Abstract
Technological developments have been bringing about changes in the field of work since time immemorial. Recently, the emergence of platform work has brought up all kind questions. For instance, in the field of labour law, where the questions seem to focus mostly on the topic legal status of platform workers contract: is the platform worker an employee? At the same time, it is also interesting to examine what it means if it turns out the platform worker is not an employee. In that case, other issues arise, albeit in the area of competition law. In particular, one can think of the consequences of the use of algorithms in determining the tariff of the service. In this article, I examine the consequences competition law has for the platform and individual platform workers. These consequences are nuanced and depend on the specific business model. However, it does not seem to be excluded those involved could face sanctions for a breach of competition law.
Introduction
The basis for most platform business models is that platform workers are solo self-employed. 1 Their modus operandi challenges the binarily divided categories of work relations since it seems to combine aspects of the employment relationship with aspects of the self-employed relationship. 2 For scholars in the field of labour law, the most prominent question relating to platform work is undoubtedly whether or not the platform worker is actually an employee and falls within the scope of labour law. The fact that in recent years, courts across Europe have been asked to consider this question, illustrates this. 3 But if a judge in a specific case concludes that the platform worker of a certain platform is an employee, the discussion is far from settled. After all, the platform can (try to) adjust its business model in such a way that it changes the situation again and can continue to find paths to keep away from labour law. In this regard, reference has rightly been made to the directional function of jurisprudence. 4 In fact, the judgment of the European Court of Justice (ECJ) in the Yodel case shows that it is not inconceivable that a platform worker will be regarded as self-employed. 5 And while this case ended up at the European level, countries struggle at the national level. As concepts of worker can differ at a national level, it is not inconceivable that platforms will find ways to label workers as self-employed on the basis of the legal system in question.
Suppose that the platform worker qualifies not as an employee, but as self-employed. Therefore, commercial law applies, and he and the platform are assumed to be equal parties before the law (in principle) with freedom of contract as the premise. 6 The platform worker will also be deemed to be an undertaking, which means competition law will apply. Whereas labour law traditionally (among other things) compensates for inequalities in the employer-employee relationship, competition law must ensure fair competition between companies for the benefit of consumers. However, subjection to competition law could be problematic for the worker who does not meet the requirements of the concept of an employee, but who is completely dependent on his principal. 7 An important pillar of competition law is that an undertaking should set its own prices and not collude with others in doing so (the prohibition of cartels). Though, when looking at platform work, an interesting circumstance is that prices for a service are not always determined by the platform workers themselves. In fact, they could be established centrally, and through an algorithm. This raises the question of the extent to which the prohibition of cartels, incorporated in Article 101 TFEU, stands in the way of such (price) coordination among undertakings via the platform. On the one hand in the vertical relationship between the platform worker and the platform, but on the other hand, also (indirectly) between platform workers themselves (a horizontal relationship). Could this form of algorithmic price coordination lead to a violation of competition law for which sanctions might be impossed? 8 Since a breach of Article 101 TFEU could lead to substantial fines imposed by competition law authorities, one might even argue that competition law may very well push these platforms in the direction of labour law, because employers remain outside the crosshair of competition law authorities. 9 Is it possible that (the enforcement of) the cartel ban perhaps contributes to solving undesirable situations that are likely to arise in platform work?
The above shows that questions can arise with regards to platform work in both vertical and horizontal situations. In this article I examine the extent to which competition law may have an impact on these relations, and in view of the outcome, what the legal consequences for platform workers are.
On my path to answer this question, in section 2 I will look at the scope of Article 101 TFEU and turn to the issue of whether platforms and their platform workers qualify as undertakings. I focus on the relationship between the platform and the platform worker and, more specifically, I will look at the so-called single economic entity doctrine, since applying that doctrine could mean that multiple (natural or legal) persons jointly qualify as one undertaking, which has consequences on the application of Article 101 TFEU. In section 3, I turn to the dynamic way in which platforms determine the price for a service. I will look at the question of whether the use of an algorithm in this process gives rise to concerns in light of competition law. Following sections 2 and 3, it will appear possible that platforms may find a construction that keeps them out of trouble with competition authorities. In section 4 I will look at what this outcome means for the platform workers and reflect on the question of whether or not they might fall between the cracks.
The concept of an undertaking and the single economic entity doctrine
The scope of competition law
The aim of competition law is to ensure effective and fair competition. Infringements of that objective should and will be penalised. EU competition law in general, and more specifically, Article 101 TFEU, prohibits agreements or concerted practices between undertakings which, directly or indirectly, prevent, restrict or distort competition. In section 3 it becomes clear that it is possible that the use of pricing algorithms by platforms could fall within the scope of this provision. But since not every agreement between two parties is subject to Article 101 TFEU, first it is useful to take a closer look at the relationship between the platform and the platform worker. After all, this provision applies to undertakings, and an undertaking may very well consist of one or multiple persons. This means that the construction of the relationship initially determines whether someone - and if so, who - can be held liable for a possible infringement of Article 101 TFEU.
Foremost, labour lawyers will probably wonder whether the platform worker is an employee. Although perhaps remarkable at first glance, it remains relevant to look at the employee category, for instance, because it is possible that a judge in a Member State may come to the decision that a platform worker is self-employed based on national law. That does not immediately mean that he is also self-employed for the purposes of competition law. There may be room between the national qualification of a relationship and the European one. 10
One could also ask if an employee can be an undertaking. This is not the case, as employees act on behalf of their employer and normally form an economic unit with the undertaking for which they work. 11 Therefore, there are important differences. Consequently, in Becu, the Court held that employees are integrated into the undertaking during their relationship, form an economic unit, and therefore do not constitute an undertaking themselves. 12 They perform work for, and under the direction of, their employer and do not bear the financial risks connected with that work. This means that an employee is not considered to be an independent entity and is therefore not an undertaking. 13 The most prominent consequence is that employees can conclude collective labour agreements without competition law concerns. In the FNV Kiem judgment, the ECJ ruled that self-employed musicians in the Netherlands could be ‘false self-employed’, and therefore in a comparable position to employees if they acted under the same management as the employer with regard to their freedom to choose the time, place and content of their work; did not share in the employer's commercial risks; and formed an integral part of the employer's undertaking for the duration of their employment relationship. 14 The ‘false self-employed stamp’ in this case meant that they were actually workers, and that minimum rates could be agreed for them in a collective agreement as they were not subject to competition law.
Accordingly, on the question of whether the platform worker would be considered to be an employee under European law, there are no concerns from a competition point of view. However, it is no secret that platforms instead argue that there is no employment contract. But claiming something does not make it true. In court, the outcome may vary from case to case. For an answer to the question of the qualification of the relationship, one must look at the autonomous EU definition of employment. The essential features of the employment relationship are that for a certain period of time a person performs services for, and under the direction of, another person for which he receives remuneration in return. 15 In a preliminary study in 2016 – the Collaborative Economy Agenda – the European Commission explored the application of the employment criteria to platform workers. 16 The Commission seemed to question whether the relationship between the platform and platform workers is an employment contract. Nevertheless, it was argued that the criteria mentioned are somewhat ambiguous and provide little guidance in this regard. 17
The Uber Spain case was interesting in this respect. While it was not a labour law case, AG Szpunar touched upon the debate regarding the qualification of the employment relationship between Uber and its drivers. Attention was paid to subordination, which is considered the most distinguishing criterion of an employment contract, and provides food for thought in respect of platform work. He pointed to the effectiveness of ‘management by algorithm’. Uber maintained firm (indirect) control over the service, which, in his opinion, was almost more efficient than a classic example of instructional power. 18 The ECJ also noted the degree of influence exercised by Uber. In the light of the legal question before it, it found that Uber had a decisive part to play in respect of the conditions under which that service was provided by the drivers. The Court also noted that Uber determined (at least) the maximum fare through the app, from which the platform received a percentage. Moreover, it exercised a certain control over the quality of the vehicles, the drivers and their conduct, which might even result in their exclusion. 19 The firm (algorithmic) control around the task to be done can be explained by the fact that the company has a vested interest in the good execution of the service. This is particularly true for platforms that focus on a specific task rather than for platforms that concentrate on bringing supply and demand together in a cross-sector manner. 20 While this could be the first step towards the conclusion that we are dealing with an employment contract, in the end, the Court of Justice did not get to rule on the precise interpretation of the relationship between Uber and its drivers. 21
However, one must bear in mind that the significance of this ruling for qualifying platform relationships is relative, since it does not necessarily mean that Uber drivers, let alone all platform workers, are employees, particularly when we look at the recent Yodel judgment of the Court of Justice. 22 This case concerned the question of whether a parcel delivery driver with a courier service agreement must be considered to be an employee within the meaning of the EU Working Time Directive. 23 Here, the Court mentioned four circumstances (being able to call in a replacement, the freedom to accept or refuse tasks, being allowed to work for the competitor and determining one's own working hours) which suggested that there was no fictitious self-employment and no presence of control (and therefore presumably no employment contract). The elements mentioned are very relevant to platform work. Moreover, they seem to be open to unilateral influencing by the platform. 24 Despite the court's note that the final assessment must be made by the national court and the outcome could still favour the driver, the judgment received criticism. 25 Whatever else may be said of this judgment, it shows, in any case, that it may well be that the platform worker is not an employee from an EU perspective. Moreover, platforms are likely to continue to push the boundaries. This has led multiple authors to call for either an expansion of the definition of worker in order to include precarious workers, or an adjustment to the approach under competition law. 26
If the platform workers are not employees, they fall into the residual category of an undertaking, and therefore fall under the scope of competition law. As previously mentioned, Article 101 TFEU addresses undertakings. The concept of an undertaking is not defined in the Treaty. The Court of Justice consistently defines it as ‘any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed’. 27 An economic activity is then outlined as ‘offering goods and services on a given market’. 28 The definition refers to an entity that, legally speaking, may consist of several natural and/or legal persons. Whereas from an employment law perspective one might be inclined to view the undertaking through a company law lens, from a competition law perspective it is not decisive whether parties are legally separated.
An undertaking is deemed to operate independently and there should be no influence or control by another entity. This means, for example, that a parent company and its subsidiary, with the former holding 100% of the shares, are not two separate entities from a competition law point of view. 29 The rationale behind this is that if one company is able to exercise decisive influence over the market behaviour of the other, these parties cannot be regarded as competitors. On the contrary, they pursue the same goal and these separate legal entities therefore constitute one entity. 30 The so-called single economic entity doctrine was introduced to apply Article 101 TFEU to corporate groups. 31 It found its origin in the Christiani and Nielsen case. The Commission ruled that a market-sharing agreement (an agreement that would definitely raise eyebrows if concluded between competitors) concluded between a parent company and a subsidiary is legal. The rationale behind this is that within the arrangement there is only a division of labour and no economic independence, thus there is no agreement between separate undertakings. 32 Pauer argued that the concept meant to characterise the level of integration allowing for the distinct treatment of corporate groups. 33
What makes applying the doctrine complex is that the question of whether it applies is considered on a case-by-case basis. In determining whether different entities constitute an undertaking, it is assessed whether one party can be identified as exercising decisive influence over the other so that the latter cannot determine its behaviour on the market autonomously. 34 As mentioned above, legal separation is not decisive, as different legal entities can behave on the market as a single entity. 35 An indication of the existence of a single economic entity is when a controlling entity influences pricing policy, production activities, sales objectives, cash flow, stocks and marketing of the other company. 36 However, strong financial interests and centralised management supplemented by centrally formulated policies and centrally provided services also hint at it. 37 It shows that it is key to determine whether parties to the agreement are independent in their decision-making or whether one has sufficient control over the other so that the latter does not autonomously decide its own course of action in the market. 38
When different legal entities form a single economic entity (i.e., an undertaking), generally, agreements between them are not governed by Article 101 TFEU, hence there is no agreement between two competing entities. This is noteworthy when it comes to platform work, because it distinguishes two possible scenarios. The first occurs when the platform worker determines his own course on the market, and there is no decisive influence of another party. He would then be considered a separate undertaking and agreements with other undertakings (for instance, the platform and/or other platform workers) are subject to competition law. 39 If, on the other hand, a platform worker, in his vertical relationship with the platform, cannot be seen as an independent economic actor, for instance, because the platform exercises decisive influence, their relationship is not governed by Article 101 TFEU. 40 Then they jointly qualify as a single undertaking which means there are no competition law sanctions in the offing. At this point, it is worth recalling that in the Uber Spain case, the Court of Justice ruled that Uber exercised decisive influence on the conditions under which the service was provided. 41 However, this does not necessarily mean that platform workers are therefore employees. 42 AG Szpunar pointed this out in his opinion on the Uber Spain case, stating that the platform might provide its services via independent traders who act on its behalf as subcontractors. 43 Since there are more situations imaginable in which different persons form a single economic entity, we need to look into the relevant boundaries of an undertaking in light of the different actors and their mutual relationships in the platform economy. Multiple categories of persons and/or arrangements have been identified as constituting an economic entity, which would be relevant for the assessment of the relationship from competition law perspective. 44 One of them, namely, that of the the employee, has already been covered. Additionally, two of them seem interesting from a platform work perspective. 45
Relevant working arrangements
Agency agreement
Firstly, if a relationship is governed by an agency agreement, parties will not be subjected to competition law provisions. An agency agreement is a so-called vertical relationship, and therefore the agreement is governed by the Vertical Guidelines, in which the Commission has set out the principles for the assessment of vertical agreements under Article 101 TFEU. 46 According to these guidelines, an agency agreement is a contract whereby a legal or physical person (the ‘agent’) is mandated to negotiate and/or conclude contracts on behalf of another person (the ‘principal’), relating to the purchase or sale of goods and/or services by the principal. The agent may do so in his own name, but also in the name of the person he represents. Agreements between the principal and his agent may fall outside Article 101 TFEU if they jointly constitute an undertaking. According to established case law, this is the case if the agent does not bear any significant financial or commercial risks in relation to the activities. 47 He then operates as an ‘auxiliary body entrusted with the execution of the principal's instructions’ and is therefore an integral part of the principal's undertaking. 48 The agent acts on behalf of his principal and is therefore not in a position to compete with him. Therefore, where an agent has separate legal personality, but does not independently determine its market conduct and follows instructions given by its principal, Article 101 TFEU does not apply to the relationship. 49
It is argued that if the agent and the principal act as a competitive unit on the relevant market, they then form a single economic unit. However, if the commercial agent assumes commercial and financial risks on the relevant market that makes him behave like an independent economic operator who can effectively influence competition on the market, they are (no longer) a single undertaking. To provide some guidance, the Commission has divided the relevant commercial and financial risks into three categories: (1) risks related to contracts concluded or negotiated by the agent on behalf of the principal; (2) risks related to market-specific investments made by the agent; and (3) risks related to other activities which the principal requires the agent to carry out on the market for the principal's goods, but which fall outside the scope of the agency relationship. 50 Although not exhaustive, the Commission has also specified a number of risks that the agent should not share in order to remain a single undertaking. 51 The most noticeable are: (1) not to contribute to the costs related to the delivery of the goods and/or services, including any transport costs; (2) not to share in storage costs; (3) not to accept liability towards third parties for damage caused by the product, unless the agent is himself at fault in this respect; (4) not to accept liability in the event that the customer does not comply with the contract, except for the loss of the agent's commission; (5) not to make investments in advertising; (6) not to make market-specific investments in equipment, premises or personnel training; and (7) not to undertake other activities required by the principal on the same product market, unless these activities are fully remunerated by the principal. The risks must be assessed on a case-by-case basis, thereby taking into account the economic reality rather than the legal form. However, if an agent bears any of the costs or risks, the agreement cannot be characterised as an agency agreement. The general risk assumed by the agent in order to maintain his business is not relevant here. 52 This means, for instance, that the risk of the agent not getting paid because he fails to provide the service, does not rule out the presence of an agency agreement.
This leads to the question of whether the (vertical) relationship between the platform and the platform worker can be one of agency. 53 There are two areas in which it can be argued that a relationship between the platform and the platform worker constitutes an agency agreement. First, one could claim that the platform is the principal, which allocates its agents (the workers) to perform services on its behalf. It should then be examined if the agent bears any risk, because he can only incur a negligible proportion of the financial and commercial risks. However, contrary to what seems to be routine in the gig economy, it is not commonplace for an agent to use their own equipment to perform the task. Also, workers are in business for their own benefit. 54 Another important obstacle that stands in the way of this scenario is that contracts are generally not to be regarded as one of agency if the agent does not provide the service himself, 55 while in fact, a typical element of platform work is that the worker performs the task at hand.
Another possibility would be that the platform will be considered the agent, and the workers, its principal. The platform would then act as a mediator in the conclusion of agreements between workers and the customers. A prominent advocate of this view is Akman. In a notable contribution, she defends the assertion that platforms (and in terms of relevance to this article, Uber) could qualify as agents, who negotiate on behalf of the drivers. In this regard the platform (such as Uber) holds money and also is the link in communication on behalf of the drivers. In her view it is also the platform worker that is paying the platform for services rendered. 56 It is an interesting point of view, but it would lead to the question of whether it could be maintained that platforms bear no, or only a small, part of the commercial and financial risks. Also, one must keep in mind that the Vertical Guidelines point out that an agency agreement nevertheless triggers the applicability of competition law when the relationship is used to facilitate collusion, for instance by exchanging confidential information (the hub and spoke scenario; see section 3). 57
Subcontracting relationship
A second potentially relevant category, also briefly referred to by AG Szpunar in the Uber Spain case, is that of subcontracting. A subcontracting agreement is an agreement by which one party (the ‘contractor’) entrusts to another party (the ‘subcontractor’) the manufacture of goods, the supply of services and/or the performance of work under the contractor's instructions. 58 In 1978 the Commission published a notice that was intended to provide guidance on the application of Article 101 TFEU concerning subcontracting agreements. The so-called Subcontracting Notice establishes the criteria for the application of Article 101(1) TFEU to subcontracting agreements between non-competitors and applies provided certain conditions are met, which primarily relate to the transfer of technology and/or equipment from the contractor to the subcontractor. 59 Herein it distinguishes between two types of subcontracting agreements. First are horizontal subcontracting agreements which are concluded between undertakings which operate on the same market, as actual or potential competitors. The application of Article 101(1) TFEU to the agreement will then be covered by the Horizontal Guidelines, which set out the rules with regard to horizontal cooperation. Secondly, vertical subcontracting agreements are concluded between undertakings which are active at different levels of the market and are no competitors. 60 This area seems relevant to platform work. A subcontracting agreement would generally require the subcontractor to make use of technology or equipment that the contractor provides to the subcontractor. The contractor may then wish to restrict the use of such technology or equipment to the extent necessary for the implementation of the subcontractor's tasks under the agreement and to supply the contractor.
The platform worker could be seen as a subcontractor of the platform. This would mean that he performs the service on behalf of the contractor (the platform), and the platform therefore is the one who ultimately provides the service. 61 Saffron points out that the compensation a subcontractor receives, should be seen as remuneration for his work, therefore falling outside the scope of Article 101 (1) TFEU. Whether a platform worker is a subcontractor or perhaps an employee depends on the question of whether the platform is ultimately to be seen as the provider, and depends on the degree of decisive influence exercised. 62
Interim conclusion
We saw that the Court of Justice utilises a longstanding and functional definition of the concept of undertaking. Different natural or legal bodies can form an undertaking under the single economic entity doctrine. According to this doctrine, the joint conduct of companies that are regarded as a single economic unit fall outside the prohibitions laid down in Article 101 TFEU. What is pivotal is not whether the parties are formally separated, but whether one party has the decisive influence over the policy of the other, so that the former should be regarded as the supplier of the service. It takes a close analysis of all facts to determine if the platform and the platform worker are considered to be a single undertaking. One has to closely examine whether the service provider can act independently and set its own business policies, bears financial and commercial risks, individually set its prices and use its own resources. However, it does not seem to be excluded that in some cases the relationship between the platform and the platform worker is shaped in such a way that they form an undertaking. In this regard, the most obvious conclusion is that the platform worker is either an employee or a subcontractor. The platform is ultimately the provider of the service and Article 101 TFEU does not apply between them. 63 It seems less likely that the relationship is an agency relationship. Another good possibility is that the platform worker is self-employed. In that case the single economic entity doctrine does not apply, and parties qualify as separate undertakings which means that the entities are subjected to Article 101 TFEU. The possible consequences thereof will become clear below.
Dynamic pricing via algorithms
Algorithmic pricing by the platform
If the platform and the platform worker both form undertakings, they are subjected to competition law. This means that if they adopt a coordinated pricing strategy, it could raise concerns with regard to Article 101 TFEU. After all, this provision prohibits agreements or concerted practices between undertakings, which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition. 64 In particular, this prohibition will apply to agreements and concerted practices that directly or indirectly fix prices.
The question is how the business model of platforms, specifically with regard to the pricing of the service, relates to this provision. For platforms that let platform workers decide their own rate, this causes no problems. On platforms such as TaskRabbit, for everyday tasks the rate is determined by the individual that provides the service. Although these platforms may show some form of guidance through suggestions and or recommendations, it is ultimately the platform worker that sets his price. Therefore, there is no price coordination or fixing, and from a competition law perspective, there will be little concern. There are also platforms that exert more influence on pricing policy. With these types of platforms, use of the system is usually subject to the condition that the price for a service will be generated in the app by an algorithm. The app calculates the price at lightning speed on the basis of a number of parameters. These could include all kinds of relevant factors that influence supply and demand and that can push the price up or down (sometimes also referred to as surge pricing or multiplier). Examples of relevant parameters for platform work are weather conditions, traffic density and the number of available platform workers. 65 The core properties of a pricing algorithm are that they monitor the market and then (re)price the service. The creator of the algorithm will, based on the pricing strategy, provide the relevant preconditions for this. 66 In any case, the result is that prices become very dynamic. With the help of machine learning AI, algorithmic pricing can be faster and more accurate than when a human determines the price. 67 Dynamic pricing can contribute to more efficient transparent and cheaper services which should ultimately improve competition. 68 However, the use of algorithms in price determination also raises concerns among competition law experts. 69
Think of ride-hailing platforms like Uber and Lyft, but also food delivery platforms, where supply and demand must be matched in real time and speed is therefore of the essence. It is notable that when the service needs to be provided at short notice, the nature of the service makes it desirable to set a price in the app. In doing so, the app reduces transaction costs and avoids hassle around the price of a service. Therefore, the driver and customer are paired up and see a rate that the algorithm generates. If both parties accept the ride, they also accept the prescribed tariff. In this scenario, the influence of the algorithm on the final price is considerable. Although in the case of Uber, for example, it is still possible to agree on a lower price; a higher price is out of the question. Moreover, the fee that the platform charges for the connection is still based on the rate initially determined by the algorithm. Changing the rate also poses a practical challenge, as the app is designed in such a way that everything is geared towards making the transaction as smooth and fast as possible. Moreover, the question arises in what scenario a driver would want to agree on a lower rate after a match.
Imposed fees: a cause for concern?
So, there are platforms that have a strong hand in determining the level of the fee. This might raise some concerns pursuant to Article 101 TFEU. If we were to zoom in on the relationship between the platform and the platform worker, one could say that prescribing a fixed fee leads to limitations between them that prevent competition, i.e., the platform worker, as an undertaking, is not in a position to freely determine its own tariff. Because the platform and the workers move in a different market it does not seem obvious that they are each other's direct competitors and therefore the competition between them is affected. The platform is primarily in a vertical relationship with the platform worker. In vertical relationships it is not inconceivable that a party will impose certain conditions on the other that restrict competition. 70 However, the imposition of so-called vertical restraints is subject to conditions. The Commission has created regulations regarding certain categories of vertical agreements falling within Article 101(1) of the Treaty, which are laid down in the Vertical Agreements Block Exemption. 71 Prescribing a tariff via a price algorithm in this form shows similarities with a form of price maintenance that is more often found in vertical relationships: Resale Price Maintenance (RPM). 72 RPM is the practice whereby a manufacturer obliges its distributor to maintain a fixed sales price or a minimum sales price. It may facilitate collusion between buyers as it eliminates intra-service competition. 73 Because of the disadvantages of an obligation to respect a fixed sales price, it is qualified as a hardcore restriction under the Vertical Block Exemption and violates Article 101(1) TFEU. 74
The platform may argue that it is not imposing a price, but merely proposing a tariff. 75 Indeed, recommended and maximum resale prices do not qualify as hardcore restrictions under the same Regulation and are therefore allowed. 76 However, a recommended resale price shifts colour when the supplier exerts influence on the buyer, including through an incentive, not to resell below the ‘recommended’ price level, and provided that the buyer in some way agrees to apply the ‘recommended’ price. In that case, the application of the recommended price is also considered to be price fixing which, both directly and indirectly, is prohibited as we have seen. 77 Digital steering, for example, through incentives, is an important pillar of the business model of platforms. 78 Although one can find similarities within the platform pricing strategy and RPM, it there are also clear differences. 79 For instance, a platform does not sell a product to a platform worker that he then has to resell. The product in question is the labour of the platform worker. It is as yet unclear whether the concept of the RPM is a good fit when interpreting the practice of tariff-setting, but perhaps there is an interpretation that fits the facts better.
Hub and spoke scenario
There is another important factor that the concept of RPM also does not include, namely, the fact that other platform workers charge the same price via the algorithm. 80 Since the price in this situation is set on the basis of the same software used by all drivers, price competition between them is virtually impossible. One can therefore not exclude that individual platform workers in fact collude with each other on a horizontal level through the platform. This is what AG Szpunar pointed this out in his opinion on the Uber Spain case. 81 He indicated that the use of algorithms by competitors may not be unlawful in itself, but certainly deserves attention. In particular, it might give rise to a so-called hub and spoke type of conspiracy. 82 In a hub and spoke cartel, illicit collusion takes place via a central player without there having to be direct contact between the competitors. There is a common supplier or producer (the hub) that facilitates or organises a price cartel between competitors (the spokes). The competitors use the hub to share competitively sensitive data, for instance, price information, with each other. What makes it difficult to establish that a cartel exists here is that there are no direct agreements between the competitors. There is communication with the hub, but normally, contact between a supplier and a distributor about competitively sensitive information (such as prices) does not directly lead to a cartel either. 83 However, this is different if it turns out that via this third-party, agreements are made between direct competitors. 84 After all, competitors must determine their own market behaviour. They are not allowed to influence the conditions on the market directly or indirectly in an unnatural way. 85
As noted, platform workers who work for a particular platform all use the same algorithm. This algorithm uses the same data to determine the price for all users, so that the algorithm acts as a virtual hub. Information is exchanged between the platform workers via the algorithm. It is the platform, which is ultimately responsible for the algorithm, that plays a coordinating role in determining the rates for all self-employed workers working via the platform. This means that the platform workers, whom you would expect to be competitors of each other, use the same algorithm and are thereby prescribed a price. 86 This can ultimately influence competition, have a negative impact on consumers and cause prices for the service in question to rise. The use of the same algorithm by competing companies may therefore lead to price fixing via the aforementioned hub and spoke scenario. 87
Interestingly, in the US, a customer launched a case against (the former CEO of) Uber, complaining that the algorithm led to price coordination. 88 He claimed individual drivers would collude through the central hub, Uber, whose pricing algorithm sets the fees they charge. In the eyes of the claimant, it restricted competition between the drivers using the Uber app. 89 In fact, the judge who first heard the case stated that if the Uber drivers worked independently, it would not be in their interest not to compete on price. He therefore saw little merit in the argument that self-employed drivers joined the platform for the benefits of service rather than price fixing. 90 The judge also found that the accuracy of such a claim of conspiracy between Uber and its drivers was not improbable. 91 However, he never reached a final decision as the case was eventually referred to closed door arbitration, where the claim was rejected. 92 It therefore failed to provide some guidance on the matter.
To my knowledge, there is no case law at the European level on (algorithmically-driven) hub and spoke cartels. 93 However, there have been a number of cases that provide an indication of how the Court views information exchange via a third party. In the AC Treuhand judgment, a consultancy firm was labelled a ‘cartel facilitator’ because, among other things, it organised meetings between competitors and thus created and maintained the conditions for the maintenance of a cartel. This eventually led to an infringement of Article 101(1) TFEU and the parties involved (so, both the ‘hub’ and the ‘spokes’) received a fine. This case shows that facilitating collusion is not wise, even if it is through an algorithm. 94
Also interesting is the case that led to the Eturas judgment. Here, travel agencies agreed among themselves on the maximum discount they would grant to customers, a practice that was initiated by the operator of an online booking platform with which the agencies were all affiliated. 95 Perhaps making it a next-level case of the textbook hub and spoke situation, the Eturas platform centrally sanctioned action, which influenced prices, and specifically, the percentage discount. It therefore violated Article 101 TFEU, according to the ECJ. The Court also ruled that undertakings can be held liable for their participation in a concerted practice when they independently endorse the use of a system of a third multi-player platform that has the object of restricting competition. According to ECJ, travel agents who were aware of the content of Eturas’ communication may be presumed to have tacitly acquiesced in a common anti-competitive practice. That presumption of guilt may be rebutted if a travel agent could show that it had publicly distanced itself from that conduct or that it had reported it to the authorities. Since it was established that they had received the notice from the operator and had not objected to it, they were considered to be participants in an anti-competitive concerted practice. 96
It is conceivable that platform workers could be found to be in breach of the cartel ban by having the level of their fees determined by the same algorithm. The aforementioned cases show that using an algorithm when determining the price for a specific service, could lead to an infringement of Article 101 TFEU and all the corresponding implications. Both the platform and the platform worker risk facing fines from the competition law watch dog. These circumstances could very well be a viable threat to the business model of a platform. According to Nowag, it would be wise for a platform to consider being an employer and, as such, avoid competition law sanctions. 97 Though at the same time, it could pose serious challenges for the authorities to prove the existence of these restrictive practices. 98 However, while enforcement by the authorities perhaps remains uncertain, we do not have to wait for the authorities to act. Both the platform and the platform workers also risk private legal proceedings, which raises interesting questions about liability regarding damages caused by infringement of competition law. Who is held accountable, and for what conduct? In this context, the question will also arise as to whether the platform and the platform workers do not constitute an undertaking from the point of view of competition law, which was already discussed in section two.
Efficiency benefits
So, before a breach of the cartel ban is established, there still remain some ‘ifs’ and ‘buts’. Meanwhile, there may also be an escape in the offing: invoking the exception clause of Article 101(3) TFEU. Under this provision, an infringement of competition may be tolerated if the agreement improves the production or distribution of goods or promotes technical or economic progress, and consumers receive a fair share of the benefits, in that the agreement is proportionate and does not eliminate competition. A question that might arise is if there could be room within the exception clause to consider the interests of platform workers (e.g., a higher rate). However, the problem here is that competition law does not aim to protect competitors. The apparent contradiction between innovation on the one hand, and the position of workers in the platform economy on the other, is clearly causing friction. According to Commissioner Vestager it is not the aim of competition law to combat all cases of unfairness. 99 In other words, there is a difference between a conduct that is unfair and conduct that is anti-competitive.
That we must not exclude the possibility that the practice of algorithmic pricing via platforms qualifies for this exemption is illustrated by a case between the Luxembourgian competition authority and Webtaxi, an online platform for taxi services. This platform coordinated supply and demand and used an algorithm to determine the price users had to pay for a ride. The affiliated taxi drivers thus (horizontally) agreed jointly to have the prices for rides determined by the platform's pricing algorithm. The competition watchdog looked into the case and eventually ruled that the use of the algorithm restricted competition and was an infringement of the ban on cartels. 100
However, that was not the final decision in this situation. The authority found that the working method of Webtaxi, in fact, fell under the Luxembourgian variant of the exception just discussed. 101 One of the important factors was that the use of Webtaxi resulted in various economic efficiency advantages, such as fewer empty taxis, reduced emissions and a better match between supply and demand. In addition, they considered the uniform pricing model essential for the platform. In fact, it was precisely the algorithm within the business model that provided benefits for the consumer. Otherwise, driver and customer would have to negotiate the rate, for example, which could ultimately be disadvantageous to the customer. Another advantage was that risks inherent in taxi rides (such as traffic jams) were not passed on to the passenger. Although the challenged practice resulted in a competition restraint by object, the competition authority found there were no viable alternatives with the same pro-competitive effects. The authority concluded that the algorithmic pricing model was pro-competitive and granted its approval. 102 Therefore, although there was a breach of the cartel ban, in this situation the advantages outweighed the disadvantages. The advantages cited by the Luxembourgian authority also seem to apply to other platforms operating in the gig economy, even those situated outside transport sector. It will be interesting to see whether a similar case will arise in another Member State in the near future.
Concluding: what are the consequences for platform workers?
This contribution analysed the extent to which competition law may have an impact on both vertical and horizontal relationships in platform work. The previous sections have shown that it that it takes some puzzling to value platform work in the light of competition law. At first, on the relationship between the platform and the platform worker, one has to consider the mutual relationships. For a single economic entity to exist, one primarily has to look at the level of (decisive) influence exercised. If decisive influence is present, there is a single undertaking and Article 101 TFEU will generally not be applicable. The most obvious conclusion would seem to be that platform workers either are employees or subcontractors. However, a different outcome is not excluded since platform workers could also be self-employed. If that is the case, Article 101 TFEU is applicable. Section 3 showed that competition law concerns may arise in the vertical relationship between platform and the platform worker, but more likely also in the horizontal relationship between platform workers. In the latter scenario, the platform workers, working for a particular platform, could be found to collude by using the same algorithm. This is a violation of Article 101 TFEU, and could lead to sanctions for both the platform workers and the platform. At the same time, we should also note that it would be somewhat harsh, since platform workers typically have little or no control over the pricing algorithm.
However, we can see that to date, no action has been taken against platforms and platform workers. A possible explanation may be that the authorities mainly see the benefits for consumers. 103 The example of Luxembourgian platform Webtaxi shows that a clear breach of competition law does not necessarily have to have an immediate impact on the business model. That outcome is not very surprising since the innovative aspects of platforms bring undeniable benefits for consumers. This was already apparent in the case of Webtaxi, but also seems likely for many other companies operating in the gig economy. So, for the time being at least, the platforms do not seem to have any major concerns in this regard. It is, however, still a factor to consider. And while platforms are now primarily concerned with staying outside the boundaries of labour law, they should realise that this does not mean that they are avoiding regulatory frameworks entirely.
In the gig economy, the mantra is that anyone can be self-employed and enjoy the benefits of entrepreneurship. However, it does not seem to be the platform workers who reap the profits. In practice, little remains of that entrepreneurship, and platform workers are mainly confronted with its negative aspects. They occupy a poor negotiating position, have little say in their working conditions, and risk becoming embroiled in an (algorithmic) race to the bottom. 104 The possibility of uniting in some way does not exist. In addition, it appears there is also a risk that they will be held to account for competition law violations. Changes to labour law to improve the position of platform workers are currently being considered. 105 But it is questionable whether changes in labour law alone are sufficient. Therefore, it is a good development that the EU is also looking at possibilities to facilitate collective bargaining for self-employed workers providing their labour through digital platforms. 106 Some serious proposals are already being made in this area. 107 That development can contribute to agreements on fair tariffs and reasonable working conditions, which is ultimately something everybody deserves. In any case, it is certain that competition law has a role to play in finding solutions for the better protection of platform workers, who currently fall too much between two stools.
Footnotes
Declaration of conflicting interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship and/or publication of this article.
