Uber’s latest regulatory setback is a real body blow for the ride-hailing firm.
London’s transport regulator said Monday that it was denying Uber a new operating license because the company was “not fit and proper” to hold it. Transport for London (TfL) said the U.S. Firm had, among other things, allowed unauthorized drivers to pick up passengers on at least 14,000 journeys, putting them at risk.
The shock move means that, unless Uber can convince the courts that it can actually keep passengers safe, it may soon have to stop operating in London—though until the appeals process has run its course, it gets to stay on the road.
Uber is used to being hammered by regulators around the world, but TfL has presented the firm with a real headache. That’s because London is a crucial playground for Uber.
‘Key areas’
When the company was preparing for its big IPO earlier this year, it revealed in U.S. Regulatory filings that nearly a quarter of its bookings took place in five cities: London, New York, Los Angeles, San Francisco and São Paolo.
“An economic downturn, increased competition, or regulatory obstacles in any of these key metropolitan areas would adversely affect our business, financial condition, and operating results to a much greater degree than would the occurrence of such events in other areas,” Uber said in that filing.
In the run-up to its flotation, Uber used London as a showcase for the integration of other services into its app—including real-time public transport information derived from TfL data.
Uber remains a heavily loss-making company, though its most recent quarterly loss of 68 cents per share was slightly better than analysts had been expecting. Its share price has dropped 43% since the IPO, with Monday’s London license news alone being responsible for a fall of over 4%.
When it comes to the British capital, “regulatory obstacles” are not the only issues on Uber’s plate. Competition has also recently been surging, from rivals such as India’s Ola, France’s Kapten, and Estonia’s Bolt—the rebranded version of Taxify, which itself found itself stripped of its license by TfL a couple years back.
But London’s regulators have been on Uber’s back for several years now, spurred on by city politicians and traditional taxi drivers.
Apologies and extensions
The situation first came to a head in September 2017, when TfL said it would not renew Uber’s operational license because of its inadequate background checks for drivers, its failure to report criminal incidents, and its scandalous use of software to undermine regulators’ policing activities.
Cue much apologizing and lobbying from then-new Uber CEO Dara Khosrowshahi, who was mere weeks into the job when the decision hit. Fast-forward to June 2018, and Uber finally won its appeal against that TfL decision. Westminster Magistrates’ Court gave the company a 15-month probationary license, on the basis that it appeared to have cleaned up its act.
The probationary license ran out in September this year, upon which TfL granted Uber a mere two-month extension of its right to operate, giving the regulator more time to make a final decision. That extension runs out just before midnight on Tuesday.
“Uber has made a number of positive changes and improvements to its culture, leadership and systems in the period since the Chief Magistrate granted it a license in June 2018. This includes interacting with TfL in a transparent and productive manner,” TfL said in a Monday statement.
“However, TfL has identified a pattern of failures by the company including several breaches that placed passengers and their safety at risk. Despite addressing some of these issues, TfL does not have confidence that similar issues will not reoccur in the future, which has led it to conclude that the company is not fit and proper at this time.”
Driver vetting
The headline failure was a change in Uber’s systems that let unauthorized drivers—one of whom had previously had his license yanked by TfL—upload their photos to the accounts of authorized Uber drivers. Uber also allowed dismissed or suspended drivers to create new accounts, and permitted the use of cars that weren’t properly insured.
Uber said it will appeal. The law gives it 21 days in which to do so, and it gets to stay operational throughout the whole appeals process—just as it did last time.
“We have fundamentally changed our business over the last two years and are setting the standard on safety,” said Jamie Heywood, Uber’s regional general manager for Northern & Eastern Europe. “On behalf of the 3.5 million riders and 45,000 licensed drivers who depend on Uber in London, we will continue to operate as normal and will do everything we can to work with TfL to resolve this situation.”
Regarding TfL’s accusation over driver vetting, Heywood said Uber “will soon be introducing a new facial matching process, which we believe is a first in London taxi and private hire.”
But Uber’s opponents are happy to see the company take a hit. “14,000 instances? And they actually thought they would get a license???” Tweeted the Licensed Taxi Drivers Association with undisguised glee.
“Uber’s DNA is about driving down standards and creating a race to the bottom which is not in the best interests of professional drivers or customers,” said Jim Kelly, the chair of the London and Eastern cab section at Unite, the U.K.’s largest union. “In order to protect the public and to ensure standards are maintained it is essential that TfL follows this decision with stricter licensing of private hire operators and apps.”
TfL confirmed Monday that it is not currently investigating any of Uber’s rivals, as it hasn’t “discovered similar issues” to Uber’s through its regular compliance operations.
So now it’s back to Uber to do some convincing, again. Last time it was able to argue that it had turned over a new leaf with the ouster of CEO Travis Kalanick, who’d led the ride-hailing giant through a series of ethical scandals. This time it may find its task even more difficult.
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