Uber has disrupted traditional taxi services with its innovative, ride-hailing platform which connects independent drivers with customers via the Uber app. Uber has shown novel ways in which technology can be employed in the carriage of persons and thereby brought the efficiency of traditional taxis into question. However, Uber’s business model has attracted several lawsuits across the globe which raise labour law and competition issues. In Nigeria, Uber has faced similar challenges with the latest attack being a class action challenging Uber’s classification of drivers as independent contractors. This article examines some of the competition law issues implicated by Uber’s activities in Nigeria.
Are drivers’ employees of Uber?
The initial issue relevant to a competition analysis concerns the status of Uber drivers under Nigerian labour law. Uber considers that it is not a transportation company; drivers are not its employees but are “independent firms that are in competition with one another for riders.” Olatunji & Anor. v. Uber presented an opportunity for a Nigerian Court to address the status of Uber drivers under labour law. Here, the claimants brought a class action (on behalf of Uber drivers in Nigeria) inviting the Court to declare that drivers are employees of Uber under section 91 of the Labour Act “by virtue of [the] nature of […Uber’s] control over the[m]…” In seeking to establish control, the claimants relied on the fact that Uber stipulates the conditions of their work and periodically assigned rides to them for which they were paid wages. Expectedly, Uber argued that “…the claimants signed-up for the use of Uber Services” as independent contractors to “…. seek, receive and fulfil on-demand requests for transportation services….”
Uber’s argument that drivers are independent contractors rather than employees has two implications. First, it enables Uber to circumvent obligations applicable to “employees” under labour law, including payment of a minimum wage, pension contributions, employees’ compensation contributions, etc. Second, by showing that it is merely a hosting platform and does not provide transportation services, Uber seeks to avoid compliance with regulations applicable to traditional taxis. Unfortunately, the Court did not make a finding on the merits, but dismissed the suit for claimants’ failure to provide sufficient evidence to inform a substantive determination. The Court did hint, however, that section 91 of the Labour Act provides sufficient scope for the Uber-driver arrangement to qualify as an employment relationship, leaving room for future challenges to Uber’s classification of drivers.
Arguably, Uber does not provide transportation services directly; however, its users pay money and drivers provide services for a profit. Specifically, Uber provides the e-platform for both drivers and customers, manages the pricing system, charges the customer, pays the driver and sets guidelines which drivers must comply with. It is therefore arguable that Uber’s model falls somewhere in between direct service providers and purely hosting platforms. If one concludes that drivers are Uber’s employees, Uber would be deemed to be providing a transportation service and therefore subject to applicable taxi regulations and employment obligations. However, if Uber’s argument that drivers are independent contractors is accepted, then its arrangement with drivers, especially its pricing system, may have competition implications. Below, we discuss two competition concerns raised by Uber’s activities in Nigeria – price-fixing and regulatory disparity.
Price-fixing
Competition law seeks to protect markets from price-fixing, an activity which occurs when companies artificially dictate prices rather than allow market forces to determine prices. The application of competition law to price-fixing is controlled by the notion of undertaking. An undertaking is any entity engaged in an economic activity and includes “any person involved in the production of, or the trade in, goods, or the provision of services.” Section 107 of the Federal Competition and Consumer Protection Act (“FCCPA”) prohibits price-fixing between undertakings; that is, price-fixing may only occur when at least two undertakings are involved. An undertaking must be understood as a ‘single economic entity’ – “the minimum combination of natural and legal persons able to exert a single competitive force on the market”. Entities or individuals who form part of a single economic entity are permitted to coordinate their conduct through price-fixing.
The European Court of Justice has ruled that employees form an economic entity with their employer and therefore, do not in themselves constitute undertakings under EU competition law. The idea behind the FCCPA is similar. While the FCCPA prohibits price-fixing between undertakings, it permits price-fixing arrangements between “principal and agent”, understandably because the agent-principal relationship establishes a single economic entity. The FCCPA clearly states that an employee is an agent of the employer. Therefore, if we consider drivers as Uber’s employees, the Uber-driver relationship would yield a single economic entity that can fix prices without infringing section 107. Conversely, if drivers are independent contractors, they do not form a single economic entity with Uber but qualify as separate undertakings under the FCCPA.
Ifeanyi Nwankwo
Prince Nwankwo holds law degrees from Harvard Law School and the University of Nigeria. Currently, he provides legal and technical support to the ECOWAS Regional Competition Authority as a Harvard Orrick Fellow. The author can be reached by email at [email protected].
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