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The EU’s Top Court Just Blew a Big Hole in Uber’s Business Model

December 20, 2017, 9:36 AM UTC

Uber received the biggest setback yet to its business in Europe Wednesday, as the European Union’s top court ruled that it should be treated and regulated as a transportation company.

The ruling means that Uber can no longer use the argument that it is simply a technology platform that matches passengers and independent drivers, an argument that it has used to avoid the regulation that legacy taxi companies are routinely subject to. As such, its ability to undercut established taxi firms could be greatly restricted.

The European Court of Justice ruled that: “The service provided by Uber connecting individuals with non-professional drivers is covered by services in the field of transport.”

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“Member states can therefore regulate the conditions for providing that service,” it said.

The ECJ was ruling on a a complaint brought by an association of professional taxi drivers in Spain. They had argued that Uber‘s use of non-professional drivers in its UberPOP service represented unfair competition.

Uber responded by saying the ruling won’t change the way it operates in most EU countries, which have already taken steps to regulate it more tightly. While it has relaunched in cities such as Madrid and Berlin to comply with stricter regulation, it is still banned in other European capitals such as Copenhagen and Budapest.

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The company has spent heavily on litigation to defend its business model since launching in Europe five years ago, but has taken a more conciliatory approach since the ouster of co-founder and CEO Travis Kalanick earlier this year. His successor, Dara Khosrowhahi, has promised “to change the way we do business.”

“As our new CEO has said, it is appropriate to regulate services such as Uber and so we will continue the dialog with cities across Europe,” Uber said in a statement e-mailed to Fortune. “This is the approach we’ll take to ensure everyone can get a reliable ride at the tap of a button.”