appeal to the regional Appeal Court is resolved platform, which was just an intermediary, but on the drivers. in less than one year (around 8 months). The appeal before Second, the plaintiff did not prove the infringements or the the Supreme Court needs more time: two and a half years (33 advantage. Lastly, the failure to provide documentation was months in 2018, 27.7 in 2017) (Source: Spanish General Council not relevant enough for the Unfair Competition Law. of the Judiciary). Regarding prices below costs, a taxi union argued that Mytaxi Nonetheless, judicial confrontation has considerable risks Iberia SL, the Spanish subsidiary of a German company that owns and disadvantages. The first is losing: as we have seen, all the an app that links taxi drivers and customers, committed an act actions brought against collaborative platforms regarding of unfair competition as it announced discounts to people who unfair competition have been dismissed (something similar hired taxi services through its app. According to the plaintiff, happens in the United States, according to Cohen 2017, 177 this was illegal because local authorities fixed compulsory taxi ff.). Although the battle has not finished, judicial decisions in fares. Again, the Commercial Court 3 Barcelona dismissed the the first instance, and one on appeal have been favourable to claim. Mytaxi Iberia was not subject to taxi fare regulation, as the defendants. Secondly, time and cost. Although they are not it did not provide taxi services. It was just an intermediary. disproportionate in Spain, the situation worsens when doubts arise about the compatibility of the national law with the EU legal Last, the argument of not fulfilling the bona fide require- system. A reference for a preliminary ruling to the European ments fared no better. Spanish case law considers it as an ultima Court of Justice increases the time needed to reach a definitive ratio. Although it is a true legal norm, with binding force, it solution. And since time is money, total costs can be high. These can only be applied when the facts do not fit any of the other inconveniences do not only harm the lawsuit’s parties, but they unfair competition prohibitions (for instance, Judgments of the can be detrimental to the legal system too. They contribute to Spanish Supreme Court 570/2014, 29 October; 468/2013, 15 judicial collapse and force economic resources to be allocated July; 395/2013, 19 June; 75/2012, 29 February and 48/2012, to judicial administration instead of elsewhere. 21 February). This was not the case, as other prohibitions had been invoked and dismissed. Another drawback is the lack of certainty. It is an inherent feature of judicial proceedings, because the outcome does not just depend on a party being right, but also on the lawyer’s 4.2. CRITICAL ASSESSMENT expertise, on the evidence that can be provided and on the When assessing this strategy, the motives of incumbent judges’ receptiveness. The features of the judicial system play operators are obvious. It allows them to achieve their goal: a role too. The rule of precedent does not bind Spanish judges, to expel competitors from the market. Some of the remedies as members of a civil law country. Hence, it is not extraordinary Law in context, Vol 36, Issue 2, 2019 80 ISSN: 1839-4183 that the three instances do not decide in the same vein; i.e., the the owners of Blablacar do not control the providers of carriage Appeal Court can overturn the first instance verdict and the services; they simply put passengers and non-professional drivers Supreme Court can uphold or revoke it. The fact that a higher in contact. In contrast, according to the Advocate General Szpunar, court opts for one solution does not provide enough of a guaran- Uber created a new market and controlled it. The solution of tee that lower courts will follow it; they may hold the opposite this case cannot be applied to the claim against the owners of view. Besides, it is normal for Appeal Courts to disagree on an Cabify, as they have administrative authorisations to perform issue and the Supreme Court decides which view is right. But a carriage services. Similarly, the appeal to comparative law is Supreme Court ruling does not provide an absolute guarantee, of little help because of the differences between national legal unless it has given a judgment to establish case law doctrine. systems. Nonetheless, the fact that another State has banned Uncertainty increases when cases concern new technologies. a service can be an interesting argument to convince a judge. The reason for this is that the doubts of lawyers and judges Last, but not least, a legal victory does not necessarily mean grow. On the one hand, they may have little knowledge about complete success. Apart from cases where the defendant is the new technologies. On the other, the interpretation and insolvent, it is possible that it will change strategy and, hence, implementation of the law become more problematic. The the judgment becomes ineffective. This could have been the Spanish case law on collaborative transport proves this. The case of Uber, if the association of taxi drivers had won the case. doubts of the judge of the Commercial Court 3 of Barcelona on As the Commercial Court 2 of Madrid provisionally banned the qualification of Uber’s services led him to submit a prelimi- UberPop’s activity, Uber Technologies Inc. looked for an alter- nary ruling to the ECJ. Although the ECJ maintained that the native way to carry out business in Spain and began offering collaborative platform provided transport services instead of car rental services with a driver. The firm and its drivers got information society services, the Spanish judge dismissed the the necessary administrative authorisation and continued with claim. The reason was that the defending party was not the the transport activity competing with taxi drivers. The change owner of the app. Thus, it had not committed an unfair com- of business tactic forced taxi drivers to modify their strategy petition act. In other words, the plaintiffs should have sued the or to implement another one. They began to pressurise public parent company and not the Spanish subsidiary. However, it is authorities to tighten the legal regime of the car rental with not easy to know whom to sue, due to the extreme complexity driver service, as we will see in the next section. However, of the corporate structure of collaborative platforms (Noto La they continue fighting in the courts, claiming that collaborative Diega 2016, p. 399 ff.). There have also been cases in which platforms breached, and continue to breach, the law. According judges censure the parties for their “ignorance” of the market’s to the press, in 2019 taxi drivers’ organisations sued Uber and reality. For instance, the Spanish Audiencia Nacional [Span- Cabify for not fulfilling the regulation on car rental services ish High Court] has not admitted a criminal lawsuit against with driver (see Efe 2019 and Garrido 2019). providers of vehicle rental with driver services (Cabify, Uber, etc.). It maintained that the plaintiff’s allegations were based 5. LEGISLATOR CAPTURE on a false premise: the Spanish market of urban passenger transport services is not free; quite the opposite, it is a highly 5.1. INTRODUCTION regulated market, especially regarding taxi services (Order Traditional operators have used another controversial weapon 3.10.2019 (Roj: AAN 1860/2019 – ECLI: ES:AN:2019:1860A)). against collaborative platforms: the capture of the legislator. Besides, the plaintiffs had not provided any sound evidence of They have undertaken several measures to have laws passed deception and, regarding taxes, the Audiencia Nacional stressed that prevent or hinder new operators from performing their that collaborative platforms are normally intermediaries and activity (Miller 2016, p. 184 ff.). This strategy has succeeded do not provide services to end customers. Thus, they do not in Spain: the mobilisation of traditional operators led to the have to pay taxes related to them. In the criminal case we have approval of different legal rules that have affected collaborative mentioned, the Audiencia Nacional stated that the principle of platforms. Some of them have left the market (Uber) and oth- the free market could not be applied to the conflict between ers are facing serious difficulties to continue developing their taxi drivers and collaborative platforms as the urban passenger economic activity (Cabify). However, there are newcomers who, market is intensively regulated. despite complications, remain fruitfully in the market (Airbnb). Regarding the difficulty of cases related to collaborative Nonetheless, the success of this strategy could be considered platforms, it is worth highlighting that their heterogeneity is a temporary, as some of the laws that have been passed are being handicap, because the judicial solution for one of them may not appealed in the courts. The reason for challenging them is that be valid for the others (Rodríguez 2018, p. 62 ff.). For instance, 81 Law in context, Vol 36, Issue 2, 2019 ISSN: 1839-4183 they restrict two fundamental rights: the freedom to conduct it desired - as long as the passenger accepted it. The second ad- a business and the freedom to provide services. Article 38 of vantage was the ease of obtaining authorisations. The so-called the Spanish Constitution recognises entrepreneurial freedom. Omnibus Act of 2009 had liberalised the land transport market Although it is not an absolute right, laws and acts that restrict (Act 25/2009, 22 December, on the Modification of various Laws it should be justified in the defence of interests that deserve for their Adaptation to the Law on free Access to Service Activi- protection. Besides, they should be proportional, in the sense ties and their Exercise). It transposed the EU services directive that they do not introduce restrictions that go beyond what is into national law, but it broadened its scope to issues that were necessary, and non-discriminatory. The freedom of services is beyond the European rule; for instance, carriage. a core principle of the EU Law and, thus, of the Spanish legal With the change of government, the approach to the land system. It has been developed by the EU Services Directive and, transport market transformed. The Spanish Act 9/2013 began regarding the services of the information society by the EU E- to harden the regime of vehicle rental with driver services (Act commerce Directive. Generally, they prohibit prior authorisation 9/2013, 4 July, modifying Act 16/1987, 30 July on Land Transport requirements. Exceptionally, they can be accepted, but they Planning and Act 21/2003, 7 July, on Air Safety). It required an must be based on overriding reasons of general interest and be administrative permit, but it did not fix requirements: these necessary, proportional and non-discriminatory (Hatzopoulos were left to regulatory development. This occurred with Royal et al. 2017, pp. 17-37). Thus, the laws that collide against these Decree 1057/2015, 20 November which modified the Regula- two principles can be valid and effective, but they must respect tion on Transport Planning. On the one hand, it established the principle of efficient economic regulation, in the sense that very stern requirements to obtain authorisation. For example, they do not introduce restrictions that are unnecessary, exces- the proportionality rule: there can only be one vehicle rental sive or distorting. Besides, those who challenge the validity of licence for every 30 taxi licences. On the other hand, it reintro- the laws that restrict the collaborative economy rely on the duced operating restrictions. The most significant was (and still Spanish Act 20/2013, on Guarantee of Market Unit. Inspired by is) that vehicle rental with driver services cannot be hired on the EU Services Directive, it aims to create an environment that the street or at a taxi rank. This proves the will to protect taxi promotes competition and investment that allows companies to services from external competition: hiring them by phone or grow, increase their competitiveness and create more employ- through digital devices was not the norm. ment. Thus, it forces all public administrations to respect its It is essential to highlight that from 2009 to the end of 2015 principles. Article 5 establishes that, when public authorities there was an avalanche of requests for vehicle rental with driver restrict access or the exercise of economic authority, they shall authorisations. As public administrations refused to give them, base its necessity on overriding reasons of public interest, that petitioners appealed to the courts. Since 2017, the Spanish are listed in article 3.11 of the Act 17/2009, 23 November, on Supreme Court has upheld their requests and ordered public the free access to the services activities and their practice. administrations to grant them all. The consequence is that it In addition, it must be proportional to that reason and there is impossible to fulfil the proportionality rule: because of the should be no less restrictive means of achieving the same effect. 2009 liberalisation, the proportion between vehicle rental with driver and taxi licences is not 1/30 but nearly 1/4 (Delle 5.2. THE URBAN PASSENGERS TRANSPORT MARKET Femmine and Grasso 2019 and “Cabify and National Express We will use two real examples to explain the capture of the emergen como grandes tenedoras de licencias VTC” Cinco Días, legislator in Spain. The first is the urban passenger transport 11 November 2019). However, it is important to stress that this and shows the defeat of Uber (Górriz 2019; regarding other situation is not the result of the administrations’ will, but the States, see Edelman et al. 2016, pp. 12-36; Lobel 2016, pp. 23- consequence of the liberalisation that took place 10 years ago. 55 and Wyman 2018, p. 129 ff.). The starting point was 2014 The change in Uber's competitive strategy forced taxi drivers when the Commercial Court 2 of Madrid provisionally forbade to modify their plan: although they did not completely abandon the app UberPop, through which the services of the collabora- the judicial route, they started to pressurise public authorities. tive platform had been provided. Uber looked for an alternative Taxi drivers revolted against the owners of vehicle rental with and found the solution in vehicle rental with driver services: driver licences. They gradually increased their protest actions; obtaining authorisations meant it could legally continue its for instance, they blocked the streets of big cities for several days activity in Spain, competing with taxi drivers. Moreover, there or weeks. On the one hand, they were demanding the enforce- were two important advantages. The first one was the price: ment of the existing laws; especially of the proportionality rule. vehicle rental with driver services was not subject to taxi fare On the other, they were asking for regulation of vehicle rental regulation, rather the provider could establish the remuneration with driver to be tightened. Law in context, Vol 36, Issue 2, 2019 82 ISSN: 1839-4183 Public authorities responded to the protests by approving is Judgment 921/2018, 4 June, in which the Spanish Supreme new rules that strengthened the legal regime of vehicle rental Court examined the validity of Royal Decree 1057/2015 (see with driver. From 2017 to 2019, they passed one Royal Decree also Judgment of the Spanish Supreme Court 14.2.2012 (Roj: STS and five Decree-Laws, a type of legal rule designed for situations 1076/2012 – ECLI:ES:TS:2012:1076) on the validity of Royal of extraordinary and urgent need. The Spanish Government Decree 919/2010 that also governed vehicle rental with driver approved the Royal Decree 1076/2017, 29 December and the services). The point of departure is the assessment of the validity Royal Decree-Laws 3/2018, 20 April and 13/2018, 28 Sep- of its legal basis. According to the preamble of the Royal Decree tember. The Catalan Government approved the Decree-Laws 1057/2015, it is to guarantee a balance in the offer of urban 5/1017, 1 August and 4/2019, 29 January (Górriz 2019). Es- passenger transport provided by cars. The court maintained sentially, they increased the requirements necessary to obtain this was correct. First, the taxi is a service of public interest. It an administrative permit and augmented the duties, burdens is highly regulated as public powers want to achieve suitable and restrictions of the services. For instance, Royal Decree- levels of quality, security and accessibility. Second, the rules Law 13/2018 establishes that the existing vehicle rental with that are approved to achieve this goal are lawful because they driver licences can be used to provide an interurban service pursue a justifiable aim for public powers. Third, since vehicle only. In other words, they do not enable urban carriage, which rental with driver and taxi services compete, when regulating represents the overwhelming majority of services that were them the legislator is looking for a balance between the two. being provided under those authorisations. Aware of the harm The Spanish Supreme Court then analysed the requirements and that it was causing, it provided for a four-year extension during restrictions challenged by the CNMC one by one. It maintained which the licence holders could continue with their activity, as that they were all legal (the proportionality rule, the require- compensation. After this period, persons who wanted to provide ments of the vehicles, the prohibition of hiring services on the urban vehicle rental with driver services should obtain authori- street or at taxi ranks, the obligation to provide at least 80% of sation from regional or municipal administrations. Besides, it the services in the community where the license is domiciled), enables Autonomous Communities to modify the law. Although except one (the requirement of a minimum fleet). Although the the Act and the Regulation on Land Transport Planning still arguments of the court are open to criticism (Górriz 2018), the govern the authorisations to provide vehicle rental with driver judgment is unappealable. services, Autonomous Communities can modify them in relation exclusively to the legal regime of these services. 5.3. THE TOURIST RENTAL MARKET Thanks to this legislative authorisation, the Catalan Gov- The services of non-hotel tourist accommodations provide ernment approved the Decree-Law 4/2019, the measures of another example of the legislator’s capture. They are important which achieved the objective of driving Uber out of Barcelona. for the Spanish economy as they relate to two key issues: the Its article 4.2(2) imposes a minimum period of 15 minutes right to housing and tourism (Doménech 2017, p. 45). The ir- between hiring and providing the service. Besides, it allows ruption of collaborative platforms in this market has affected municipal administrations to extend this period. In addition, traditional operators as well as neighbours. These groups it prohibits geolocation before hiring the service and the park- can exercise more pressure on public administrations and ing of vehicles on the streets. Thanks to this empowerment, regional/local legislators than collaborative platforms and the Barcelona City Council has extended the pre-contracting tourists. They have indeed made use of their influence to have period to 60 minutes. But Catalonia’s High Court (Tribunal some legal rules approved that apply to the services provided Superior de Justícia de Catalunya) has provisionally suspended by or through collaborative platforms; legal rules that do not the effectiveness of the municipal rule (see Comisión Nacional benefit newcomers (Doménech 2017, p. 52). Nonetheless, be- de los Mercados y la Competencia. 2019). fore explaining their content it is essential to remember that, The competition authorities have harshly and repeatedly according to the Spanish Constitution, both the State and the criticised these laws (for instance, Comisión Nacional de los Autonomous Communities could legislate on vacation rental. Mercados y la Competencia. 2016a and Autoritat Catalana de Initially, the rental of tourist homes was ruled by the Spanish la Competència. 2018). Essentially, these authorities assert Act 29/1994, 24 November, on Urban Rents. But in 2013 the that their legal basis is weak and that they introduce restric- Spanish Parliament modified the law to exclude from it the tions to competition, in favour of taxi drivers, that are detri- rental of touristic houses. The preamble of the Act 4/2013, mental to the economy. Furthermore, these authorities have 4 June, on flexibility measures and promotion of the housing challenged the validity of the laws in the courts. Nonetheless, rental market explained that the use of private housing for their claims have been dismissed until now. The key decision tourism was increasing and threatening traditional forms of 83 Law in context, Vol 36, Issue 2, 2019 ISSN: 1839-4183 this activity. As it could be considered unfair competition and guarantees its habitability. Last, some laws require customer a kind of illegal intrusion, it was worth subjecting it to suitable service 24 hours a day. In other words, the property owner special rules; i.e. the ones passed by regional parliament (see must provide a telephone number or an email address that De La Encarnación 2016, pp. 7-26). However, at the beginning allows the customer to contact them at any time. of 2019 the Spanish Government approved a rule that restricts The validity of these laws has been challenged. Associations tourist rental services. It allows the neighbours to prevent a of tourist property owners, as well as the Spanish competition flat from being rented and to increase its contribution to com- authority, have sued autonomous administrations complaining munity expenses. It is the Royal Decree-Law 7/2019, 1 March, that some of the rules are illegal. They establish some restrictions establishing urgent measures regarding housing and rent. It that do not respond to reasons of public interest or that are not is worth mentioning that an appeal of unconstitutionality has necessary, proportional or non-discriminatory. The response been filed against it. of the courts has been heterogeneous. It could be though that Most of the Autonomous Communities began to rule on the this is not exceptional, but the normal situation in Spain when subject. They greatly increased the legislative activity when different tribunals must decide on similar cases. Nonetheless, the arrival of the collaborative economy in the tourism sector the case law of the Spanish Supreme Court is heterogeneous began to be a threat to hotels and other traditional operators too (Judgments 1741/2018, 10 December; 1766/2018, 12 (a list of the different laws is available at https://www.iberley. December; 1816/2018, 19 December; 2/2019, 8 January; es/revista/arrendamiento-turistico-vivienda-modificaciones- 25/2019, 15 January; 26/2109, 15 January and 1237/2019, ley-arrendamientos-urbanos-205). Although there are differ- 29 September). It has maintained that some restrictions are ences, their laws follow the same direction: they all introduce illegal and others lawful. The reason for this is that each re- restrictions on the rental of tourist houses. In contrast to what quirement, duty and burden must be analysed separately and happens in other countries, some of which promote these new assessed whether it is restrictive and, if so, whether it meets types of house rental, Autonomous Communities have hardened the lawfulness requirements. the conditions to offer tourist rental (Lora-Tamayo 2017, p. Thus, the Spanish Supreme Court has rendered void the 286). Due to space limitations, I cannot explain the restrictions prohibition of renting tourist houses through tourist channels that each law establishes. I think that it is sufficient to describe in tourist zones. The reason is that “(t)he only explanation the most popular (see the report of the Spanish National Com- plausible to this shortcut is that its aim is favouring the offer mission of the Markets and the Competition: E/CNMC/003/18 of tourist accommodation products traditionally implanted Estudio sobre la regulación de las viviendas de uso turístico en mostly in these tourist areas, thereby violating free competi- España, p. 40 ff.). First, they limit the type of house that can tion in the provision of services” (Judgment 1766/2018, 12 be rented or the area where the tourist rental offer is allowed. December). The same happens with the prohibition to rent The Decree 113/2015 of the Community of the Canary Islands single rooms (Judgments 25/2019, 15 January and 26/2109, is a wonderful (surreal) example, as it forbids offering tourist 15 January). Third, the obligation of the proprietor to register rental (services offered through “tourist channels”, i.e. online) in the Tourist Enterprises Registry does not pass the necessity in tourist areas. Another example is the prohibition of rent- and proportionality tests (Judgment 1741/2018, 10 December). ing single rooms. Second, several laws require a “responsible The last issue will have important effects as some autonomous statement”: before starting the activity, the proprietor must administrations were fining collaborative platforms for not declare to the competent administration that their enterprise being enrolled in the official register. and the house meet the tourist accommodation requirements. In contrast, the requirement of having a map of the house, Third, they must enrol in a special registry of the Autonomous signed by a competent technician, available to the interested Community. Fourth, in some Autonomous Communities the parties is legal. However, it does not need to be endorsed by house must be identified with a plate that indicates its nature the corresponding professional associations. This obligation, as tourist housing and the administrative authorisation. Fifth, which some laws established, is illegal because that kind of some laws also establish a minimum or maximum number of endorsement cannot be the general rule but the exception. In rental days. Sixth, some Autonomous Communities have estab- this case, it is neither necessary nor proportional. The estab- lished a tourist fee that must be paid by the consumer of the lishment of a minimum or maximum duration of the rent is tourist housing rental. Seventh, some technical requirements, legal, according to the Spanish Supreme Court, when it is used minimum equipment or minimum services are imposed; for to determine the applicable law (Judgement 1237/2019, 29 example cleaning, bed linen supply, household goods, etc. The September). Nonetheless, we think that the solution would be idea is that the rented house must have a minimum quality that different if the rental contract were forbidden because of its Law in context, Vol 36, Issue 2, 2019 84 ISSN: 1839-4183 excessive or insufficient duration. Last, the Spanish Supreme Second, parliaments and governments do not have absolute Court maintained as lawful the obligations to identify the house power to pass the laws they desire. There are some principles with a plate, to have minimum equipment and to have a 24- and legal rules they must respect; for instance, the EU Law or hour customer service (Judgement 1237/2019, 29 September). the freedoms of enterprise and services. As we have seen, the The reason for the first condition is that it gives consumers the laws that collide with them can be (partially) overruled. And confidence that the house fulfils the legal requirements. The this fact leads us to another topic: the costs of the pressure. Ef- other two guarantee the quality of the product. fectively, the capture of the legislator entails significant costs. It is not easy to exert sufficient pressure on a national parliament 5.4. CRITICAL ASSESSMENT or government to cause it to approve a law that only benefits The previous considerations show that the capture of the certain operators. In the case of Uber, taxi drivers needed to legislator has been the most effective strategy to fight against demonstrate and close the streets of the main cities for several collaborative platforms in Spain. It has been more successful days (weeks in Madrid). It could be though that the difficulty than judicial proceedings. Regarding the urban passenger trans- increases when the (central) State delegates the responsibilities port services, pressure from taxi drivers led to the approval of to regional bodies because it is not enough to capture just one several rules that caused Uber to leave. It has left the Spanish legislator but several. Hence, costs and exhaustion increase. cities in which it operated because the legal conditions were too Nonetheless, the closer the powers are, the more sensitive harsh. However, the pressure has not been as successful in the they are to the complaints and protests of the citizens and field of tourist rental. The laws approved by the Autonomous economic operators. Hence, pressure has a greater effect on Communities have hardened the requirements to access the regional authorities than on State ones. And the same happens market and have increased the restrictions to provide services. with municipal authorities. Besides, it is important to take into Hence, individuals have more difficulty offering their homes consideration that challenging the laws passed in the courts through collaborative platforms and complying with the law. could be detrimental for incumbent operators. Although the Notwithstanding, collaborative platforms continue to operate latter do not support the costs of the judicial processes, it can in the Spanish market, and they represent an important source make parliaments, governments and public administrations of competition to traditional operators. less responsive to their claims. In addition, it can produce dis- appointment if, finally, the pressure is unsuccessful. When evaluating this strategy, several circumstances must be taken into account. Firstly, its success depends on the politi- Third, the capture of the legislator is detrimental to the cal conjuncture. The capture is easier the weaker and closer legislative process. It increases legislative pollution. It leads to the legislator is. The fight between taxi drivers and Uber took the approval of legal rules that are not strictly necessary and place at a time when no government had an absolute majority that complicate the work of the jurist. It is especially danger- and, thus, the parliaments were quite fragile. Furthermore, the ous for a country, such as Spain, in which public powers try to Spanish governments of recent times have been involved in solve social conflicts by passing laws that may not be enforced. cases of corruption or internal conflicts that have made them Besides, laws that are the result of pressure are often defective. very vulnerable to pressure. Hence, when possible, they have They are passed hastily, without the help of experts, without transferred legislative power to the Autonomous Communities. consulting all interested parties and without the required reflec- Something similar happened at the regional level. For instance, tion. Hence, there is a great risk that they will be challenged in the Catalan Government approved the rules on vehicle rental with court and that the judges will repeal them, with the consequent driver during the political process of independence from Spain legal security problems. It is worth mentioning that some of and allowed (forced) the City Council of Barcelona to harden the laws we have seen are Royal Decree-Laws. According to the rules it has approved. Spanish taxi drivers will not have it article 86 of the Spanish Constitution, they can only be passed as easy if the European Commission decides to legislate on the in the event of extraordinary and urgent need (such as natural collaborative economy, although they will have the support of disasters). I do not think that the conflicts between incumbents their colleagues from other member states. Moreover, it is a and collaborative platforms meet these requirements. very real threat: Spanish laws could be ineffective or repealed Lastly, this kind of law can harm the national economy (García if the EU decides to regulate this subject (this is what happened 2018). They hamper the activity of newcomers, who are usu- with the decision of the Boise to ban Uber. The Idaho legislator ally more innovative and efficient, to maintain the status quo passed a statute in which the State assumed competences on of traditional industry players (Lobel 2016, pp. 24-55). Thus, transportation network companies. See Miller 2016, p. 156 f.). they reduce the existing competition and hinder innovation. 85 Law in context, Vol 36, Issue 2, 2019 ISSN: 1839-4183 The result is not only that collaborative platforms lose, but also necessarily mean ultimate success. If the platforms change consumers and the national economy, in general, are damaged. strategy or they lobby public authorities to obtain protective laws, victory can be Pyrrhic. 6. CONCLUSIONS Litigation is full of uncertainties, which increase when the Established market operators use imitation and confrontation, case deals with technological issues. The outcome depends both judicial and legal strategies, to fight against newcomers. on many factors (e.g. the legal abilities of the lawyers or the The analysis of the confrontation between Spanish taxi drivers knowledge of the jurists). Besides, there are negative external and Uber proves that capture of the legislator seems to be the factors. On the one hand, time and costs for the parties. On most effective strategy. Due to the social pressure of the former, the other hand, work overload for judges and the necessity to legislative powers have increased the duties, obligations and devote resources to the judicial administration, which could charges of the providers of collaborative carriage services so have been devoted to other purposes. much that Uber ended up leaving the market. Nonetheless, Last, imitation and collaboration are the most desirable the success is not complete: Cabify has stayed in the market strategies. They essentially improve competition and boost because its lawyers maintain there is a legal gap. And some- innovation. They allow incumbents to continue in the market, thing similar occurs in the market of tourist accommodations competing with newcomers. They enhance their services, by services. On the other hand, the success could be temporary: adapting them to the needs and desires of the consumers. They Spanish competition authorities have announced that they are force newcomers – and traditional operators – to keep on in- judicially challenging these laws. Thus, the Spanish Supreme novating to succeed and not succumb to competitors. Court may hold them void. Nonetheless, this is not likely if we Nonetheless, there are economic, legal and social obstacles take into consideration its past judgment 921/2018, 4 June. that make imitation difficult. Traditional actors may need fi- The analysis of the Spanish legislative battle highlights nancing to develop computer applications that improve their another important lesson: the regulatory capture works when service. Highly regulated markets limit the answer of established public powers are fragile. The closer and weaker they are, the operators. They cannot undertake the strategies they want; for greater the chances of success of social pressure. It does not instance, lower prices. Besides, they must want to compete. seem likely that the European authorities will be as receptive However, it is not easy to acquire this will, when they have not to the demands and complaints of the taxi drivers of Madrid traditionally needed to face competitors because regulation and Barcelona. It is important to remember that the European protects them. Something similar happens with collaboration: Commission has taken the side of the collaborative economy. it is not possible if incumbents are not ready to compete. The reason for this is that it can be a source of growth, enrich- ment and employment: “some experts estimate that the col- 7. REFERENCES laborative economy could add EUR 160-572 billion to the EU 1. Acquier, A. and Carbone, V. 2018. “Sharing Economy and economy. Therefore, there is a high potential for new businesses Social Innovation.” In Davidson, N. 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