German court hits Uber with temporary nationwide ban

September 2, 2014, 11:13 AM UTC
Taxi Drivers Protest New Internet Services
BERLIN, GERMANY - JUNE 11: Taxi drivers gather at Tegel Airport to wait for customers before many of them joined a protest through the city on June 11, 2014 in Berlin, Germany. Approximately 1,000 taxis had registered to participate in a protest that coincided with similar protests in cities across Europe against new apps like Wundercar and Uber that the taxi drivers claim are undermining their livelihood and creating unfair competition. (Photo by Sean Gallup/Getty Images)
Photograph by Sean Gallup — Getty Images

Taxi app service Uber suffered its biggest setback in Europe to date Tuesday, as a German court hit it with a nationwide, temporary ban on two of its three services.

A regional court in Frankfurt issued an injunction stopping the company from operating either its Uber or its UberPop ride-sharing service anywhere in Germany, arguing that its use of unregistered drivers constituted unfair competition.

The ban doesn’t affect Uber’s premium service, Uber Black, which uses registered drivers.

Uber said it will appeal the ruling pending a formal hearing, which may take up to four weeks to arrange. Once the appeal application is formally accepted, the company will be able to operate normally until the hearing, a court spokesman confirmed. In an e-mailed statement, a spokesperson said Uber would “look after” any drivers who get fined as a result of the ban.

The court ruling threatens Uber and its directors in Germany with fines of up to €250,000 ($318,000) and up to six months in jail if they are found in contempt.

The company has already used the same tactics against local injunctions in Hamburg and Berlin. The current ban is national because it was in response to a suit filed by Taxi Deutschland, a nationwide network of taxi dispatchers.

A spokeswoman for Taxi Deutschland told Fortune that insurers typically charge registered cab drivers around eight times what they charge private motorists, something that allows Uber to undercut its members substantially.

“Uber…doesn’t accept any responsibility at all,” Taxi Deutschland head Dieter Schlenker said in a statement. He claimed that neither vehicles nor drivers were registered or insured for transporting passengers, and noted that Uber’s business also deprived the state of tax revenues.

Like many other U.S. companies, Uber’s European headquarters is in the low-tax jurisdiction of the Netherlands. The European Commission is currently investigating whether its tax regime, as exemplified by a deal with Starbucks Corp. (SBUK) is compatible with E.U. Single Market rules.

“In this kind of Locust-like Sharing Economy, the state, society and employees all lose equally,” Schlenker said.

Germany has always threatened to be a unique opportunity and challenge for Uber. Europe’s largest national market by far, it also has a long tradition of strict consumer protection laws that have often evolved over time into a form that protects established providers at least as much as consumers.

Uber had started operations in Germany earlier this year. It quickly styled it as one of its fastest-growing markets, but ran into trouble almost immediately with licensed taxi drivers, as it had done in the U.S.

In addition to Germany, Uber has had similar problems in the Belgian capital of Brussels, and as far afield as the Korean capital of Seoul.


(Note: this article has been updated to include Uber’s response and additional context.)