29 September 2020

Uber have won – but their battles with TfL are far from over

By

Uber can stay in London, for now. The ride-sharing app is once again ‘fit and proper’ to operate, after winning an appeal against TfL’s decision to revoke their license.

We’ve been here before. In 2017 when TfL banned Uber for the first time, they were overruled by the courts. Back then, Uber was granted a 15-month probationary license leading up to the second ban. This time around, Uber has been given 18 months – much shorter than the five years they asked for last November. Alas, Uber’s battles with TfL are far from over.

When TfL first banned Uber, Londoners were up in arms. Nearly a million people signed a petition to save the company. Back then, the alternatives for consumers and drivers were limited. Without Uber, Londoners would be forced back to black cabs and old-school minicabs. The market looks very different now. Today’s decision will disappoint the black cab lobby but even if Uber lost it is unlikely they would win back any customers. Consumers and drivers can now choose between Estonia’s Bolt, India’s Ola, or Germany’s FreeNow, among others.

Uber lost its license due to concerns about passenger safety, which was particularly ironic given that the company’s arrival in the capital market made travelling around London safer. Imagine telling someone 15 years ago that a taxi company that logged every trip and tracked it with GPS would be banned on safety grounds. Back in 2003, a judge at the Old Bailey said “It appears that nobody can travel in minicabs with any degree of assurance or safety”. Or recall TfL’s disturbing Cabwise posters. Uber didn’t just disrupt black cabs, it disrupted black market minicabs too.

We should look to the example of Austin too. When Uber left the Texan city in response to excessive regulation, customers switched to riskier alternatives. While it’s unlikely people would do the same thing in London today, it is a reminder that we should judge safety and risk on counterfactuals.

In their decision to ban Uber, TfL cited 24 unlicensed drivers who took advantage of a loophole in the app to make 14,000 illegal trips. Concerning though this undoubtedly was, revoking Uber’s license was always a hugely disproportionate response. TfL failed to consider the counter-factual. Are other apps or minicab agencies less liable to be exploited by fraudsters? If they are, would we have any way of knowing? Remember that it was customer complaints that drivers didn’t look like their photos which helped Uber identify the scope of the problem.

Since their license was revoked, Uber has taken a number of steps to prevent other unlicensed drivers from accessing their platform. TechCrunch report they have introduced “real-time driver ID verification; new scrutiny teams and processes; and [a freeze on drivers who had not taken a trip for an extended period]”. In fact, the judge overturning their ban stated: “I am satisfied that they are doing what a reasonable business in their sector could be expected to do, perhaps even more.”

While it is reassuring to see the court system ensure fair treatment, TfL’s initial decision to revoke Uber’s license sent a damaging signal. Start-ups across the world and, in particular, Silicon Valley were told London is closed to tech. Not only were we dragging our feet on micro-mobility, but our institutions were captured by vested interests.

This wasn’t always the case. When a raft of unworkable and anti-competitive rules aimed at Uber were proposed by TfL in 2015, the Competition and Markets Authority stood up for innovation and challenged the rules.

It is hard to quantify the value of such interventions. By sending a message that entrepreneurs can innovate without permission and that incumbents will not have a veto, it is a boon to the most valuable kind of entrepreneurship. Just look at Emmanuel Macron. His pro-business reforms to labour laws and the taxation of stock options are changing the perceptions of France as anti-entrepreneur.

When I speak to techies in San Francisco, they often complain that their local governments seem to despise them. They cite misguided attacks on e-scooters, office canteens, and, again, businesses like Uber. If we want to draw the best and brightest to London to start businesses, create jobs, and invest in research, then we should try to send a different message to tech companies.

The Mayor of London and TfL should seek to draw a line under this affair by the time Uber’s 18 month extension is up. At the same time, they should throw their support behind the startups driving the micro-mobility revolution. Put simply, they should make it clear London is re-opening to tech.

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Sam Dumitriu is Research Director at The Entrepreneurs Network.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.