Position Paper

“It was Aristotle who taught mankind that things that are alike should be treated alike, while others things that
are unalike should be treated unalike in proportion to their unalikeness”

-Justice Puno, Marcos vs COMELEC

The common carrier is bound to observe the highest degree of diligence in ensuring the
safety of its passengers. The Civil Code states “Art. 1755. A common carrier is bound to carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with a due regard for all the circumstances.” The common carrier must
prove his or its observance of that extraordinary diligence; otherwise, the legal presumption that
he or it was at fault or acted negligently would stand. Ergo, it is imperative that a distinction must
be made between those that are common carriers and those that are not.

Issue

Whether or not Transportation Network Companies are common carriers.

Arguments

The Transportation Network Companies (TNC) are NOT common carriers for the following
reasons:

I. Transportation Network Companies (TNCs) do not fall under the definition of

common carriers under the Civil Code.

Article 1732 of the Civil Code provides that:

Common carriers are persons, corporations, firms or associations engaged in the

business of carrying or transporting passengers, or goods, or both, by land, water,
or air, for compensation, offering their services to the public.

Under D.O. 2015-011 of the Department of Transportation, it defines a Transportation

Network Company (TNC) as an “organization whether a corporation, partnership, sole proprietor,
or other form, that provides pre-arranged transportation services for compensation using an online-
enabled application or platform technology to connect passengers with drivers using their personal
vehicles.”

In both cited definitions, it is clear that the business and object of both common carriers and
TNCs are different; under the Code, a common carrier directly engages in the business of carrying
or transporting passengers or goods or both. On the other hand, TNCs, under the Department
Order, provide pre-arranged transportation services only. TNCs do not engage in the business of
transporting passengers or goods or both as it merely pre-arranges it using “an online-enabled
application or platform technology to connect passengers with drivers using their personal
vehicles”.

The TNC may or may not have been granted a Certificate of Public Convenience (CPC). If it
is a holder of a valid and current CPC, it is known as a common carrier. Otherwise, it is classified
as a land transportation service contractor. The Partners (owners of the vehicles used in
transporting passengers) forming part of the network of a TNC, may or may not be a common
carrier, depending on whether the Partner(s) itself/themselves are holders of a CPC. A mere
Accreditation given by LTFRB is not an equivalent to a CPC and will not make said holder a
common carrier. If the Partner is a holder of a CPC, said Partner is a common carrier. However, if
the Partner is not a holder of a CPC, said Partner is merely a land transportation service contractor.1

II. In Transportation Network Vehicle Service (TNVS), it is the driver, and not the
TNC, who is the common carrier.

Under the cited Department Order, TNCs use an “online-enabled application or platform
technology” to connect passengers with drivers using their personal vehicles. Clearly, TNCs do
not operate like taxi service providers. They do not own the vehicles driven by its drivers, or
“partners”. This is unlike taxi service providers where its operators are issued franchises, or
specifically known as Certificate of Public Convenience, and are, in fact, the actual owners of the
vehicle units. Drivers in a TNVS do not pay a certain “boundary” to the TNCs; the TNCs only
take a percentage of the fare (up to 20% for GrabCar) as commission for the usage of their software
or application services. Unlike a taxi service, where the driver of the vehicle needs to surrender
the same to the operator at a certain time, depending on the agreement, or otherwise suffer

1
BIR RMC 70-2015
penalties, a TNVS driver does not have the same obligations to the TNC. In fact, in GrabCar,
drivers do not have minimum driving periods and no minimum number of trips required. The
drivers decide for themselves on their time.

TNVS is just a platform for booking and not the one that transports passengers. TNCs are
considered as Online-Enabled Transportation Service, relying on internet connection, mobile
application, and geo-location technology. This means that their passengers are limited to those
who use the application and have a registered account with the TNC. When a passenger requests
a driver, the application pairs the passenger with an available and willing driver. The price in turn
is determined by the TNCs own computation and made known to the potential passenger.

The business of Grab is innovative and it does not have full control of the vehicles. The main
difference between Uber or Grab and traditional utilities is that it does not own or operate its own
network. It functions as a cloud service on top of the existing mobile Internet fabric. Uber or Grab
and its customers both rely on wireless data networks to communicate, but Uber or Grab does not
control, manage, or financially benefit from their data transport services. Uber or Grab leverages
those connectivity utilities to provide its functionality; hence the term “Internet-enabled”. From
the perspective of Uber or Grab users and partners, Uber or Grab is the network.2

In the 1916 case of US v. Kutz adopted in the 1923 case of Ilo-Ilo Ice and Cold Storage
Company v. Public Utility Board, the US Supreme Court refused to consider a taxicab’s business
of furnishing automobiles from its central garage on individual orders generally by telephone, as
a public utility. The TNVS are similarly situated because their contract of carriage appears to be
undertaken by special agreement and therefore the public has no legal right to demand and receive
its services. Thus, arguably they should not be considered as common carrier.

In sum, the drivers in a TNVS are independent from the TNCs. Here, the drivers, themselves,
through an online-enabled application or platform technology, engage in the business of
transportation of passengers or goods or both, by land, offering their services to the public. They
satisfy the definition of common carriers as provided by law.

2
I/S: A Journal of Law and Policy for the Information Society: Is Uber a Common Carrier? by Kevin Werbach
 III. The operations of TNCs are similar to that of travel agencies or even akin to that
of an ordinary barker, both of which are not common carriers.

It is already settled that travel agencies are not considered as common carriers. Their object is
their service of arranging and facilitating the booking, ticketing and accommodation in a tour and
not transportation as in common carriers.

In the case of Crisostomo vs CA, Supreme Court held that a travel agency which facilitated
the booking of an airline ticket by a passenger is declared not to be a common carrier. The Supreme
Court states:

“Caravan Travel and Tours is not an entity engaged in the business of transporting either
passengers or goods and is therefore, neither a private nor a common carrier. Caravan
Travel and Tours did not undertake to transport Estela from one place to another since its
covenant with its customers is simply to make travel arrangements in their behalf. Caravan
travel and tour’s services as a travel agency include procuring tickets and facilitating travel
permits or visas as well as booking customers for tours.”

While they provide booking of travels or trips for a consideration, they do not transport that
person/s from one place to another.

The same can be said of TNCs. Their object is their booking service although done in
automatically through the online-enabled application. TNCs, through their software, determine
based on location the best suitable driver. Although TNCs do not facilitate in ticketing, still, their
main service is merely to arrange the booking and accommodation of a passenger with a driver.

Grab, for example, is not a vehicle for hire service; therefore, it is not a common carrier.
Neither does Grab operate as a public utility. Thus, it doesn’t violate the equal protection clause
because Grab is not of the same class with taxis. It is a class in its own which existing laws have
not yet completely categorized. It is more akin to an ordinary barker who announces to the public
that a transportation service is available at a certain place and time. It merely advertises the
availability of the transportation service to the riding public.

TNVS is just a platform for booking and not the one that transports passengers. TNCs are
considered as Online-Enabled Transportation Service, relying on internet connection, mobile
application, and geo-location technology. This means that their passengers are limited to those
who use the application and have a registered account with the TNC. When a passenger requests
a driver, the application pairs the passenger with an available and willing driver. The price in turn
is determined by the TNCs own computation and made known to the potential passenger.

Passengers who utilizes TNVS are protected by existing laws. Upon riding a vehicle, a contract
is entered into between the passenger and the driver. The drivers transport them from one place to
another for a consideration. While we submit that the business of transportation is imbued with
public interest and thus, extraordinary diligence is the degree that is required, it is however not
applicable to Uber, Grab and the like. It is to be noted that the drivers are the ones who own their
respective cars; they personally transport the passengers to their destination. In other words, the
safety of their passengers is on their own hands. Therefore, they are bound to exercise at the very
least a standard of diligence to protect the riding public.