The regulation of a project of the deregulation: UBER in Brazil and … (p. 1-28) 1 

 

DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

The regulation of a project of the deregulation: UBER in Brazil and the 

European Union 
 

Submitted: 22/11/2016 

Delphine Aurélie Laurence  Defossez* Revised: 09/01/2017 
Accepted: 21/01/2017 

 

 

 

Abstract 

Purpose – This paper focuses on the regulation of Uber at regional level (Sao Paulo and 

Brasilia), national level (European Member States) and supranational level (The European 

Commission initiative), which are often too restrictive.  

Methodology/approach/design – This article analyses standards and literature on 

regulation, as well as the role of competition. Attention was specially drawn to the market 

failure theory for justifying regulation, advocated by Breyer, Ogus and Baldwin & Cave. 

Due to the fact that there will be an evaluation of the regulations in place, consequentialism, 

welfarism and Pareto are briefly mentioned. 

Findings – None of the current regulatory responses, at the exception to Sao Paulo and the 

initiative by the European Commission that are not based exclusively on market failure 

theory, are working. Indeed, Uber is still banned in various cities. In others, the regulatory 

burden is so high that it takes away any incentives that Uber created. Regulation is not the 

only exit to market failure, competition must play a role. Uber is based on deregulation of 

the market and to try to regulate such concept with conventional theories will only lead to 

failures and restrictions. 

Practical implications – This article discusses the possible improvements to the already 

existing regulations.  

Originality/value – This paper correlates the regulation of Uber in Brazil and in Europe, 

explaining the difficulties these regulations are creating for Uber.  

 

Keywords: Uber, Regulation-Brazil, European Union, Market failure 
 

                                                           
*Delphine Defossez obtained two Master degrees in law, one in Comparative International 
and European Law from the European University Institute (EUI), Florence Italy, the other 
in International Commercial and Maritime Law from Swansea University, United 
Kingdom.  Her Bachelor studies were in European Law at the University of Maastricht, 
The Netherlands, in which she also was selected for a researched based programme, Marble 
program, under the supervision of the Dean of the law faculty. Apart from her studies, she 
has worked, pro-bono, as a researcher for the e-lab of NYU and HEC in order to help NGOs 
through the use of European law. On top of that, she has published numerous articles on 
various topics, such as aviation law, maritime law, money laundering law, etc. She 
participated in a competition for a writing prize offered by the International Air Transport 
Association (IATA), article that was published in the Annals of Air and Space law. Email: 
delphine.defossez@live.be. 

mailto:delphine.defossez@live.be


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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

Introduction 

Regulations are simply rules and norms put in place to achieve social, 

political, environmental or economic outcomes that could not be otherwise 

achieved within an open marketplace. Regulations are necessary when 

competition within a market has the potential to harm society and exploit 

consumers. In such instances, regulations benefit consumers and can create a 

healthier business environment. The opposite view is often defended by those who 

believe regulations are unnecessary as markets can effectively regulate companies 

that are playing within the market. 

Like the oldest profession, taxi service transcends borders and has its roots 

in the beginning of time. Every modern country – and thus every modern economy 

– has it.  It is the trillion industry that trickles down to the ordinary man, putting 

food on the table for drivers, and delivering customers to essential destinations, 

enabling them to carry on their lives (ECONOMIST, 2015). 

In early times, taxi service found itself regulated, partially regulated or 

fully regulated depending on the county.  As the evils of the business grew roots, 

regulations took hold.  Now every modern country regulates taxi service, as it 

brings people intimately close together, allowing the machinations and foibles of 

human beings to play out in a daily, gritty stage.   

Uber – and companies like it – represents a disruptive tear in the taxi 

service economy.  It threatens, as do all new ideas, an existing way of life.  Driven 

by the internet, which enables driver and customer to communicate directly, Uber 

provides democracy to the taxi service industry, whereby many of the people once 

slaved to licensed cabs prefer Uber. 

While it should be acknowledged that some markets do not have the 

necessity of regulation, others are heavily relying on regulation. History has 

proven that the taxi industry needs regulation, as an unregulated taxi industry is 

harmful to everyone, from the consumer to the driver and the operating 

companies. For instance, during the Great Depression in the US, people used to 

drive unlicensed taxis due to the absence of stable jobs. (MUNDY, 2015) 

Nowadays, such type of behaviour is still taking place, but is relying on new 

technological method, and is called Uber. Within the crisis that Brazil is currently 

facing and with people having problems finding jobs, many unemployed decided 

to drive for Uber, giving them a kind of stability. The number of drivers increased 

so much, alongside with the conflict of the taxicabs drivers, that government 

decided to regulate Uber.  

Since its launch in Europe, Uber has faced a bumpy regulatory ride which 

was acknowledged by the European Commission. As a result of the bans in 

France, Spain and Germany, Uber has filed several complaints with the European 

Commission alleging that such bans are violating Article 49 (freedom of 



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

establishment) and Article 56 (freedom to provide services) of the Treaty on the 

Functioning of the European Union (TFEU). The Commission has already 

demonstrated its support to Uber by investigating manners to regulate the ride-

sharing service at a European rather than national level.  

Uber is operating in a legal grey area, and consequently, various regulatory 

authorities have responded in a multitude of ways. These multiple ways of 

responding to the problem as well as the regulatory battles Uber has faced, and 

continues to face when entering new markets, has rendered Uber famous 

worldwide. This paper will explore the regulatory frameworks put in place in 

Brazil and the European Union to regulate Uber, their rationales and the possible 

amelioration that could be introduced. To this effect, this article evaluates the 

principles of regulatory intervention applied to Uber in Brazil, especially Brasilia 

and Sao Paulo, and the wish of the European Union to legislate on the matter. The 

hypothesis this article conveys is that sharing economy creates a paradigm shift 

in the consumption habits. Therefore, new theories should be applied to this new 

concept. Indeed, Uber is based on a deregulation of the market; hence to try to 

regulate such concept with conventional theories will only lead to failures and 

restrictions. The author decided to exclude the responsive regulation theory, as 

advocated by Ian Ayres and John Braithwaite, as she felt that this theory has been 

designed in developed economies and therefore, shows limitation when applied 

as a strategy in developing countries (BRAITHWAITE, 2006). The theory that 

best fits this article is the “market failure” framework for justifying regulation, 

advocated by Breyer, Ogus and Baldwin & Cave. Since there will be an evaluation 

of the regulations in place, consequentialism and welfarism will be briefly 

mentioned. 

 

1. The concept behind Uber: sharing economy  

The Internet has changed the way people are able to act and interact in 

many different markets (BOTSMAN, 2013). The Internet has also driven the 

development of technology-based platforms that enhance this lifestyle and that 

are based on the so-called sharing economy. The sharing economy is based on 

reductions in transaction costs, therefore enabling exchanges that were previously 

impossible. Firms built upon the sharing economy framework facilitate a more 

efficient use of underutilized resources or assets to the benefit of both owners and 

users.1 Sharing economy businesses have often entered markets subject to 

                                                           
1In a report commissioned by the European Parliament, sharing economy was defined as 
“the use of digital platforms or portals to reduce the scale for viable hiring transactions or 
viable participation in consumer hiring markets (…) and thereby reduce the extent to which 
 



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

significant government regulation. Sharing economies can be distinguished from 

‘conventional’ forms of economy due to the requirement of a digital platform 

which facilitates the interaction between parties (CHUNG, 2015, p. 29). 

Uber is the perfect example of a sharing-economy business that was very 

successful. The company was created in 2009 in San Francisco with the initial 

proposal of offering luxurious transport. Uber’s ride-share mobile phone 

application (“app”) was launched in 2010 and rapidly expanded worldwide 

(UBER). As of December 2016, Uber was servicing 77 countries and 527 cities 

(Cities). 

Uber offers:  

“a technology platform that enables users of Uber’s mobile applications 

or websites provided as part of the Services to arrange and schedule 

transportation and/or logistics services with third party providers of 

such services… .”2  

The app connects private drivers with users who need a ride from point A 

to point B. The app uses geolocalization technologies to accurately determine the 

distance between the drivers and consumers and certify the quick arrival of the 

driver. Customers set their pickup and drop-off locations, can then look at the 

estimated price and if, agreeing, request a ride, which a driver can accept or not 

(UBER). Upon acceptance by the driver, the driver’s details are sent to the 

customer, with his or her localisation and the estimated arrival time. The customer 

can follow the driver route until his or her location. If, for any reasons, the driver 

is taking a wrong turn or is not arriving, the customer can cancel the trip, free of 

charge within the five first minutes of the request. The customer can then order 

another Uber with the possibility of requesting the same driver if he or she is the 

closest to the customer’s location.  

After the ride, every user of the services has the opportunity to rate the 

experience and leave additional feedback based on the cleanness, experience, 

drive, etc.3 The ratings are recorded and aggregated. If the person has poor 

feedbacks, the low-ranking passenger or driver is removed from the Uber 

community (RUSTEN, 2015). Both passengers and drivers can check their 

ratings.4 

                                                           
assets are under-utilised” (GOUDIN, 2016). The European Commission in its report 
defined these firms as “value proposition consists of creating a match between a peer 
owning a certain resource and a peer in need of that resource, at the right time and against 
reasonable transaction costs.” (COMMISSION, 2015). 
2Terms & Conditions, nos. 3 
3Terms & Conditions, nos. 4, para. 4. 
4In the app under help> account and payment> account settings and ratings> I’d like to 
know my rating > submit. 
 



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

The company determines the price through the calculation of a tariff/ km 

combined with a tariff for the time of displacement, using a similar method as 

used by the taxi services. The main difference between Uber and taxi is that 

payment of the services is made through Uber to the third party providing the 

services via a credit card previously registered by the user.5 Recently, payments 

in cash have been accepted. Uber takes a percentage of the fare, in Brazil 25%, 

and transfers the rest to the driver as payment (How Does Uber Pay Drivers?).  

Sharing economy and Uber present multiple challenges related to different 

areas of law for regulators. At the same time, Uber is using legal loopholes to 

avoid existing regulations. For instance, in some countries, Uber, by classifying 

its drivers as independent contractors rather than employees, avoids taxation. 

“The current frameworks have created a cloudy regulatory environment for 

Uber’s operations” (LOKE, 2015, p. 5).  

All these questions and examples are only a taste of the regulatory hurdles 

Uber is currently facing. However, Uber is also playing with fire as its typical 

approach to entering a new market is to launch the app in a new city regardless of 

the legal framework in place. When facing regulatory challenges, Uber unleashes 

lobbyists and its newly loyal users to lobby governments and regulators 

(HELDERMAN, 2014). In other words, Uber has adopted a strategy of crashing 

the market and then dealing with the fallout. Such approach demonstrates that the 

company does not care about the regulations in place. As a result, it can be 

wondered if the company is victim of governments trying to regulate it or is 

playing a tricky game involving passengers and drivers that are depending on it. 

Such tactic will push some governments to regulate the company as a defiance to 

Uber’s defiance.6 It can, therefore, be wondered whether Uber is engaging in 

regulatory avoidance, either legitimate or illegitimate.7  

                                                           
5Terms & Conditions, nos. 3, 4, para. 1. 
6Arrogance is the leitmotiv of many disruptive tech companies, such as Napster in music. 
These companies disdain things as they are, but things as they have an existing legal 
structure that has built up around them. The arrogance of the new companies thus disdains, 
in one sweep, not only the existing industry protocol (e.g., paying for music) but its 
concurrent legal structure (e.g., publishing laws).     
7Illegitimate regulatory avoidance is when the service provider offers a service that, in 
substance, is within the purpose or goal of a relevant regulation but does not comply with 
it. On the contrary, legitimate avoidance is when the service provider is offering a service 
substantively different from the activity which is intended to be regulated, or when the 
regulation simply does not apply to the activity. 
 



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

2. Welfarism and consequentialism  

Perfect competition is an ideal state that does not exist.8 In order to 

objectively evaluate regulation, the appropriate moral criteria should be provided. 

Economists, while evaluating regulation, have invariably had recourse to 

consequentialism and welfarism. Consequentialists evaluate all kinds of actions, 

including governmental actions, with reference to a neutral agent ranking of 

outcomes. Within the consequentialists, a subspecies is welfarism which only 

accepts well-being as the intrinsically morally relevant feature of outcomes.  In 

other words, for welfarists, if the well-being in outcome x is the same as the well-

being in outcome y, both situations are considered morally acceptable 

(BOADWAY e BRUCE, 1984). This principle is also referred to as the Pareto 

indifference principle because there is “no difference in the moral ranking of 

outcomes without a well-being difference” (ALDER, 2009, p. 592).  

Most welfarists also accept the principle of Pareto-superiority. Under this 

principle, the logic is that if outcome x and y are giving the same advantages to 

every individual, but at least one individual is better off in x, then x is better than 

y. To avoid absurd cases and compare incomparable outcomes, the Pareto non-

comparable was established. Under this principle, if by virtue of Pareto-

indifference, x is not equally good as y, then it will be considered Pareto non-

comparable.9 (Chapter 1 Defining Efficiency)Two types of criteria are used. First 

is the criterion of Kaldor-Hicks efficiency, which is translated as if there is a 

hypothetical transfer of resources between the persons better off in x to the person 

worse of in x, making everyone at least as well off in both situations. The second 

criterion is to rely on the social welfare function (ADLER e SANCHIRICO, 2006; 

ADLER, 2007; ADLER, 2008; ADLER, 2010). This framework uses a utility 

function to calculate the well-being of each individual in a specific outcome.  

These traditional economic views have created heated debates when 

applied to regulation - certainly so with the cost-benefit analysis, a technique 

widely used by economists and vigorously opposed by legal scholars (ADLER e 

POSNER, 2006; ACKERMAN e HEINZERLING, 2004). Due to the fact that no 

plausible and reasonably comprehensive normative accounts, that are not based 

on welfare, and would enable us to analyse regulatory interventions has not yet 

                                                           
8As Viscusi stated: “If we existed in a world that functioned in accordance with the perfect 
competition paradigm, there would be little need for… regulatory efforts. All markets 
would consist of a large number of sellers of a product, and consumers would be fully 
informed of the product’s implications. Moreover, there would be no externalities present 
in this idealized economy, as all effects would be internalized by the buyers and sellers of 
a particular product” (KIP VISCUSI, 2005, p. 2).  
9See the example given by Adler & Posner whereby in x one person gets a slight headache 
which she avoids in y, but in y millions die painful deaths which they avoid in x (ALDER 
e POSNER, 2006, p. 24-61).  



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

been developed, the perspective adopted in this article will mainly follow the 

welfarism theory. 

3. Regulatory theories: from market failure to deregulation 

Various motives exist to explain the wish of a government entity to 

regulate a specific field of law. The most frequent is to response to market failure 

(BALDWIN, CAVE e LODGE, 2012, p. 15). Structural problems are likely to be 

efficiently and effectively resolved by regulation (DUNNE, 2015). In a world 

more and more connected, regulation is necessary as the market itself fails to 

produce the expected results (FRANCIS, 1993, p. Ch.1). However, market failure 

is a necessary but not sufficient economic justification for state intervention 

(VELJANOVSKI, 2010, p. 27). In Ogus’ opinion, market failure should be 

accompanied by private law failure before any state intervention occurs (OGUS, 

2004, p. 30). Indeed, sometimes existing regulations are not efficient to counter 

structural problems. Instead, new types of regulations should be enacted to 

effectively respond to the needs of new businesses. Market absence is the second 

good reason for regulating a specific market.  

Uber is not the first transport market that is facing problems. Its direct 

concurrent, the taxicab, has already passed through market failure and 

deregulation. The deregulation of taxicabs in the US has proved to be a failure for 

many reasons. For instance, among other things, prices increased, with fares 

becoming confusing and unpredictable to passengers, while the vehicle quality 

decreased. Taxi riders in low-density areas were neglected and access to 24/7 

transportation became difficult. As a result, almost every city that deregulated 

taxicabs re-regulated the taxi market to reverse the process and provide a better 

service. (MUNDY, 2015) 

It seems that legislators in the European Union and Brazil learned from the 

mistakes made with the taxi market and decided to quickly regulate Uber. But, is 

this approach the most appropriate? According to Prosser, it exists four rationales 

for regulation; 1) market-centered regulation which aims at maximizing economic 

efficiency and consumer choice, 2) regulation which aims at protecting human 

rights, 3) regulation aiming at enhancing social solidarity and, finally, 4) 

regulatory participation and deliberation (PROSSER, 2010, p. 11-20). As Prosser 

rightly said, it is a matter of description. In the same vein, Orgus argues that what 

constitutes public interest varies according to time and place, but also according 

to the values of the particular society (OGUS, 2004, p. 29). Indeed, regulatory 

laws are not limited to correcting and helping constitute market relations. More 

importantly, they provide frameworks of rights and processes which will avoid 

market fragmentation (SHEARING, 1994). Avoiding market fragmentation is an 

important step to be taken to allow the market to work properly. Regulation is the 



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

primary method for the organization of social relations (BALDWIN, CAVE e 

LODGE, 2012, p. 22). Often regulation of this type is pursuing a public interest 

objective (MORGAN e YEUNG, 2007; HANTKE-DOMAS, 2003; LEVINE e 

FORRENCE, 1990). 

Uber is based on the principle of offer and demand but, on top of that, on 

deregulation and market failure. Uber entered a market that was craving for 

changes. The more Uber will be regulated, the less interesting it will be compared 

to taxis, causing a decrease in the amount of work for drivers and a possible 

increase in the market fragmentation. Such decrease in driving can already be 

noticed with Uber Black in Brasilia. 

At the same time, similar problems as those in the 1970’s in the US are 

resurfacing; quality is slowly decreasing due to an increase supply of drivers and 

a decrease in drivers’ earnings. Inexperienced drivers are struggling with the 

responsibilities of being professional drivers. As a result, some regulators have 

imposed pre-existing rules which currently apply to analogous markets, although 

Uber is not creating similar problems that the regulations are aimed at minimising 

(KOOPMAN, 2014, p. 5). Indeed, one of the problems created by the deregulation 

of the taxi in the 1970s, namely the decrease in the quality of service, is regulated 

by Uber itself, as passengers decide who stays and who leaves the app, by rating 

the drivers according to the services that were provided.   

According to the market failure theory, regulation is justified only if 

certain failures are occurring in a free market and the market is unable to 

overcome the effects of such failures (BREYER, 1982; OGUS, 1994; BALDWIN 

e CAVE, 1999; SALANIE, 2000). Failures within the market can endanger the 

welfare of the society as a whole and hinder economic efficiency.10 Starting from 

the premise of an idealized economy, where everyone is fully informed and fully 

rational, based on a free market equilibrium, failures of the idealized society can 

be identified. Such failures justify the actions taken by the government other than 

maintaining the conditions for market exchange. In other words, this theory 

explains that, when the market can no more regulate itself, there is a need for 

external regulation, mostly done by States. This theory is related to the social 

welfare function and shows that morally best outcomes can be produced by 

governments through free markets.  

Failures within a market can be caused by externalities, monopolies, 

imperfect information11, etc. Externalities can be defined as the well-being of one 

                                                           
10Cento Veljanovski defines efficiency as a situation when: “[…] resources, goods and 
services are allocated to their highest expected valued uses as measured by individual 
willingness to pay, assuming that the most productive existing technology is used” 
(VELJANOVSKI, 2010, p. 19).  
11Ogus described imperfect information as: “The assertion that observed market behaviour 
in the form of expressed preferences leads to allocative efficiency depends crucially on two 
 



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

individual (A) depends on the well-being of another individual (B). Therefore, if 

(B) enhances his or her well-being, (A)’s well-being will be enhanced. Uber is 

based on externalities: as happy customers grade well allowing drivers to keep 

driving for Uber; under a certain grade, drivers are removed from the app.  

Uber is exacerbating ‘traditional’ market failures. However, it can be 

wondered whether it is appropriated to impose rules restricting its activities or not. 

Indeed, one of the market failures in the taxi industry was the information 

asymmetries and market power that taxi had. In the case of Uber, these problems 

are greatly reduced or inexistent, as customers know beforehand the fare they 

might pay and also can enter a complaint if the driver did not, for instance, take 

the shortest way. Therefore, Uber should not be subject to regulation related to 

correcting these market failures.  

The wide variety of reactions, from ban to imposition of existing 

regulations, suggests that there are radically different views on how Uber should 

be regulated. Uber entered in a sector with a long-standing government regulation 

which prevented effective competition and created monopolies, i.e the taxi 

drivers. Monopoly mostly leads to market failures and a need for governmental 

regulation. (ROSS, 2015) The divergent views about whether Uber should be 

regulated and if so, how, suggests that the main inquiry is the underlying purpose 

of the regulation, which will help to determine the applicability and relevance of 

a rule to Uber.  

The main problem with regulation is that rules may fail to capture the intent 

of the legislator in substance (BLACK, 2007, p. 153). According to Julia Black, 

rules are either over or under inclusive because they are based on generalisations 

which are per se imperfect. Generalisations are imperfect as they can suppress 

relevant information or elevate unimportant information. Often rules fail to cover 

future developments (BLACK, 2007, p. 153-154). Uber often uses the argument 

that the law is overinclusive and inappropriately restricts its activities because the 

goals of the regulation do not apply to its activities caught within the regulation. 

Uber’s competitors, on the other hand, argue that the laws be under-inclusive in 

                                                           
fundamental assumptions: that decision-makers have adequate information on the set of 
alternatives available, including the consequences to them of exercising choice in different 
ways; and that they are capable of processing that information and of ‘rationally’ behaving 
in a way that maximises their expected utility. A significant failure of either assumption 
may set up a prima facie case for regulatory intervention” (OGUS, 2004, p. 38). However, 
Schwartz and Wilde disagree by advocating that the traditional approach to imperfect 
information is not sufficient to evaluate whether the intervention is justified or not. In their 
view, optimal information focuses on individuals rather than on markets, creating unhelpful 
assumptions. Instead, they suggest the inquiry should be whether competition amongst 
firms for particular groups of consumers who search for information is sufficient to 
generate optimal prices and terms for all consumers, including searching and non-searching 
customers (SCHWARTZ e WILDE, 1979, p. 636-640). 



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

order to subject Uber to certain rules that are currently not applicable. Uber is, 

therefore, introducing an ‘unforeseeable course of change’ into the market.  

As Cortez said:  

“The plight of the modern regulator is to adapt old regulatory 

frameworks to new technologies and practices. This should not be as 

paralyzing as it seems.” (CORTEZ, 2014, p. 228) 

Sofia Ranchordás followed this idea and argued that the balancing of 

interests be the core challenge of achieving successful regulation. As she rightly 

pointed out:  

“Regulators should try to understand the challenges of innovation to 

traditional regulatory instruments and institutions− including how to 

marry the fast-changing character of innovation with the need for 

predictability and legal certainty, bridge innovation with regulatory 

procedure and requirements […] and convince legislators and 

regulators to accommodate and incentivize social innovation.” 

(RANCHORDÁS, 2015, p. 443)  

The exercise of balancing requires taking into consideration a number of 

factors and will greatly depend on personal perceptions on how this balance 

should be struck. A liberal approach would prescribe regulations not to hold back 

businesses (KOBIE, 2015, p. 12). Alternatively, the concerns of the regulator 

might predominantly be the safety and certainty:  

“From a regulator’s perspective, a relevant focus point is whether the 

rationales for the existing or proposed regulations truly apply to the 

activity in question; if not, the regulatory framework should be 

altered.” (MAE LOKE, 2015, p. 27) 

On top of these questions about the need for regulation, the rationale of 

such regulation should be investigated. Rationales for regulating Uber may be 

influenced by the innovative context in which it evolves. Theoretically, 

innovation can create legitimate reasons to avoid existing and perhaps outdated 

regulations, as the existing regulatory framework might not effectively deal with 

new technologies. To apply these regulations to innovations would lead to 

regulatory failure. Here, welfarism is important to evaluate whether regulatory 

intervention is justifiable or not.   

4. Regulation of Uber in Europe and the UK 

Uber’s first European market was Paris, starting in late 2011, and then was 

spread across the EU. Uber is currently active in 52 European cities across 22 of 

the 28 Member States (Cities). Within the European Union, Uber had a significant 

impact on the labour market. Indeed, solely in France, Uber’s enabled 20.000 



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

drivers, mostly workers that were excluded from the mainstream labour market, 

such as minorities and other groups, to work (VINOCUR, 2015). Even though 

Uber created large advantages for the labour market and consumers, various 

courts across the Union have issued injunctions orders to suspend the firm’s 

operations.12 

The app’s legal status varies considerably across the Union, with three 

broad distinctive categories of regulatory environments that can be identified. In 

few Member States, including Denmark, Finland, Poland, Czech Republic, 

Estonia and Lithuania, Uber faces no restrictions. In the majority of the Member 

States, Uber is allowed to operate, but its drivers have to meet licensing and other 

requirements. Finally, in few countries, the app is illegal or pending court rulings 

on its legality. While some countries that had imposed a ban have lifted it, such 

as Spain, several other Member States which had taken until now a laissez-faire 

approach, such as Denmark and Poland, are considering regulating the use of the 

app.13  

 

4.1 The existing model: divergent approaches to the regulation of Uber 

EU Member States have taken several approaches to the regulation of the 

sharing economy. In Germany, Uber faced regulatory roadblocks, with, for 

instance, an edict against the company in the city of Berlin. Similar actions were 

taken in France, Belgium and Spain at either local or regional level, leading to a 

suspension of all or some of the services in these countries. State intervention has 

often followed protests or lobbying from competitors, such as taxi drivers alleging 

that they were being undercut by rivals who do not face the same regulatory 

burden. 

In response, Uber filed complaints with the European Commission against 

France, Germany, and Spain, alleging a breach of Articles 49 and 56 of the Treaty 

on the Functioning of the European Union (TFEU).14  

Legal difficulties stem from the categorization of Uber and the 

qualification of the relationship between Uber and its customers. While Uber 

claimed that it only provides a digital platform for third party drivers, various 

European courts did not share this view.15 The polemic question, in the EU, is 

                                                           
12France, Germany, Portugal and Bulgaria. (BANCALEIRO, 2015) 
13Earlier this year, the Spanish national competition authority required the Ministry of 
Transport to lift the ban imposed on private hire licences (CNMC, 2016; VALERO, 2015); 
For Poland (RYLUKOWSKI, 2015).  
14Under EU company law a lawfully incorporated subsidiary, according to the threshold 
set in Article 21 of Directive 2013/34/EU, in one Member States enjoys the freedoms 
provided for in the TFEU. 
15Uber mainly based its claim on the classification of the company as “transportation 
network company” in the California Public Utilities Commission (CPUC). According to 
 



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

whether Uber is an information society services or a transport service. If the 

drivers were Uber’s employees, Uber would be qualified as transport service and 

would be subject to the same regulations as taxis.  

Information society services are regulated by European law, especially the 

Service Directive 2006/123/ EC. They also benefit from the freedom of 

establishment and the free movement of services in the TFEU. Recital 21 and 

Article 2 of the Service Directive defines information society services as: 

“any services normally provided for remuneration, at a distance, by 

means of electronic equipment for the processing (including digital 

compression) and storage of data, and at the individual request of a 

recipient of a service.” 

However, in the same Recital 21, the Directive states quite clearly that:  

“Transport services, including urban transport, taxis and ambulances 

as well as port services, should be excluded from the scope of this 

Directive.”  

Article 2(1) establishes the scope of the Directive as “This Directive shall 

apply to services supplied by providers established in a Member State.” While the 

exclusions are embodied in Article 2(2) which stipulates in paragraph d that 

“[S]ervices in the field of transport, including port services, falling within the 

scope of Title V of the Treaty.” 

The Directive only provides a minimum harmonisation and grants two 

major freedoms to the companies it regulates. As a result, the regulation of those 

companies is more lenient. On the contrary, transport operation is only regulated 

at Member States level.  

To shade light on the matter, a Spanish Court has requested a preliminary 

ruling from the Court of Justice of the European Union (CJEU) in Asociación 

Profesional Elite Taxi (COURT OF JUSTICE OF THE EUROPEAN UNION. 

CASE C-434/15, 2015). One of the questions referred requested the Court to 

define what kind of services Uber provides. Until now the case has not yet been 

decided. 

Another similar preliminary ruling was introduced a bit later by a Belgian 

court (COURT OF JUSTICE OF THE EUROPEAN UNION. CASE C-526/15, 

2015). The particularity of this case is that it has been initiated by TRB, which is 

a company in Brussels running a taxi call center and which is not subject to 

Brussels’ taxi laws as it is only the taxi drivers on TRB’s books that are registered. 

TRB provides a very similar type of service as Uber, except that TRB does not 

                                                           
the definition of the CPUC, “transportation network companies (TNCs)” are companies 
that “provide prearranged transportation services for compensation using an online-enabled 
application or platform (such as smart phone apps) to connect drivers using their personal 
vehicles with passengers.”   



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

use an app. In TRB’s opinion, Uber relies on a piece of software that allows them 

to pick up people and take them on journeys akin to a ‘taxi service’. The major 

argument used by TRB is that the Uber’s drivers do not possess the relevant taxi 

license and are not subject to the relevant laws for providing a taxi service. Uber 

denies being in competition with TRB and reckons that it does not need taxi 

permits because it is merely supplying a dispatch service, similarly to TRB. On 

top of that, Uber does not fall under the 1995 Brussels Ordinance concerning taxi 

services and the hiring of vehicles with drivers, as the money the driver receives 

neither constitutes remuneration nor a wage. Rather, the money is simply 

compensation that helps private individuals with the costs associated with running 

their own car, and who chose to do so by sharing their car with others. 

Interestingly, TRB does not question the qualification of Uber as a service 

provider but instead attacks the company on the ground of remuneration. The 

Belgian judge referred questions mostly related to the principle of proportionality, 

enshrined in Article 5 of the TEU. 

A London judge took a more pragmatic approach when asked whether the 

app was equivalent to a taxi meter or not. Without resorting to a preliminary 

ruling, the London judge decided that smartphones are not equivalent to taxi 

meters and, therefore, its users are not required to possess a license from the city’s 

transport authority. The judge easily decided on the status of the Uber’s 

technology and dismissed the argument made by the cab driver associations. 

Judge Duncan Ouseley ruled that the regulations do not cover “a device that relies 

on GPS signal in the course of a journey and forwards GPS data to a server.” By 

ruling so, Judge Duncan Ouseley legalised Uber, at least in London, without 

requiring the intervention of the CJEU. However, Uber only won a small battle in 

the view of the many other claims that it is fighting around the world. Moreover, 

this decision could be later overturned by a higher authority in the UK.  

In the meantime, yet another preliminary ruling was referred to the CJEU 

this time by France (COURT OF JUSTICE OF THE EUROPEAN UNION. 

CASE C-320/16, 2016). Once again, the question related to the definition of 

‘information society services’ is key to the proceeding.  

Germany was probably the most complicated battlefield that Uber had to 

face. Indeed, several lawsuits were initiated in Germany on top of the various bans 

in various cities.16 As a result, Uber B.V, which is Uber’s European subsidiary 

                                                           
16In August 2014, the Higher Regional Court of Frankfurt am Main, based on a failure from 
the drivers of UberPOP to meet the requirements of section 2 of the German Passenger 
Transport Act (Personenbeförderungsgesetz (PBefG)), ended with a preliminary injunction 
against Uber (LG Frankfurt am Main, docket no. 2-03 O 329/14). However, the injunction 
was revoked later due to formal reasons (LG Frankfurt, docket no. 2-03 O 329/14). In 
March 2015, The Higher Regional Court of Frankfurt ruled against Uber and issued a 
Germany-wide ban on the service UberPOP (LG Frankfurt, docket no. 3-08 O 136/14.). At 
 



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

with its headquartered in the Netherlands, only offered transport services provided 

by licensed independent professional drivers in both its UberX and UberBLACK, 

but also a standard taxi service through UberTaxi. UberPOP, which used private 

non-licensed drivers with their own vehicles, and which is called UberX in Brazil, 

was discontinued in all of Germany and many other European countries.17  

Uber encountered its major roadblocks in Germany due to the German 

Passenger Transport Act (Personenbeförderungsgesetz (PBefG)). Indeed, under 

§ 1, para. 1 first sentence, all transportation of persons with motor vehicles, 

trolleybuses and trams for remuneration or in the framework of the economic 

activity of an enterprise is subject to the Passenger Transport Act. Any regular or 

occasional transport of persons with motor vehicles falling under section 1 is 

subject to the acquisition of a permit, according to § 2, para. 1, sentence 1. 

However, there is an exception to the applicability of the Passenger Transport Act 

embodied in § 47, para. 1; if the price of the ride does not exceed the operating 

costs. If it is offered for free, the Passenger Transport Act is not applicable. § 

                                                           
first Uber resisted by lowering its price to the equivalent of the cost of operation (35 cents 
per kilometre), to take advantage of the exception of the PBefG before completely 
abolishing the service. In Berlin, a taxi driver sued Uber in civil court alleging that its 
business model UberBLACK violated German competition law, because drivers were 
encouraged to make themselves available outside of the place of business without 
responding to a concrete assignment. In April 2014, the Higher District Court of Berlin 
granted a preliminary injunction against Uber (LG Berlin, docket no. 15 O 43/14.). Uber 
appealed the ruling and the appeals court overturned the measure, because the plaintiff had 
not enforced the injunction (KG Berlin, docket no. 5 U 63/14.). But, in February 2015, the 
Berlin Higher Regional Court held that the UberBLACK business model violates German 
competition law and issued a prohibition order against the company in Berlin (LG Berlin, 
February 2015, main proceedings, docket no. 101 O 125/14.). Uber’s appeal failed (KG 
Berlin, December 11, 2015, appeal, docket no. 5 U 31/15.). The City of Berlin additionally 
prohibited UberBLACK, arguing that the service was not permitted according to the 
requirements of the PBefG as the UberBLACK drivers did not receive their assignments at 
the place of business of Uber and/or return to the place of business after the conclusion of 
a ride. Higher Regional Court of Berlin-Brandenburg upheld the administrative decision 
(OVG Berlin-Brandenburg, docket no. OVG 1 S 96.14). 
17In August 2014, the Higher Regional Court of Frankfurt am Main, based on a failure from 
the drivers of UberPOP to meet the requirements of section 2 of the PBefG, ended with a 
preliminary injunction against Uber (LG Frankfurt am Main, docket no. 2-03 O 329/14). 
However, the injunction was revoked later due to formal reasons (LG Frankfurt, docket no. 
2-03 O 329/14). Other German cities such as Hamburg and Berlin issued administrative 
decisions prohibiting Uber from offering services through its app, UberPOP. The Higher 
Administrative Court of Hamburg upheld the city’s decision (OVG Hamburg, order of 
September 24, 2014, docket no. 3 Bs 175/14), while the Federal Constitutional Court 
declined to hear the case (Bundesverfassungsgericht [BVerfG], order of November 13, 
2014, docket no. 1 BvR 2861/14). In March 2015, The Higher Regional Court of Frankfurt 
ruled against Uber and issued a Germany-wide ban on the service UberPOP (LG Frankfurt, 
docket no. 3-08 O 136/14.). At first Uber resisted by lowering its price to the equivalent of 
the cost of operation (35 cents per kilometre), to take advantage of the exception of the 
PBefG, before abolishing the service UberPOP completely.  



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

46, para. 1 lists the additional requirements for the occasional transport of 

persons, which is defined as transport according to the customer’s specific 

requirements. According to the second paragraph of section 46, only taxis (§ 47), 

excursion and long distance trip organizers (§ 48), and cars or buses-for-hire (§ 

49) are allowed to carry out the occasional transport of persons. The definition of 

taxi in section 47 goes as follows:  

“transportation of persons with motor vehicles which the professional 

makes available at publicly designated locations and with which the 

transport of a passenger to a specific location is performed.”  

Furthermore, taxi drivers are obligated to accept a riding assignment within 

their assigned zones (§ 49, para. 4.). Prices for the ride are fixed by regulation (§ 

51). Transport with cars-for-hire is defined as: 

“transport of persons with motor vehicles which can only be hired as a 

whole and with which the professional conducts rides in which the 

purpose, destination, and course are determined by the passenger and 

which cannot be qualified as transport with taxis.”  

Unlike taxi drivers, cars-for-hire may only accept assignments which were 

received at the place of business of the professional and had to return to the place 

of business after the conclusion of the ride (§ 49, para. 4).  

Although Germany has a relatively strong and rigid regulatory framework, 

Uber was not yet fitting in any of the established categories. For both the Hamburg 

and the Berlin courts, Uber was not acting merely as an intermediary between the 

driver and the consumer but presents itself as a professional to the consumer. It 

was clear for both courts that Uber concluded the contract with the consumers and 

handled the payment, since a direct payment to the driver is prohibited by Uber’s 

terms and conditions. Uber is the one contracting the drivers as it sets the prices 

and coordinates the assignments via its app. Both courts considered that the 

clauses in the terms and conditions made it irrelevant whether Uber simply acts 

as an intermediary or not.18 

As a result of prohibition in various Member States, authorities at EU level 

are calling for a common approach. Indeed, the growth of the sharing economy 

businesses has caused tension in several Member States and claims that existing 

industries are being damaged started to flow in. In the meantime, a 2014 report 

from the Law Commission for England and Wales recommended the retention of 

the current two-tier regulatory system which distinguishes between taxis and 

private hire services. The report also recommended to repeal most of the existing 

legislation as in the Commission’s opinion the law was unduly restrictive and 

                                                           
18OVG Hamburg, para. 14; OVG Berlin-Brandenburg, para. 28-32. 



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

contained confusing overlaps (LAW COMMISSION FOR ENGLAND AND 

WALES, 2014, p. 1.3). 

 

4.2 The Commission initiative 

After some complaints from Uber claiming that some of the Member States 

laws were infringing its right of freedom of establishment and services, which are 

provided for in Articles 49 and 56 TFEU, the European Commission decided it 

was time for it to provide guidance. Mid-2016, the Commission restated that 

countries should only ban sharing economy as a last resort.  

The Commission in its new guidelines warned governments to think 

carefully before cracking down such firms, highlighting the revenues that such 

businesses create across Europe. However, regulating such business without 

damaging the ecosystem surrounding start-ups is hard, especially at European 

level. Certainly so, when no regulation of taxi was ever attempted at EU level and 

sharing economy based businesses are using the most complicated mean to 

regulate: technology. One thing is clear for the European Commission: stricter 

regulations on sharing economy companies are not a viable option, especially if 

Europe wants to remain attractive and compete with the US.  

With a more lenient approach to regulation of sharing economy as a 

leitmotiv, the Commission’s guidelines expressly stipulate that such companies 

should not be subject to sector-specific rules, i.e rules aimed at taxi, unless the 

purpose of the rule is to set the price of the service. At the same time, it is not the 

wish of the Commission to let sharing economy companies run as parallel 

informal economy operating free from regulation. The Commission, therefore, 

disagreed with the Law Commission for England and Wales, which advocated the 

application of broadly similar standards to drivers, vehicles and dispatchers, to the 

extent that regulation would meet the defined purposes of public safety, 

accessibility, enforcement of the legislation and environmental protection (LAW 

COMMISSION FOR ENGLAND AND WALES, 2014, p. 1.24). 

Service providers should only be required to obtain licences “where strictly 

necessary to meet relevant public interest objections” as the Commission put it. 

The guidelines also recommend that Member States distinguish between 

individuals providing services on an occasional basis and providers acting in a 

professional capacity, by establishing thresholds based on the level of activity. 

The guidelines are certainly a good starting point and will ease the tensions 

for a little while, however, it is not a long-term action. The guidelines will ensure 

that national legislations do not violate the freedom embodied in the EU treaties.  

 

4.3 The possible options to achieve a better legislation 

A level-playing field for drivers would be impossible to achieve due to the 

difference between taxis and Ubers. In September 2015, Transport for London 



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

proposed new rules for taxi services. Under the proposals, drivers of private-hire 

minicabs face English-language and navigational tests, stricter insurance 

requirements and limits on bookings. Such regulatory rules would put in jeopardy 

Uber and consolidate the monopoly that taxis are enjoying.  

Given the disparities between Member States, a single regulatory 

framework appears to be complicated to achieve. The Service Directive, even 

though probably applicable, gives room for manoeuvre to the Member States by 

allowing them to enact technical regulation, which must be notified to the 

Commission. Such possibility could lead to discrepancies between the regulations 

of the Member States but does solve the major problem of infringement by 

national laws of the freedom of services and establishment that Uber should enjoy 

under EU law. A better solution would be for the Union to enact a regulatory 

framework that covers all aspects able to infringe competition, the free movement 

of services and lays down standards. The main danger that such new common 

framework could create, and as is happening in Brasilia, is that the new rule 

inhibits the employment flexibility characteristic of Uber.  

While enacting regulation, the European Commission should try to avoid 

various pitfalls, such as a regulation that limits the options available to consumers 

and providers. Otherwise, it will roll back the progress made. Moreover, 

flexibility and cost reductions should not be hindered by the new rules. An even 

more important point that should be avoided at any cost is onerous employment 

rules that will reduce employment opportunities and consumer welfare. 

5. Regulation of Uber in Brazil  

Uber was launched in June 2014 in Sao Paulo while the process of 

regulation started on the 4th of May 2015, not even a year later, but was suspended 

by the city council of Sao Paulo on the 30th of June 2015. Similarly to the situation 

in Europe, there was a strong lobby on the taxis’ side to ban Uber. The regulation 

was enacted on the 10th of May, 2016 through a decree. (G1 SÃO PAULO, 2015; 

PINHO, 2016) 

 

5.1 The existing model 

Ex-President Dilma Rousseff criticized ride-sharing software Uber and 

said that Uber increases unemployment, adding to a chorus of labour concerns 

about the world's most valuable venture-backed start-up. The idea of regulating 

Uber came from her as already in 2015 she invited local authorities to regulate the 

service.   

In the three major cities of the country, Sao Paulo, Rio de Janeiro and the 

capital Brasilia, a ban on the application was agreed (ASSOCIATED PRESS IN 

RIO DE JANEIRO, 2015). In Sao Paulo, Mayor Fernando Haddad override 



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

attempts by city-council members to ban Uber and other apps through the 

promulgation of a decree. In Brasilia, although lawmakers had voted to ban the 

unregulated services of Uber, the Federal District governor decided to veto the 

ban and set up a commission to decide what was best for the city, following the 

example of Sao Paulo. 

In Sao Paulo, the city created a new class of taxis, in which Uber was 

accommodated, and allowed only 5,000 operating permits. To fall within this new 

class, drivers must have official authorization from the city and work as 

independent contractors.  

Surprisingly, Uber has a strong support in Brazil in the ‘person’ of CADE. 

Indeed, Brazil antitrust watchdog sees:  

“(…) the advantages that increased competition could bring to users 

and advocate a negotiated co-existence between the ride-share service 

and city taxis.” (PARAGUASSU e BOADLE, 2016) 

 

5.2 The regulation in Brasilia and Sao Paulo  

According to Article 18 (1) of the Política Nacional de Mobilidade 

Urbana, whose general guidelines are established in the Law 12.587/2012, the 

regulation of transportation services is a competence of the municipality. 

Sao Paulo is the pioneer in Brazil with regard to the regulation of Uber. 

Instead of following what mayors of other cities have done, the Mayor of Sao 

Paulo decided to find alternative solutions. The Decreto Municipal no 56.981, 

enacted in May 2016, instituted a specific regulatory regime for the jurisdiction 

of the municipal district. The solution adopted within that decree is relatively 

flexible, creative and dynamic. 

Article 1 of the Decreto Municipal no 56.981 establishes the scope and 

object of the regulation. The law applies to three similar activities that cannot be 

confused: 1) private initiative of transport of passengers for remuneration of 

public interest, which includes service as Uber; 2) solidary ride's services, i.e 

applications such as Lyft and Sidecar; and 3) the vehicle sharing without driver, 

service of rent of vehicles via sharing economy apps, such as Zipcar. This decree 

is only regulating sharing economy activities. Therefore, this decree is not 

applicable to taxis, which are falling under the regime of the Decreto Municipal 

no 7.329/1969. The legislator decided to give the most flexibility possible to this 

decree as it realised that more sharing economy companies would invade the 

market.  

The wish for sharing economy companies to continue their work in the city 

is highlighted by the fact that Article 2 establishes guidelines regarding the use of 



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DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

the road of the municipal district, with for instance Article 2(1) referring to the 

overload of the infrastructures, rather than restricting the use of these services.19 

Within the regulation, one of the requirements is the registration of a 

platform as an Operator of Technology of Transport Accredited (OTTC), 

according to Article 3. The OTTC is subject to the requirements of Article 6. The 

requirements are: paragraph 1, to keep update maps in real time for the itinerary; 

paragraph 2, evaluation of the quality of the service by the users; paragraph 3, the 

driver's identification with picture, model and plate of the vehicle; and, finally, 

paragraph 4, emission of detailed electronic receipt for the user at the end of the 

trip. First, when one reads the requirements, it is obvious that they are based on 

Uber’s way of functioning. Second, the discussion that is occurring in Europe is 

resolved by this regulation as Uber is not referenced as taxi but as platform.  

This decree can be criticised as giving too much in for Uber and allowing 

Uber to create a monopoly as it already fulfils all the requirements of Article 6. 

However, Article 15 request drivers for OTTCs to have a professional driver's 

license, to register to the city hall similar to the Municipal Register of Drivers of 

Taxi (Condutax), to follow and be approved in a formation course with minimum 

content, to possess a passengers' accident insurance, besides the obligatory 

insurance (DPVAT). The age of the cars must not be higher than five years. These 

requirements are not applicable to shared ride's services. 

Contrary to the decree enacted in Sao Paulo, the decree that was drafted in 

Brasilia in more rigid terms. Article 1 sets the scope and the definitions, while 

Article 2 deals with the question of taxation. Article 3 of the Projeto de Lei 

777/2015 lists the requirements for the drivers. The drivers must have driver 

license category “B” or higher with the mention that they are exercising a paid 

activity (paragraph 1), show a proof of residence less than 3 months old 

(paragraph 2), show that they are the owner of the car or have a credit for that car 

(paragraph 3), have a clean criminal record (paragraph 4), show that they have no 

debts (paragraph 5) and declare that they are not working for the government of 

the Federal District, trade union, State or municipality or other publicly owned 

companies (paragraph 6). Surprisingly enough, during my extensive use of the 

app, most of my drivers were public servants, driving for Uber to make some extra 

money.  

                                                           
19Art. 2º “O viário urbano integra o Sistema Municipal de Mobilidade e sua utilização e 
exploração deve observar as seguintes diretrizes: I- evitar a ociosidade ou sobrecarga da 
infraestrutura disponível; II- racionalizar a ocupação e a utilização da infraestrutura 
instalada; III- proporcionar melhoria nas condições de acessibilidade e mobilidade; IV- 
promover o desenvolvimento sustentável da cidade de São Paulo, nas dimensões 
socioeconômicas e ambientais; V- garantir a segurança nos deslocamentos das pessoas; VI- 
incentivar o desenvolvimento de novas tecnologias que aperfeiçoem o uso dos recursos do 
sistema; VII- harmonizar-se com o estímulo ao uso do transporte público e meios 
alternativos de transporte individual” 



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Similarly to Sao Paulo, cars must have maximum five years or eight years 

for hybrid, electric or other technology using non-fossil combustive, Article 4 (1). 

Cars must also comply with the specificities listed in Article 4(2), namely that the 

distance between the axes is of 2650 mm, with air conditioning system, space for 

four persons, leather seats and at maximum seven seats. The value of the insurance 

must cover a minimum of 50.000 Reais, Article 4(4). In addition, cars have to be 

distinguishable by some visible signs of the company using its services, according 

to Article 5. Another requirement very similar to the requirement for taxis was 

introduced in Article 6, which requires the driver to visibly place an identification 

tag with his or her photo inside the car.  

Article 7 stipulates all the documents that must be shown by Uber to prove 

that it is a company, making it a heavy administrative burden. Another restriction 

to Uber is in Article 9, which obliges the company only to accept payments with 

credit cards that were inserted beforehand within the app. The obligations of the 

drivers are enumerated in Article 10, with the most absurd being the prohibition 

for the driver to stop, in order to allow a client to drop in, on parking spots, streets 

or close to big building where there are commercial activities, service providers, 

sports, leisure, tourism or cultural activities as well as places with high flow of 

persons. Reading this paragraph, one may wonder where the drivers can stop, as 

in the first paragraph the drivers are prohibited to stop at places specially set for 

taxis or at bus stops. This bill makes the life of Uber and its drivers nearly 

impossible by impeding their work and giving preference to taxis, especially when 

reading Article 10 (1) in conjunction with Article 12, which deals with the 

sanctions involved. According to Article 12(2), the driver faces a sanction of 

between 200 and 2,000 Reais per infractions while the company faces a fine 

between 50,000 to 5,000,000 Reais. Thankfully, the Governor of the Federal 

District decided at the end not to impose quotas on the number of cars that could 

be registered in Uber (GUILHERME, 2016). 

 

5.3 The possible options to achieve a better legislation 

The decree in Sao Paulo offers the flexibility that Uber needs and can be 

classified as a good regulation. However, in Brasilia, many improvements can be 

made. Indeed, reading this law, one can feel the hypocrisy of the regulator who 

enacted a decree so burdensome that a ban of the app would have been better. 

Especially so, since the buses in Brasilia are not reliable timetable-wise; 

prohibiting the Uber to stop to take a passenger in would be taking away an 

opportunity for the passenger to be on time. Moreover, it is common practice for 

private cars to do the services of the bus for the same price, called transporte 

pirata. However, these cars do normally only stop at bus stops or close to bus 

stops and are as unreliable as the buses are. The law enacted in Brasilia is 

privileging taxis to the detriment of Uber and against CADE’s opinion. This law 



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was outdated before even voted, as it is based on old ideas and opinions, hermetic 

to changes and new technologies, sending a message to the rest of the world of a 

conservative city. The regulator in Brasilia, unlike the regulator in Sao Paulo, 

missed its chance to prove that Brasilia was an open-minded city. 

Conclusion 

Taxis and Private Hire Vehicles (PHVs) provide a very local service. The 

majority of trips take place within a city, municipality or a region. As a result of 

this local focus, the taxi industry and its regulatory framework have developed in 

a widely divergent manner throughout Europe and the rest of the world. To some 

extent, the industry has also developed differently within the same country. Some 

cities have focussed on direct barriers to entry creating a maximum number of 

cabs and even allowed licences to be traded, whereas other have relied on more 

indirect barriers to entry into the industry. Uber entered this picture full of market 

failures and shortfalls. For instance, local governments often limit the amount of 

licences available for taxis, leading to a low availability in some area depending 

on the time, similarly to the situation during the Great Depression in the US.  

While Uber does compete with regulated providers, such as taxi drivers, it 

is unclear why sharing economy firms should be subject to the same regulations. 

Looking at Baldwin’s five criteria to assess the need of regulation, namely 1) Is 

the action or regime supported by legislative authority? 2) Is there an appropriate 

scheme of accountability? 3) Are procedures fair, accessible, and open? 4) Is the 

regulator acting with sufficient expertise? 5) Is the action or regime efficient? 

(BALDWIN, CAVE e LODGE, 2012, p. 27), the last two points are hardly 

fulfilled. The doubts of the European Court of Justice on whether Uber qualifies 

as a transport provider or as a technology company highlight the challenges that 

new firms are creating (AHMED, 2015).  

Ogus advocates that regulatory intervention is not flawless and that there 

is not guarantee that such intervention will reduce inefficiencies. Furthermore, 

any gains may be outweighed by the increase in transaction costs (OGUS, 2004, 

p. 30). This view can be linked to the view of Dervojeda about regulation of 

sharing economy as she stated that “[i]n general, there is a lack of tailored policy 

frameworks for regulating new sharing economy industries” (DERVOJEDA, 

VERZIJL, et al., 2013, p. 16). However, by regulating a service such as Uber, 

regulators face the risks to do more harm than good, especially when regulation 

occurs at an early stage. Such premature intervention can result in reduction of 

competition and also have a negative impact on consumer welfare. Uber was 

launched in June 2014 in Sao Paulo while the process of regulation started on the 

4th of Mai 2015, not even a year later. This approach has been described as “a 

frantic game of ‘whack-a-mole’”, where regulators struggle to contain 



22 The regulation of a project of the deregulation: UBER in Brazil and … (p. 1-28) 

 

DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

innovations while even more pop up (CBC NEWS, 2015). Such intervention 

restricts the possibilities of the market to auto-regulate effectively. Regulation is 

not the ultimate answer to market failure, as it can protect monopolies rather than 

deterring them, as Stallibrass and Fingleton argue:  

“[R]egulators and competition law enforcers should be careful that 

their interventions do not have the unfortunate side effect of 

perpetuating regulations that protect market incumbents from 

competition.” (STALLIBRASS e FINGLETON, 2016, p. 3)  

Rules may fail to capture the intent of the legislator in substance (BLACK, 

2007, p. 153). Rules are either over or under inclusive because they are based on 

generalisations which are per se imperfect. Applying existing rules to Uber can 

only lead to Uber relying on the over-inclusive argument, and its competitors and 

legislators relying on the under inclusive argument. Additionally, inappropriately 

applying conventional legislations or standard results in companies exploiting 

loopholes in the existing regulations as Uber is already doing.  

Uber has introduced an ‘unforeseeable course of change’ into the market 

and therefore regulations that are specifically tailored to its needs without 

reprimanding its flexibility would be the only viable solution. For instance, 

deregulation has certainly increased customer choice but has not correspondingly 

resulted in a decrease in price. In Brasilia, the decree enacted is clearly not 

appropriate to Uber as many requirements are similar to the requirements for taxis 

while the decree in Sao Paulo is much more tailored to Uber. Indeed, the decree 

in Sao Paulo instituted a specific regulatory regime for the jurisdiction of the 

municipal district. The solution adopted within that law is relatively flexible, 

creative and dynamic. The only critic of the decree is that it gives too much in for 

Uber allowing it to create a monopoly.  

 In the European Union, the legal status of the company varies 

considerably with three broad distinctive categories of regulatory environments; 

no restriction, ban and allowed to operate under certain requirements. Uber faced 

some major roadblocks in Germany, France and Spain. However, such conducts 

were in direct opposition with some of the core provisions of the TFEU, especially 

Article 49 and 56.  

The European Commission seems to have understood that Uber could not 

be regulated by existing laws due to the unforeseeable course of change that it 

introduced. The Commission tries to regulate sharing-economy firms without 

damaging their ecosystem and has already stated that stricter regulation is not a 

viable option. The Union has an important challenge ahead as no regulation of the 

taxi was ever attempted at EU level and sharing economy based businesses are 

using the most complicated mean to regulate: technology. The Commission is 



The regulation of a project of the deregulation: UBER in Brazil and … (p. 1-28) 23 

 

DEFOSSEZ, D. The regulation of a project of the deregulation: UBER in Brazil and the European Union, Journal 
of Law and Regulation, Brasilia, v. 3, n. 1, p. 1-28, May 2017. 

convinced that sector-specific rules is not the most adequate approach to regulate 

Uber.  

Legislators often, when faced with an innovation such as Uber, find 

themselves at a crossroads (RANCHORDÁS, 2015, p. 1). Uber is blurring the 

regulatory line. It presents regulators with both opportunities and challenges. As 

Adam Thierer and others pointed out:  

“We argue that the Internet, and the rapid growth of the sharing 

economy, alleviates the need for much of this topdown regulation, with 

these recent innovations likely doing a much better job of serving 

consumer needs. When market circumstances change dramatically—

or when new technology or competition alleviates the need for 

regulation—then public policy should evolve and adapt to 

accommodate these realities.” (THIERER, KOOPMAN, et al., 2015)  

Uber has introduced dynamic in a typically static sector. Innovation is 

beneficial as it can better serve consumers’ needs, but, at the same time, it brings 

risks and uncertainty to the market. These uncertain conditions can only be 

balanced through regulation (VAN WAARDEN, 2005, p. 230). However, the 

relationship between innovation and regulation is full of paradoxes and dilemmas, 

the most important being competition versus regulation. Regulation and 

competition are very close relatives that have a complicated relationship. 

Regulation can reduce the uncertainty innovation creates to a tolerable level, 

which may increase incentives for further innovation. Competition policy is 

essential to keep the economy working, certainly when regulation fails.  However, 

competition law is rarely sufficient in sectors with persistent market failures. 

Indeed, competition law alone sometimes does not create competition. In these 

cases, monopolies are the main rule (LAROUCHE, 2000). Monopolists 

behaviours, with complete refusal of access to competition, lead to structural 

problems. Structural problems are likely to be efficiently and effectively resolved 

by regulation (DUNNE, 2015). Regulations will enable the entry of more 

competitors into the market, increasing competition, lowering prices and 

enhancing consumer welfare. Just as competition alone will not cure market 

failures, regulation will not automatically generate changes or create ideal 

behaviour. The two need to be combined. Frequent competition law intervention 

creates better regulation. 

 

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