- Uber has lost regulatory battles in dozens of cities. Even if it had not been banned in London, Uber faced a licence fee increase up to £2.9 million. The company lost a lobbying battle against a powerful union and its law firm. It was also hurt by a change in control of the mayor’s office. That’s a lot of political risk riding on the $12 billion that investors have ploughed into Uber so far.
- REUTERS/Lucas Jackson
LONDON – In the tech startup world, most people believe the basis of Uber’s business is an ingenious map-based algorithm that matches supply-and-demand for cars and passengers in a localised area, via an app.
The current narrative about Uber is that although it might cheekily enter a new city, country or region without fully playing by the rules, once it is established it becomes so popular that governments cave and find a way to let it operate. It has been massively successful doing that so far.
That narrative took a bashing this week
Uber’s London revenues could fall to zero in the next few months if it cannot persuade the courts, and then Transport for London, the city transport regulator, to undo the decision.
The disaster is the latest of dozens of legal setbacks for the company. Uber has been banned, restricted, curtailed, or lost regulatory battles in the following markets, to name a few:
- London Austin, Texas Alaska Denmark Russia (where it merged with Yandex after failing to go it alone). China (where Uber, which was not technically legal at its launch, sold its Chinese business to Didi Chuxing). Helsinki (where its UberPOP service was withdrawn). Paris Germany (UberPOP again).
In some cities, like Edinburgh, Uber is hobbled by agreements that restrict it to licensed drivers. In those markets, Uber fails to deliver rides in 4 minutes the way it usually does, because riders are simply using the app to hail a private-hire cab – and those guys tend to always be 15 minutes away.
In London, it became obvious earlier this summer that the company was in trouble.
Uber said its customers would be “astounded” at the decision but the company itself should not have been surprised. The GMB (a union that represents black cab taxi drivers) hired the law firm Leigh Day to campaign to drive Uber out of business. That lobbying was successful this week. (And yes, this ban is about lobbying.) The London Assembly voted unanimously against renewing Uber’s licence in July. The vote was symbolic but it shows how the Labour-dominated council is beholden to unions whose main interest is protecting the jobs of a minority of elite workers. The decision came after the Conservatives lost the mayoral election. Former Mayor Boris Johnson (Conservative) gave way to Labour’s Sadiq Kahn. When that happened, Uber lost a champion and gained a Luddite enemy.
Uber isn’t really a tech company
Even if TfL’s decision had gone the other way, Uber was facing a £1 million rise in its licence fee to £2.9 million.
Uber’s big problem is that other cities and countries all over the world will be watching the London fight closely. They, too, will consider applying millions in licence fees to Uber’s fares. Or maybe they will also conclude that their taxicab cartels are too powerful to upset. (After all, ordinary people who just need to get from A to B cheaply don’t have unions or lawyers to campaign on their behalf.)
A change in politics can happen in any city, in any country. There are thousands of jurisdictions on the planet where Uber must fight this battle.
From that perspective, Uber isn’t really a tech company. Its business is archaic: Taxis have been around since the 1700s, when Hackney carriages – which give today’s black cabs their name – ferried passengers with horses and carts.
Rather, Uber is a bet that things will never change, that there will always be a taxi business it can extract value from, and that governments will sleep through the consequences. That’s regulatory arbitrage. And it ought to focus the attention of Uber’s investors, who have sunk $12 billion into a company that will go public in the next two years.