London’s minicab regulator, TfL, has revoked Uber’s licence to operate in the British capital, one of its largest world markets. Getting that licence back may require the firm to finally confront a question it cannot afford to answer: Just what is Uber?
In October 2016, two men nervously waited to hear the decision on their employment tribunal case. Yaseem Aslam and James Farrar were both licensed London minicab drivers. They enjoyed the work, but they also felt that they were being treated unfairly by their employer.
What they were asking for was, they felt, simple and reasonable. They wanted a guarantee that they would earn the UK legal minimum wage and receive the minimum amount of paid annual leave required by law. That they had found themselves in court wasn’t just because their employer had refused to grant this, but because it refused to accept that they were its employees at all.
That employer was Uber…
…or was it?
Uber weren’t the men’s employer, Uber’s lawyers told the employment tribunal. Because Uber wasn’t… well… Uber. Not in the UK at least. It was, in fact, two entirely separate companies. Uber BV (UBV), a Dutch company that offered a rideshare app the men happened to use and Uber London Limited (ULL) , a TfL-licensed Private Hire Vehicle (PHV) operator based in the British capital that the men happened to have a relationship with.
The driver’s confusion, the lawyers insisted didn’t stop there. They were happy to accept that both men had a working relationship with ULL, but that didn’t mean they worked for it. At least not in any sense that would require Uber to grant them the legal rights guaranteed by the Employment Rights Act 1996, the Working Time Regulations Act 1998 or the National Minimum Wage Act 1998.
Caddies vs pole dancers
ULL, the lawyers argued, didn’t employ any drivers. It was simply a brand umbrella under which 30,000 independently licensed minicab firms chose to operate. It was true, they admitted, that the vast majority (if not all) of that 30,000 were single-operator firms like Aslam and Farrar, but they were still independent. The tribunal was shown the contracts the men and others had signed, and drew the judges’ attention to the careful wording within them that confirmed this.
Part of the benefit for signing this contract, the lawyers explained, was that operators were granted access to UBV’s app. Not ULL’s app. On this they were clear. UBV’s app. Through that app, passengers could contact those operators directly, negotiate a ride and agree a fare.
Neither ULL or UBV were involved in the ride itself, Uber’s lawyers were keen to stress. Yes, UBV took a small commission for facilitating the connection, but that was it. If there was a contractual arrangement, then it was solely made between passenger and operator, both of whom were free to set their own price (although yes, Uber’s lawyers admitted, the UBV app did suggest a price) and route (oh and yes, again, the UBV app did suggest an optimal route).
Uber’s lawyers argued that Aslam and Farrar (and the other 30,000 Uber drivers they indirectly represented) had misunderstood the relationship they had with Uber. They drew the judges’ attention to two previous similar examples in English case law. The two men, the lawyers argued, thought they were like golf caddies – technically independent, but so closely wedded to a golf club that they were, in effect, direct employees. Uber’s lawyers stressed that this was wrong. They had a different example in mind for the relationship between Uber and their drivers, one set by Quashie v Stringfellow.
The drivers weren’t like caddies at all, the lawyers explained. They were like pole dancers. Uber – or rather ULL and UBV separately – were simply providing them access to a space in which they could perform for money.
The judgement
When it came, the tribunal’s ruling was unanimous: Whether Aslam and Farrar were direct employees of Uber or not was unclear. This was good news for Uber, but what came next was anything but. The tribunal ruled that what was clear was that the two men did, in a more general sense, work for Uber. Certainly to a level that entitled them, and indeed all Uber drivers within England and Wales, to the minimum wage and annual leave.
“This is,” the tribunal judges explained in their ruling, “we think, an excellent illustration of the phenomenon of which Elias J warned in the Kalwak case, of ‘armies of lawyers’ contriving documents in their clients’ interests which simply misrepresent the true rights and obligations on both sides.”
From Uber’s perspective, the obvious potential costs of this ruling were bad enough. The devil, however, is always in the detail and the tribunal wasn’t done. Over the subsequent pages of their ruling they gently, but firmly, tore a gaping hole in Uber’s legal definition of itself.
“[Uber’s] general case and the written terms on which they rely do not correspond with the practical reality.” The ruling explained.
It continued. “The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our minds faintly ridiculous.”
The judges still weren’t finished.
“It is, in our opinion, unreal to deny that Uber is in business as a supplier of transportation services.”
This was a potential disaster for Uber. What they had stumbled into, perhaps unwittingly, was something that as an American firm ‘by birth’ they may not even have realised they needed to avoid: the Duck Test.
The Duck Test
If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.
This maxim is known as the ‘Duck Test’. Unfortunately for Uber it is also a principle that, in part thanks to rulings by Baroness Hale (Bates van Winkelhof v Clyde & Co LLP) and Elias J (Consistent Group Ltd v Kalwak) is wired into the heart of English law.
The Duck Test means that what you do in the real world, and how you describe yourself there, trumps any clever words you put down on paper. What you do matters more than what you say. And having placed themselves in a position to be subject to the Duck Test, Uber were now failing it. Hard.
“We have been struck,” the tribunal said, “by the remarkable lengths to which Uber has gone in order to compel agreement with its (perhaps we should say its lawyers’) description of itself.”
“In her evidence,” they continued, “Ms Bertram [Uber’s lawyer] chose her words with the utmost care. But in publicity material and correspondence those speaking Uber’s name have frequently expressed themselves in language which appears to be incompatible with the case before us.”
The tribunal had looked at the fundamental contradiction lurking at the heart of Uber and decided that they were having none of it. They were presented with ample evidence that Uber consistently referred to ‘our drivers’. The firm constantly told passengers that it was Uber who was carrying them around. Uber also seemed happy to claim to TfL and the London Assembly Transport Committee that it employed people too. Indeed the tribunal were presented with testimony from the same team of lawyers that had presented to the Transport Committee. In it Ms Bertram herself referred to Uber creating jobs and having drivers.
“To our considerable surprise,” The ruling says, “Ms Bertram attempted before us to dismiss this as a typographical error.”
All of this led to one simple, potentially devastating legal conclusion for Uber. The tribunal was blunt:
“Any organisation (a) running an enterprise at the heart of which is the function of carrying people in motor cars from where they are to where they want to be and (b) operating in part through a company discharging the regulated responsibilities of a PHV operator, but (c) requiring drivers and passengers to agree, as a matter of contract that it does not provide transportation services (through UBV or ULL) and (d) resorting in its documentation to fictions, twisted language and even brand new terminology, merits we think a degree of scepticism.
“Reflecting on the Respondents’ general case, and on the grimly loyal evidence of Ms Bertram [Uber’s Counsel] in particular, we cannot help being reminded of Queen Gertrude’s most celebrated line:
‘The lady doth protest too much, methinks.’”
Uber, the tribunal was saying, was a big fat passenger-carrying duck.
Quack. Quack. Quack.
Fine margins
Uber’s foot-in-mouth (or perhaps wing-in-beak) encounter with English employment law may seem only tangentially related to the current situation. That situation is that TfL have – for the second time in under two years – refused to grant Uber a Private Hire License to operate in London. But the tribunal ruling is important, because it helps answer the question that should really be asked:
Just why is it so hard for Uber to meet the regulations in London?
The answer is that there is an existential dilemma lurking at the heart of Uber. It is Schrodinger’s taxi firm. To be profitable it needs to be an app. But to operate in London it needs to be a cab firm.
Until now, Uber has largely managed to walk a fine line between the two, in part by clinging firmly to the distinction between ULL and UBV. As the employment case brutally highlighted, however, there is no clever contractual language that, under English law, will allow them to maintain that distinction forever. It is their behaviour that matters and if they cannot force TfL to back down then their current predicament will only get worse.
It’s not about the app… again
The reasons why TfL have refused to grant Uber an operator license in London are relatively straightforward. Just as it was 18 months ago, when a similar decision was reached, it is about safety not the app.
The reasons for the license revocation are as follows:
- An identity fraud issue, which allowed unauthorised drivers to upload their photos to other drivers’ accounts. This allowed them to pick up passengers under false identities. At least 14,000 journeys are known to have occurred this way.
- System or process failures which allowed dismissed or suspended drivers to create an Uber account and carry passengers
- Serious hire or reward insurance issues related to the above and other failures (TfL successfully took Uber to court for breaches of insurance requirements in July 2019)
- A number of unspecified additional breaches
Based on these factors, TfL believe Uber’s current internal safeguards are not robust enough to prevent future issues on similar lines. They cannot, therefore, be classed as ‘fit and proper’ to hold a PHV licence.
As is clear, Uber’s licensing issue isn’t that TfL or the Mayor are blocking innovation. Nor are TfL anti-Uber. The problem is that Uber are struggling to demonstrate, to TfL’s satisfaction, that they have enough processes in place, under their current operational model, to ensure the safety of their passengers.
That ‘their’ is important. As the employment tribunal so eloquently put it, Uber are not ‘a mosaic of 30,000 small businesses’, they are a private hire firm. That means, as far as TfL are concerned, the responsibility for the safety of those passengers belongs to Uber.
Accepting this and making changes would be the easiest way for Uber to meet the regulatory requirements and regain their licence. Indeed this is, in essence, what they quietly did 18 months ago (despite claiming in the press that they had won a victory in court). Making more changes risks moving even further away from ‘app’ towards ‘cab firm’, however, which simply replaces one problem with another. Uber have already appealed against the employment tribunal decision once and lost and are now waiting on a Supreme Court appeal. Further concessions to TfL now would further increase the risk of losing that case. Uber’s existential crisis is firmly underway.
The existential crisis
Uber’s first response to their loss of London licence toed a familiar line. As was the situation 18 months ago, they questioned both the Mayor’s and the city’s commitment to innovation.
The logic behind this is understandable. Uber wishes to shift the debate away from Uber and make it about rideshare in general. Yet the truth is that the battle over rideshare apps has already been won or lost (depending on your point of view) in London. They are here to stay, and they are here to stay in numbers. Mytaxi (formerly Hailo), Gett, Kabbee, Kapten and now Ola (India’s homegrown Uber-beater) are all present on the streets of London in some way. They are all also regulated, where necessary, by TfL.
Uber’s second response has been to push a narrative to riders and drivers (via emails) and to the media that this decision represents a sudden reversal in TfL’s opinion. That, as Uber’s regional manager is quoted in a Huffington Post article as saying, TfL found Uber a: ‘fit and proper authority just two months ago’.
That this would be accepted by the recipients of an email from Uber is understandable. That so many media outlets have accepted it at face value is not. At best, it is an omission, at worst a lie. It is also one that is easy to disprove, simply by looking at TfL’s press releases for September. Uber weren’t so much granted a new license, as issued a stay of execution while all the above issues were investigated:
“Uber London Limited has been granted a two-month private hire operator licence to allow for scrutiny of additional information that we are requesting ahead of consideration of any potential further licensing application.”
Publicly massaging the truth over the current licensing situation and the reasons for its refusal may seem an odd tactic for Uber to take. Particularly given that their objective right now is to convince TfL that they can be trusted. But again, this situation highlights the corner that Uber have painted themselves into. Every change that requires Uber to behaves more like a cab firm moves them further away from ever achieving profitability.
The economics of Uber
We have written previously about the economics of Uber. Most notably the last time that the issue of Uber’s licence came up. There are two elements of their model that need to be understood:
- Uber’s path to profitability in any territory requires either a monopoly, allowing prices to be increased to cover costs, or a massive reduction in journey costs.
- Uber is reliant on venture capital and other forms of investment until profitability is achieved.
For Uber, securing a monopoly in London (or anywhere) is dependent on two factors – enough drivers to dominate the market and a low enough cost to force modal shift, or at least syphon off business from potential rivals (in London this is the existing minicab and black cab trades).
To achieve this, Uber uses investor capital to run at a significant loss in most territories. For example, in 2016 in New York (one of the few territories in which raw numbers were available), the average fare paid by a passenger covered only 40% of the journey cost.
Creating a sufficiently large pool of drivers is another reason why journeys rarely wash themselves in cost terms. London, like other territories, has a limited pool of licensed drivers and that means Uber have to make driving for them much more attractive than any alternative.
There are approximately 110,000 private hire drivers in London, a number that has largely held steady in recent years but is a significant increase on pre-Uber figures, which were closer to 60,000. It is fair to say that the explosion in private hire drivers caused significant disruption to London’s roads and considerable early friction between Uber and TfL.
Of these drivers, Uber claims that approximately 45,000 drive for them. Indeed stressing the job losses that would result from the permanent loss of their licence was a cornerstone of their public defence in 2017 and seems set to be so again. As with online games that include users who log in intermittently or have done historically to bolster their user numbers, so should Uber’s London driver figures be treated with some suspicion. In 2017 we cross-compared Uber’s various published numbers on journeys, drivers, profits and average income. Our conclusion was that Uber likely had somewhere in the region of 7,500 – 15,000 regularly active drivers annually. Either that or they were banking somewhere between £625m – £1.4bn of profits abroad, away from the eyes of Her Majesty’s Revenue and Customs (HMRC).
Rock meet hard place
Whatever the true figure, it still represents a considerable percentage of the available driver market. This is a market that the arrival of more rideshare apps, along with the measures TfL have put in place to limit PHV licensing, is making more competitive, not less. As a result, maintaining that level of driver coverage in London makes up a considerable part of Uber’s ongoing costs. Those costs will balloon further if the Aslam and Farrar ruling is confirmed (hence why Uber have appealed that decision all the way to the Supreme Court).
TfL’s licence revocation highlights the other problem that Uber face with maintaining their large driver base: it is the biggest risk to their licence. Drivers, or rather the potential safety issues bad actors among the driver pool can cause, are why Uber is now fighting for its ability to operate in London at all.
The problem for Uber is that the solutions to these two problems are mutually exclusive. To operate in London, TfL are ordering them to be more ‘hands on’, but to avoid greater financial burden due to employee obligations Uber needs to be as ‘hands off’ as possible with their drivers, to avoid them being classed as employees.
If you were wondering why Uber’s current PR blitz seems so committed to insisting that the steps they have taken already to meet regulations should be sufficient, this is the reason.
Enter the taxman
To make matters worse for Uber, there is another reason why they are so desperate for the current status quo to be preserved: a little thing called 20% Value Added Tax (VAT).
In October, ULL filed their accounts up to December 2018 with Companies House. The ‘liabilities’ section on accounts for internet startups (or in Uber’s case, unicorns) are almost always a fun read. There are a lot of things you can get away with including or omitting from an investor deck. Your accounts are different. Being creative with your accounts means breaking the law.
“The Uber Group” the accounts read, “is involved in an ongoing dialog with HMRC, which is seeking to classify the Uber Group as a transportation provider.”
There are few things that will terrify a business owner (or an accountant) more than the words ‘ongoing dialog with HMRC’. In Uber’s case, the second part of that statement makes things even worse. This is because being classified as a transport provider would make Uber, and not its drivers, liable for paying VAT in the UK.
This is another reason why Uber’s lawyers in the employment tribunal were so ‘grimly loyal’ to the idea that Uber is simply a ‘mosaic’ of small businesses. Because as long as this is true, each of Uber’s drivers are individually liable for VAT, rather than that liability sitting on Uber themselves. This allows Uber to commit tax-death by a thousand cuts.
The cumulative value of Uber’s bookings is high, but an individual Uber driver in London can expect to make £40,000 (you can find a good earnings vs costs breakdown here) at best. This is well below the VAT threshold of £85,000. Pushing the liability for VAT onto Uber would be a game changer. Not just because this would increase the tax burden on every journey from (effectively) nothing to 20%, something Uber would need to swallow to maintain its competitive price point in London, but also because HMRC would be able to collect VAT retrospectively on Uber. That’s potentially a £1.1bn liability (according to the Financial Times) currently hanging over Uber’s heads, which they can only avoid if they can persuade HMRC to accept that they aren’t a transport provider.
On that subject, just for variety, we will quote the judge from Uber’s first appeal of the Aslam and Farrar decision. The appeal was dismissed:
“I am satisfied the [tribunal] did not err either in its approach or in its conclusions when rejecting the contention that the contract was between driver and passenger and that ULL was simply the agent in this relationship, providing its services as such to the drivers. Having rejected that characterisation of the relevant relationships, on its findings as to the factual reality of the situation, the [tribunal] was entitled to conclude there was a contract between ULL and the drivers whereby the drivers personally undertook work for ULL as part of its business of providing transportation services to passengers in the London area.”
Quack. Quack. Quack.
The myth of scalability
The above provides some context for why Uber are struggling to meet their regulatory requirements. It also shows why the firm is so wedded to claiming that their current internal processes should be sufficient for TfL to grant them a licence. Uber’s problems, however, do not end there.
Whatever the outcome of the licensing process, it is likely to increase the cost to Uber of operating in London, as a greater level of driver oversight will be required. That cost will increase further should they lose the final appeal at the Supreme Court over Aslam and Farrar. Then there is the lurking VAT issue beyond. All of these increase the pressure on Uber to improve the financial return on every journey, but their ability to do so is much more constrained than they have sometimes tried to portray.
As with the majority of startups, particularly those claiming to be disruptors, at the core of Uber’s promise to investors is the principle of ‘economies of scale’. Just like Amazon (the argument normally goes) the larger you get as a technology firm, the more efficiencies you can find. This is another reason for the quest for monopoly – it’s not just about forcing your rivals out of the market, it’s about getting big enough to start seeing the efficiencies that size is meant to provide.
Taxis are not technology
As Uber have increasingly discovered, however, taxis are not technology. Every journey carries a number of fixed costs that simply don’t scale. Most particularly: driver and tax. Already for Uber the cost of the driver takes up the majority of the fare. Again, here the conflict between being an app and a cab firm counts against them.
The need to be ‘just an app’ means that for Uber the driver cost isn’t simply that of the person behind the wheel. Uber cannot maintain a fleet of cars themselves, nor can they buy fuel or most other services in bulk. The driver has to provide the car and the fuel, cover the cost of cleaning and a whole host of other services which have to be factored in to the total ‘commission’ that Uber pays out. A commission rate which now has to be more competitive after those costs, not less, because Uber has been unable to secure a monopoly on rideshare in London and the pool of available private hire drivers is topping out.
Should HMRC decide to make Uber liable for VAT, then the (effective) zero cost per-journey of tax is also about to get a whole lot bigger.
These costs do not scale, despite the traditional pitch to investors. It doesn’t matter whether Uber has four cabs on the streets of London or 40,000. They all require one driver, one car and have a fixed rate of tax. So the overall percentage of the revenue collected that is subsumed by operational costs will largely stay the same, no matter how large Uber gets
This is a problem not just in London, but across every territory. It is the reason that Uber are investing so heavily in driverless technology research. Because, for all of Uber’s talk of their contribution to the London (and UK) job market, the firm’s future profitability is dependent on making all of those jobs redundant.
The promise of driverless
Driverless technology is nowhere near ready for market though. If it can ever truly replace a cab driver at all. There is a reason why most driverless technology companies are based in America and put out videos of their cars (mostly) successfully dealing with traffic there. America is a car-first culture. Even in its cities roads are often designed to give priority to car use, sometimes to a point of active hostility to other forms of transport (such as cycling or buses).
The driverless technology problem is a cultural one as much as a technical one. It will be far easier for AI to navigate Los Angeles than the Lea Bridge Road. The Silicon Valley-centric nature of major startup investment – including Uber’s – has so far largely avoided acknowledging this is even a problem, let alone worked out how to tackle it. Indeed the betting money here at LR Towers is that the first workable driverless system that can deal with London is as likely to come out of Camden (where homegrown driverless firm Wayve are quietly beavering away) as it is from California.
Surviving the short term
All of this leaves Uber with a limited range of short-term options to squeeze out more revenue from their share of the fare. Indeed perhaps the only gap to exploit is the small one they have already identified: get more people paying money in the same vehicle.
If, as a Londoner, you have been wondering why your ears (podcasts) or eyes (Uber emails, social media and public advertising) are being bombarded with information and offers for UberPool then this is why. UberPool sees two or more people headed broadly in the same direction both get in the same Uber in return for a slightly lower fare.
It is Uber’s way of trying to beat the scalability problem, but it is not hard to see the limitations. The obvious one is that although it skews the fixed costs down a few percentage points, there are still limits to the effect it can have.
Pool driving is less appealing to drivers, as it adds complexity and uncertainty. It also further increases the risk that, in light of TfL’s current concerns, Uber can least afford to increase: passenger safety issues. There is a difference between getting into a car with a cab driver who (if the system is working) you can trust to have been vetted, and a complete stranger. Uber may argue that it is a conscious decision on the passenger’s part to place themselves in that situation, but that is hardly a viable defence in the court of public opinion, let alone the law, if something goes wrong.
That public opinion also remains another barrier to uptake. Again, culture matters. As seemingly every visitor from the north of England insists on pointing out, Londoners are not a particularly friendly bunch. This isn’t true, of course, but what is true is that socialising with strangers is not something Londoners have a strong tendency towards. It is no coincidence that Uber’s current round of podcast advertising for UberPool doesn’t claim it is an opportunity to talk to your fellow passenger. Instead it features internal monologues from two passengers, presumably sitting as far away from each other as possible on the back seat, quietly lost in their own thoughts.
It is difficult to know how heavily Uber are selling UberPool to investors as a potential solution (or at least one of them) to their current predicament in London or elsewhere. It is hard to see, however, how it can really do anything other than nudge the needle of revenue-per-journey slightly towards the black. To make drivers take it up, Uber are having to offer them better rates to do it. To make passengers use it, they are having to do the same.
Beyond all that, there is still an upper limit to how many ‘Poolers’ you can pack into a single journey anyway. Uber cars aren’t clown cars. There is a limit to how many passengers you can fit into one before you’re running a bus service, not a cab service. And if Uber start trying to edge into that territory then TfL will definitely want a word.
The quacks are starting to show
All of this serves to highlight the precarious situation that Uber now find themselves in, both in London and beyond.
Large American firms often seem to reach a stage where the legal department is the ultimate power in the company, often to the frustration of marketing. What the employment tribunal ruling clearly showed is that within Uber it is the opposite way round. It has to be, because the company’s continued existence depends on the image it presents to both passengers and investors.
That second group is arguably more critical right now than the first. It is investor money, not fares, that are keeping Uber alive. This is something that is worth its users remembering, next time Uber emails them and asks them to go on social media and tell TfL and the Mayor – or indeed the transport and political representatives of any city it operates in – just how much Uber means to them.
Right now they are not the customer. For now at least they are actually part of the product. They are a pressure group and a resource, a tool with which to lean on regulators and reassure investors that Uber are worth the long term gamble.
That’s important because the odds on that long term gamble paying off are getting longer. TfL’s decision to revoke their licence is part of the reason for that, but it should not be seen in isolation. It represents both an active threat to Uber’s continuing ability to function in London, and a contributing factor to the firm’s developing existential crisis.
Certainly, from a London perspective, Uber’s future looks uncertain to say the least. Their current best-case scenario is that they are able to restore the status quo without having to change a thing. This would require the Supreme Court to overturn the tribunal ruling, TfL to back down and grant them a London operator licence without any changes to the way they operate at all and HMRC to decide that they will drop their pursuit of Uber for VAT.
The chances of all three of those things happening are slim. Heading off the tribunal and HMRC, the two biggest long term threats is perhaps possible, but requires Uber to do something that they failed so spectacularly at last time round: keep quiet and convince a set of British judges that they are not the duck that they seem to be.
Uber’s problem is that TfL have now told them that if they want a licence to operate in London again, then they better start quacking very loudly indeed.
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All a perfectly valid argument. But I think the issue can be looked at in a much simpler way.
To operate a mini-cab in London you need to be licensed by TfL. Uber claim that they are effectively an umbrella organisation for 30,000 mini-cab drivers who are, in effect their own company. But they are not licensed with TfL as a mini-cab company. So either the licensee is Uber, who is responsible, or an unlicensed cab is being operated and it should be removed from the streets.
Surely, if Uber wins their argument, all that has to happen is that the Met police (controlled by the Mayor as far as establishing policy is concerned) seize the cars of Uber drivers and charge them with driving other than in conformity of the conditions of their insurance [as a legitimate hire and reward vehicle] – so six points on licence. Get caught twice means no licence to drive at all.
It’s simple in a London sense, yes, but what most people are missing is the full picture:
Appeasing TfL almost certainly means accepting that they must treat their drivers as workers and also pay VAT.
And the real question is whether they can afford to do that and still stay in the game.
Quack, quack, quack. Are the other newcomers to the mini-app-cab business experiencing the same issues?
ps “you can find a good earnings vs costs breakdown here” – no, you can’t.
So Uber’s duck is a canard.
Excellent writing about this here and on Twitter JB. I wonder if we’ll look back on this and see it as a peculiar quirk of early 21st entry economics, something that Matt Stoller has described as ‘counterfeit capitalism’
https://mattstoller.substack.com/p/wework-and-counterfeit-capitalism
It almost certainly looks as though Uber’s game in London is up in one way or another. Even if they get their license back, they can meet neither of the two benchmarks to achieve profitability. They won’t get a monopoly, even of ride sharing, or anywhere close, and they can’t cut their costs significantly, certainly not in the short to medium term. Superficially you could say that the demise of one company has limited impact because, as the article points out, there are a variety of competitors who could well fill the gap created. But, as Alison W points out, they could well be hit in the same way. And what about the radio circuits for black cabs, such as Computer Cab or Radio Taxis? Is there really a major conceptual difference between using a telephone and radio circuit to get a car to a passenger and using an app? The Supreme Court’s decision, when it comes, is not merely significant for Uber but could have a major impact on the whole taxi sector in London.
The courts have also upheld a (in my opinion) rather artificial distinction between an app which controls and prices the journey, and a taxi meter – seems like the duck test should apply here too…
I’m not sure if this would help Uber or not though.
New South Wales effectively re-wrote the regulations to provide a more level playing field for what it now calls “Point to Point Transport”.
It has similar divisions in licensing to London – taxi plates are quantity-limited but are sold by auction – and the new rules cater for Uber-style operations as well as more traditional formats.
The Companies House link points to Uber Group Ltd (a dormant company in Cheltenham) rather than Uber London Ltd (Company number 08014782).
14,000 uninsured drivers ,the ones TFL know about and Uber knew about begs the question if Uber knew in may ,their words why did they not act ? Non existent profits ?
Fancy being an Uber passenger in one of the 16,000 RTA’s in London with NO insurance ?
Uber’s licence should be Revoked with immediate effect ,allowed to operate under the same operandi is unaceptable and a clear danger to all.
Have TFL. abdicated responsibility and left it to a bent judge like the last one arbuthnot,conflict of interest with her husband a major investor in Uber to decide TFL renewal of licence ? Are Uber’s in London insured or not ? The public need to know NOW
Outright ban needed and its polictical
While all this is fascinating from a legal and infrastrucutre point of view at some point some consideration must be given to those that actually pay for taxis and transport – and implementing a fares freeze that, er, doesn’t and then killing the cheapest way to get about London when other options are limited seems a bold strategy…
I see that Siobhan Benita is defending Uber, which is a bit of a gamble that the economic libertarian votes she may win by it will outweigh the anti-corporate, pro-public-transport and pro-worker ones she’ll lose.
Uber operates in Manchester and Birmingham etc. just fine. You can barely tell the cars apart from “real” minicab firms, except that all private hire vehicles have a big uniformly placed sticker stating the name of their firm.
What are the differences between London and other UK cities regarding taxi licences that led to the dispute with Uber only occurring in London?
A few comments if I may. I agree re Uber’s financial model not working so will not explore that. I am not an industry insider so caveat the below is not built on any special knowledge.
I am really unconvinced though on the safety side being a fail and that merits closer scrutiny. As I understand it we are talking about 43 rogue drivers and another 43 who let them use their accounts. That’s 86 out of 30,000. ie 0.3%. Presumably they have the names, addresses and licence numbers of the 43 “account lenders”. Everyone can be traced and brought before TFL. Of the 43 rogue drivers, they have photos and presumably can trace (image recognition to previous licensed drivers etc). So the Uber system allows a high degree of tracing and TFL to follow up.
So if I am Uber’s Barrister Q1 – what do TFL think the average percentage of hire cars being driven by unauthorised drivers is? Do they know? Q2 – what in the (6 months?) since this was stopped has TFL done to pursue the drivers (Uber doesn’t have any powers)?
Point is that I would argue that Uber’s system and traceability is better than TFLs, which presumably involves random stop and check, and is on an improving curve.
Next point. Bear in mind TFL is both regulator and operator/funder of services hit by competition (eg night buses). There is an arguable conflict of interest.
Drifting on to finance and tax. Surely the problem on VAT is not unique to Uber. The foundation point is surely a VAT registration threshold of £85k that drives many minicab firms to try and operate on a similar basis of “self employed” drivers sourcing work via equally virtual cab companies. Search AAA Cabs, find a website and go to terms and conditions. My first hit was AAA taxis Hertfordshire. Same principle but 300 drivers not 30,000. The concern is that avoiding VAT poses a risk of poorer control over vehicle and driver safety. That will be more marked at the 5 or 10 driver outfit than the 300 or 30,000 where there is scope for systems and controls.
So a way forward would be to either zero rate mini cabs which would remove the disincentive to consolidation and safety. Problem is there is a revenue cost in that non-registered businesses can not recover input VAT. Underlying problem is the UK’s high VAT registration threshold – probably the highest in Europe. https://www.avalara.com/vatlive/en/eu-vat-rules/eu-vat-number-registration/vat-registration-threshold.html. That is a drug politicians need to get off. I would argue that that has a structural impact on minicab operators and a safety impact. With the cashless economy its time to lower this and have better VAT capture.
Still it’s election time. Fortunately we can delay the appeal until post vote. After all shareholder subsidised cabs are popular.
As already explained, Uber’s only the cheapest way to get around London because it’s currently being subsidised by investors in the expectation of gaining a monopoly when prices will go up. When Winter comes to the magic money tree, what then? Anyway, cheapest? Last week – Heathrow T5 to Brixton by Tube -£2.05 with a Railcard.
I wish to express my admiration for your excellent phrase “big fat passenger-carrying duck”, probably the finest in all your years, through an appropriate depiction.
@John (comment at 28 November 2019 at 08:15 )
Manchester Council is also reviewing Uber’s licence
https://www.manchestereveningnews.co.uk/news/greater-manchester-news/manchester-council-summon-urgent-talks-17324834
Brilliant article.
Thanks!
MyTaxi is now (checks) FREENOW, and instead of a icon which implies a taxi or travel, is just a red circle saying FREENOW. Unfortunately while I can remember MyTaxi have changed their name to something meaningless, when I actually want to use it I can never remember what this is so use it less. I’m sure this is marketing genius.
Having read you pieces on Uber, I’m still slightly baffled at how they struggle to come even close to making a profit (your quote from New York about only covering 40% of costs is staggering). Surely their costs are similar to any other taxi/minicab firm, driver, car, fuel, tiny bit for central support/admin/app (that latter should broadly scale).
From what I’ve read, Uber drivers earn less (typically) than london black taxi drivers, so that’s a lower cost too. So even if they set their prices a littler lower, optimising vehicles/drivers with the app, you would have thought their losses should be small, or even breakeven.
And why not increase the price a little, I’m sure most who use it would continue to do so if the price was a little higher. The quick pickup (due to num of drivers) and no need to pay at end are benefits compared to other options.
Re Chris Keene,
A number of the cost issues come from needing the huge number of drivers to ensure quick pick-up most of the time, the other side of the quick pick-up coin is low driver utilisation a lot of the time which is not good for driver income (driverless being Uber ultimate solution to this).
In terms of increasing prices they would need to a lot not a little.
The number of registered PHV drivers in London is already falling which suggests Uber may struggle to get the number of drivers needed (~42% work or have worked for Uber) hence the possible recent advertising push for UberPool? Previously in some locations they were helping to finance vehicles for drivers to get the numbers up so waiting times were down.
“Their Costs” – they have outsourced most of those to the drivers!
Grammar/spelling note; – “license” is a verb, “licence” is a noun. Both instances of *”licenced” in the article should be “licensed”. It’s the same as ‘practice’.
[Corrected. Thanks. PoP]
@ChrisKeene – You are correct about FREENOW’s rebranding being beyond idiocy.
However, you are not correct about Uber “coming close to making a profit”. They don’t. They lose billions and billions of dollars. Have done every year without fail. They’re playing silly buggers with accountancy rules now to try and stave of the inevitable: https://arstechnica.com/cars/2019/11/uber-lost-1-1-billion-last-quarter-says-rides-are-profitable-sort-of/
“The tribunal ruled that what was clear was that the two men did, in a more general sense, work for Uber. Certainly to a level that entitled them, and indeed all Uber drivers within England and Wales, to the minimum wage and annual leave.”
How does this work when you have one driver who is simultaneously operating on several apps, say Uber, Kapten and Bolt?
Donciccio
The same way that say, Film Extras” are working for/through more than one agency in a week/month/year.
They are hired hands for the duration of each individual hiring.
The same applies, in a field some of us might be more familiar with … Passenger Counting, hired originally by the TOC’s or DfT or Tfl, or another interested party. The individual counters may be contracted to more than one agency or intermediary.
It’s not problematic.
I note the TfL press release refers to ‚dismissed‘ and ‚suspended‘ drivers. Please correct me if I am wrong, but surely you could only dismiss employees? Otherwise it would be drivers whose contract hab’s been severed?
I find it difficult to believe that all of Uber’s drivers will be out of work if Uber lose their licence. Where I live (outside London) all the cars with Uber stickers usually have another, local, mini-cab sticker on them too. i.e. Few people appear to be exclusive Uber drivers.
@John Holt
The VAT issue with Uber, is that the passenger pays Uber (via the app), who then passes the money on to the driver. Uber’s turnover is above the threshold, so VAT is due. With a minicab, you pay the driver directly, their turnover is below the VAT threshold so the fare is free from VAT.
If you have an account with a (mini)cab company, and settle up at the end of the month, then you will most likely be paying VAT on the fares as again you’re paying the VAT registered company.
If Uber changed their model so you pay the driver directly, and the driver then pays Uber their percentage, then there would only be VAT paid on Uber’s commission (unless the driver is VAT registered).
Thank you for the article. Not sure if it’s a duck or a penguin disguised as a chicken.
Does anyone know how the driverless cab will cope with the sooner-or-later inevitable situation where it has to take instruction from a traffic policeman or a streetworks contractor? As a potential passenger I might be nervous about being in a vehicle that could be told by an official looking person to turn back and go somewhere other than my intended destination.
Re PinBallDave,
“If Uber changed their model so you pay the driver directly, and the driver then pays Uber their percentage, then there would only be VAT paid on Uber’s commission (unless the driver is VAT registered).”
But that only works if Uber don’t need to subsidise the fare – which they do.
Even if profitable overall they will still need to subsidise some fares.
Uber’s 2 game changers out side the use of an app to try to recreate the market was
a) subsidising to attract customers on a sophisticated basis.
b) cutting waiting times (involves indirect subsidy)
e.g. they break the direct link between what the customer pays and what the driver is paid.
They need to be the payment conduit and to make it opaque too for their business plan to work.
The other way they continue to finance a loss making enterprise, as well as investor cash, is by taking it from the asset value of the vehicle. Drivers new to private hire can be intially pleased with their earnings from Uber, because their day to day consumable costs seem relatively low.
However when some of the high cost but low frequency items eventually need replacing on the vehicle then they realise their earnings have been artificially high until this point. This often leads to them quitting as the true earnings are much lower than they initially believed, even for a good while whilst driving for Uber.
@RogerB “Does anyone know how the driverless cab will cope with the sooner-or-later inevitable situation where it has to take instruction from a traffic policeman or a streetworks contractor? ”
None of the various versions of autonomous vehicle cope with this. Look at the now infamous incident where the lady was killed in the US because the autonomous car computers were programmed on the basis that it would never encounter a pedestrian except at a crosswalk – so didn’t react when there was someone in the car’s path.
As JohnB has alluded to – the companies based in Silicon valley are developing software based on strict segregation between road users and pedestrians – they are ill prepared to be able to develop any software that would cope with the almost anarchic pedestrian and cyclist behaviour that is considered normal in major European cities
IslandDewller
You are saying that they are NOT programmed to STOP before, or avoid an obstacle in their path, no matter what it is?
That’s what confused me, because a bicycle would be a very good radar-reflector, with all those spokes/wheel/metal frame.
@GregTingey
“because a bicycle would be a very good radar-reflector, with all those spokes/wheel/metal frame.”
The radar or lidar will typically see the bike, animal, or person, but it all depends if the self-driving software is programmed to recognise it as something worth stopping for. Which is the case for the unfortunate woman with bike who was killed by the AV.
The software also typically filters out environmental conditions, like snow. As many AV companies are based in the southern US, it’s not automatic that the software will adjust for these.
Longbranchmike wrote:
“The software also typically filters out environmental conditions, like snow. As many AV companies are based in the southern US, it’s not automatic that the software will adjust for these.”
But their software may filter out smoke and flames from wildfires?
Re Greg T,
Yes they managed to do exactly that (long story) basically because it couldn’t identify what the object was so did nothing.
What is worse, is that the base vehicle before Uber modified it was a high spec Volvo XC90 with an object detection and automatic braking system… which Uber disabled. (NTSB final report 10 days ago)
Volvo reckoned their system would have prevented the incident and provided 6seconds of emergency braking pre-impact.
The reason given for disablement was that it affected passenger comfort but probably impacted Uber’s ability to develop their software. If Volvo’s system was kicking in that should have been a warning sign to Uber that their system wasn’t as good.
It seems to me that Uber is depending for its future profitability on people being unable to control things from where they are, or plan and organise their lives.
The whole of the rest of the tech sector is heading in the opposite direction……
Another fantastic article, thanks.
No doubt the Uber executive team are lining up potential fall guys for when their investors finally realise they’ve backed a lame duck (quack quack) and the business collapses. London’s rigorous regulators are probably a prime candidate.
A friend is an Uber driver, but is also signed up for other Apps / minicab firms. I am also sure that some of the parcels I receive are being delivered out of vehicles with private hire stickers. So I suspect more than a few drivers are taking on other work.
I still don’t understand how a driver working for a number of minicab firms / apps and is obviously self-employed, will be able to receive sick pay etc. from one of his employers.
The advantages of self employment being the lower tax rate, the claiming of travel expenses, and not having to pay for unwanted ‘benefits’ (Sick pay etc.) are all lost if you become an employee. I do wonder at the wisdom of the court case.
N.B. I am self employed but in an unrelated area to transportation.
“The advantages of self employment being the lower tax rate”
Aren’t the latest round of IR35 changes aimed at putting a stop to all that? The government (regardless of colour) seems to be absolutely determined to ensure that self-employment is not simply an elective status but an intrinsic one.
Trying to complete the government check as if I were Uber engaging a driver returns an “unable to make a determination” result…
On the one hand taking work from multiple firms suggests that an Uber/etc driver might be genuinely self-employed. On the other hand the fact that the driver is not allowed to send another suitably qualified person in his place to do the job suggests (by the IR35 rules) the opposite.
@TJ. Surely the sick pay etc would be calculated on a pro rata basis, depending on “shift patterns”. Which in this case, would equate to how many hours per week (on average) the driver was logged onto each cab app.
You say the drivers are “obviously self employed” but are they? They can only get bookings via the app and they are penalised if they don’t accept the assignments they’re given. They can only drive a vehicle type dictated by Uber. They don’t set fare rates or take any payment directly from customers…. They are not even supposed to pick the route themselves, but follow the route calculated by the app. That doesn’t look like self employment to me.
The drivers might work for more than one employer but that doesn’t – in itself – make them self employed.
The whole point of the IR35 legislation is to prevent people cherry picking the tax breaks available to the self employment when they’re actually in disguised employment.
@TJ @IslandDweller
I get the impression that “self employed” status doesn’t work out all that well for Uber drivers. In particular, Uber uses the platform to encourage them to sit around idling in their cars all day (and all night) waiting for jobs whilst not getting paid; and having rides available around every corner is crucial to Uber’s business model.
So whilst being a “self employed” minicab driver might be good money if you can do 8 hours a day and be taking fares for most of that time, Uber not only isn’t delivering that to its drivers, it actively works against it by saturating the market with drivers to ensure they’re always ready (but unpaid!) around the corner when someone wants one.
To me, the argument that drivers should get minimum wage while they’re logged into the app is a strong one, because as soon as they appear on that app map, they’re performing a function for Uber.
To summarise, we have:
•. An innovative traveltime saving project
•. State of the art technology
•. Subsidies in the hope of future profits
•. Inherently more costly than the competition
•. Frustrating regulatory issues
•. Heavyweight PR exercise.
Comparisons with R101 and Concorde come to mind. Does anyone here expect the outcome to be any better for Uber?
@GREG TINGEY 28 Nov 18:08
“a bicycle would be a very good radar-reflector, with all those spokes/wheel/metal frame”
I’ve recounted this story before, possibly here, but it’s worth repeating in this thread.
As a telecoms journalist, I had a worrying conversation at a big exhibition/conference a year or three ago with an exec from Ericsson, one of the big equipment makers, about self-driving cars. Though he was from Sweden, he seemed to have the same attitude that cars would be segregated from other road-users. Cars will ‘recognise’ one another from their respective self-driving equipment [indeed, there’s a lot of work now on car-to-car communication to this end].
How will a self-driving car recognise pedestrians, people pushing children in buggies, cyclists and so on, I asked him. We’d have to carry transponders, he suggested, though you could see the faults in his arguments becoming visible to him by the second.
So the industry seems to think — at least from that engineer’s point of view — that the onus will be on us. And watch out cats, dogs, cattle, elks and other animals that are so careless as to not carry transponders.
@ ALANBG 19:49
Segregating cars from pedestrians isn’t a terribly good starting point for a wouldbe taxi operator, if that’s what Uber is relying on for its future profits.
@ RogerB
On the whole you’re right, but I’d be very reluctant to give Uber the label of either “innovative” or “state of the art”.
They like to claim their app is unique or clever but it’s neither, it’s a fairly obvious way of using smartphones to access taxis, it was never especially hard to implement once smartphones existed, and it’s been around for nearly ten years. They might claim they thought of it first; I’d imagine the founders of Hailo and others would also make that claim, but either way, what was “innovative” on smartphones in 2010 is run-of-the-mill in 2019. It aint Concorde by a long stretch.
The duck reference reminded me of Basil Fawkty and his Gourmet Night where he offered
Duck with cherries
Duck with orange
Duck surprise (duck without oranges or cherries)
Uber want’s to be all three but also none of them
Schrodingers Duck perhaps
RogerB “Segregating cars from pedestrians” … I know, we could have a place reserved for access to a car. We could call it something … hmmmn … how about “a station”?
Frankly, the idea of self-directing vehicles is reasonable on motorways but imho a non-starter in suburbs or towns. Unless you hang them from a rail over the road? (I’ll get my coat – it’s cold)
Sadly, much of the automotive industry is still in a state of denial about future trends in cities. The big German manufacturers, in particular, Mercedes, thought they had it all sewn up with Angela Merkel protecting them. However, the German courts have shown this to be wrong over diesel cars. Hence the move in the last year or so to look at other approaches. Until then the view was that all the issues over air pollution would just blow over and we would be back to business as usual.
“Caddies” ? Cabbies, surely.
In my view practical and useable driverless cars are decades away certainly for urban areas. The dynamic road interpretation and risk assessment requirements of a city environment are just too demanding to achieve equivalent performance to a human driver in respect of simultaneously being safe and making reasonable progress. In simple terms humans are (currently at least) far better at perceiving what is a genuine hazard and what is not.
In any event it seems likely the software will be compelled by certification requirements to set a very low bar for the perception of a hazard. What will result is an overly slow and cautious approach and a system which will almost always overreact to the situation it is facing by comparison with a reasonably competent and unimpaired human driver. Anyone who has current technology dynamic cruise control in their car will be familiar with this characteristic. This might be perfectly acceptable to many but many others will find it frustrating especially those in a hurry.
In my view if Uber are really relying on driverless vehicles to be their ultimate salvation then they will not survive.
@ ALEX MCKENNA please read the article!
There’s a reference to Caddies.
With regard to driverless cars, I think Uber (and everyone else) has rather missed an important point.
It is very hard to write good software (and develop suitable hardware) in order to be able to operate driverless cars. As part of the package you would also need to maintain them (clean, recharge and repair as necessary).
Relatively speaking, it is easy to write a hail-and-ride app and the necessary back office stuff to support it. So why on earth should some organisation that has cracked the driverless car problem hand all that over to a company that has merely badly implemented a hail-and-ride system? Surely the driverless car company would do the relatively simple additional bit and provide in-house support for their own autonomous driving system?
In the industry they are talking about the goal of Transportation As A Service. A small and relatively unchallenging part of that is creating and supporting the hail-and-ride functionality.
What is the average time between a person standing on a pavement in London hailing a black cab and the cab responding? I realize this is variable depending where in London, so let’s say ‘central’ London.
What is the average time between a person in London connecting to a ride app and negotiating a ‘contract’ , and a ride responding?
Just curious as a visitor my only experience is with the former.
@riverwear. Surely you have to include the time waiting for a taxi with its flag up to appear?
In my experience, hugely variable. I’ve stood at the Lambeth end of Lambeth Bridge for half an hour waiting for a cab heading across to Westminster and beyond.
Don’t know about Uber, as I’ve used it only once, but two weeks ago Data Cars first quoted me 35-40 min wait for a car from the Cromwell Road to Blackheath; the time time on the live map dropped to 10 min; then it went back up to 30 min, which indeed it was.
The benefit of hailing off the street is that you can walk in the right direction while waiting. If a cab comes, you benefit from the shorter journey. With Uber and other online booked services you have to wait where you say you’ll wait.
Superlative summary.
Uber has the problem that it wants to be a duck and not a duck simultaneously, depending on who it wants to impress.
There is nothing wrong with the concept of ride hailing apps per se.
Unfortunately, Uber has based its business model on having its cake and eating it, but only after it has deprived its competitors and workers of their fair share.
This is not helped by its attitude to VAT and PAYE which, if not yet demonstrated to be evasion, could well be viewed as abusive avoidance.
The English legal system might be creaky but the concept of substance over form (or anatine interrogative comparison) is almost impossible to get round. Similarly the concept of “fit and proper” is sufficient to require more care than simple box ticking.
In short, it is only a matter of time before all the problems land on its head, turning it a pure Norwegian blue.
Self driving minicabs are much hyped but the technology for the interface with other road users is nowhere near the proficiency demonstrated by its predecessor, the horse drawn vehicle.
If these are not given their own segregated track, I would estimate that they are decades away from safe operation.
I would suggest that a fair test route would be a journey from Finchley Central to Edgware via Mill Hill Broadway incorporating a double mini-roundabout and at least one emergency roadworks with stop/go boards. This would be undertaken at about 3.15 pm on a damp and drizzly Thursday evening in November during school term time.
Namelss
You must also include the remains of a previous roadworks, where the workmen have removed the temporary “30mph” signs at one end, but forgotten those at the other ……
Seen that ( Or its equivalent ) sevreal times …. does the automated vehicle obey the forgotten sign & continue down the ( normally 50 or 70 mph ) dual carriageway at 40 mph for ever, or what?
I do have to agree with PoPs first comment re each driver actually needing to be registered as a firm with TFL.
One could make a comparison with UberEats, JustEat etc
Just because each restaurant operates on their app, doesn’t mean that the app is a foor retailer, and has to comply with food hygiene regulations itself, that is down to the individual restaurants.
However the obvious difference here, is that each restaurant sets it’s own menu and prices – although you could argue I guess that the driver deciding the route and which car to offer is the same as deciding on the menu.
I would guess for this argument to work the Uber app would have to be defined as an ‘advertising’ app as opposed to a transport firm
Re: the death due to self-driving car.
Uber’s self-driving team had a reputation inside the industry. [Offensive language snipped. LBM]
As far as I can tell Google (Waymo) and most others have been super, super cautious about safety in a way that Uber wasn’t. Waymo’s been running an uber-like in Arizona for a few years now for testing, and as I understand it the intervention rate (by a human monitor) has dropped quite close to zero. On the other hand, there are people deliberately trying to [Offensive language snipped. LBM] mess with the cars for various reasons, which was a problem that the designers hadn’t anticipated. They’ve driven some huge number of miles in passenger service with no major incidents.
As far as I’m aware (my work is only very peripherally related) they’re testing in more hostile environments now–snow, rain, twisty city centres, etc. We shall see, but I’d be astonished if widespread deployment was as late as 30 years from now.
Uber also in trouble on home ice in LA:
“Los Angeles wants a peek at the location data collected by the Uber scooters in its city. The company, better known for its ride-hailing service, doesn’t want to give up the information and may take legal action to keep the data private.
“Uber said Monday that it would file a lawsuit against Los Angeles after months of refusing to give the Department of Transportation access to its scooter location data. In September 2018, the Los Angeles Department of Transportation instituted a requirement for all scooter companies to provide location data on the vehicles. The city said it was for city planning purposes.
“LADOT said Tuesday it hasn’t received the lawsuit, noting that it’s still in talks with Uber regarding the data policy. On Tuesday, the agency suspended Uber’s permit, but the company is still allowed to operate its scooters as the discussions continue.
“Uber has delayed filing the lawsuit during this process, but is still ready to sue LADOT once the proceedings are over.
“Los Angeles’ “Mobility Data Specification” plan represents one way local governments are trying to wrestle with the impact of technology companies. It’s caught on in other cities such as Seattle; Austin, Texas; and Louisville, Kentucky because they don’t want to be caught flat-footed the same way they did when ride-hailing companies first arrived and caused traffic headaches. But the request for real-time location data on scooters is a step too far, raising serious privacy concerns, Uber argues…”
LBM
But the request for real-time location data on scooters is a step too far, raising serious privacy concerns, Uber argues…”
Well that’s pure ( insert $Name of total nonsense_here ) of course.
TfL & IIRC, others do exactly that with passenger/ride locations – they “simply” anonymise the data, stipping off any personal info. But apparently uber claim they can’t, or more likely won’t, do this thing.
Moving fast & breaking things can work both ways, perhaps.
@JC actually on many food delivery services the price you see wasn’t set by the restaurant – you are seeing the marked up prices the delivery service chooses to charge.
In some cases the restaurant hasn’t signed up at all, and they send a driver in to pay cash.
Court of Appeal judgement today.
Mrs Justice Lieven has rejected HMRC arguments, and ordered them to disclose whether or not they had made an assessment over Uber’s payment of VAT
I’m not clear whether HMRC has to comply right away or whether there is a possibility of a higher appeal.
More predatory behaviour – Uber’s new loan program could trap drivers in cycles of crushing debt according to the Guardian.
One of the big differences between Uber the taxi and Uber Eats (and caddies) is that delivering food (and carrying clubs) is not the core business, it is an additional Service to the food and the golf course. The core business of Uber the taxi is providing a taxi, nothing else.
The link to the appeal tribunal judgement is also great. Whereas the first tribunal is just taking Uber‘s case apart, the appeal judgement provides a thorough summary of the history of the duck test in employment law. Especially the quotes of government justification of various employment acts make me wonder how Uber the taxi thought they can get away with it – it literally describes the purpose to prevent unequal power leading to undesirable employment relationships by the means of pretend contacts.
Directly relevant article on this subject in last weekend’s FInancial Times.
Link here
One gets the impression that the FT are uimpressed with uber’s performance.
[ If the FT’s paywall interrupts, try putting: “FT uber article” itno the search box! ]
Something has subsequently occurred to me about Uber’s business value that I don’t think’s been considered here: The data they gather. Data is said to now be the world’s most valuable resource. Uber has a mountain of data in numerous cities around the world about where and when people travel. Like Citymapper, perhaps this is where they hope their value will ultimately be.
Paul
After some thought, I’ve got to disagree about that.
It’s quite clear that Uber & its backers & founders were intent on completely disrupting the urban transport “market” – they are on record as saying so.
With the clear objective of driving off all, or almost all of the “competition” ( Including Public Service buses ) & then using their monopoly power for price gouging. Again, all on-record.
Now, it looks as though it might all be coming apart, & all of the money poured in by said backers might, just might be lost.
@greg
The problem I have with that argument, is that no-one can really believe a private taxi monopoly is possible or sustainable. The barriers to entry for new competitors are just too low, especially in London where any 4-door car in decent condition can be used as a PHV. It’s not like the predatory bus pricing of the 80s and 90s where companies had to invest 6 or 7 figures in a bus fleet to even get started.
The only way I can see a private monopoly being possible is through large scale political corruption – dare I say Russian style – to prevent or intimidate competitors. Whilst anything seems possible in this politically surreal era, I’m not convinced that’s very likely.
Greg, Paul
A possible explanation is that, for the Uber originators to make money, it would not be necessary for the taxi monopoly to actually be achieved. All that is necessary is for potential investors to believe that it could. Which, judging by the capital which has flowed in, many of them must have done.
Malcom
Agree with your hypothesis, but – as yet more & more money is poured into the maw of uber, the required eventual rate of return continues to climb.
I have also heard the words “Ponzi Scheme” mentioned in this context …..
If/when TfL wins in the courts, the various outcomes from that are going to be … interesting.
You must remember that the Uber plan for its business model originates in the USA, where, in most cities, public transport is vestigial and car is by a long way the majority mode. In this context, looking to achieve a monopoly – or, at least, an effective monopoly – is quite achievable and the traffic consequences of bus trips being replaced by car trips are acceptable. As in a large number of other cases, Americans have assumed that a model that works there can be made to work everywhere, and certainly in the developed world. But this is, of course, not true. Not only could the streets of London (and most other Western European cities) not cope with a large scale modal transfer from bus to Uber, the scale of current public transport use is sufficiently large to make this wholly unachievable (with or without Uber being a monopoly). The business model which might well work in small to middle sized US cities is doomed to failure in London, but it will take a serious failure for this to be believed.
Interestingly the same assumption that works at home will work elsewhere also applies to the Chinese dockless bicycle hire schemes.
Quinlet
Spot on – can I add something that “JB” said to me in the pub yesterday?
The US legal model is very, startlingly, different to the British one …. hence all the discussion, earlier in this thread about “The Duck Test”. And Uber’s backers are or were assuming that US legal models would work here … and they do not, as they are now discovering. Authoratative sources suggest that, if Uber are found to be an “employer” then they will be facing a total tax bill in the £-billion-plus range.
A serious amount of money that they probably do not have.
Data from Chicago suggests Uber/Lyft shared rides falling quickly as companies cut subsidies and hike fares.
“How much ride-hailing companies Uber and Lyft charge customers throughout a day is one of the most closely held secrets in Silicon Valley. But a law in Chicago requiring the companies to disclose fare data shines a light on how at least one of the former “unicorns” is trying to turn a profit for the first time.
“A Reuters analysis of the data shows fares for shared rides in the city have risen significantly over the past year, while fares for single riders have remained stable. The price increases for shared rides predominantly affect Chicago’s low-income neighborhoods, which is where most of the carpool rides are booked, the analysis showed. Over this period of increased fares, carpool ridership fell.
“For a graphic on Shared rides decline in Chicago as prices rise” click on the above link
Worth noting that Uber has exited markets after losing including:
China – sold out to Didi
SE Asia – sold out to Grab.
Entirely possible they will disappear from London. Other rideshare/hailing services are available.
@FormerTransportInsider
“A court in Germany has banned Uber from offering rides through rental car firms. It’s another blow for the US ride-hailing company, which has had its European ambitions curtailed by the courts.
“A regional Frankfurt court found on Thursday that Uber’s business model in Germany, which relies on the use of vehicles from local car hire companies, violated several anti-competiton laws.
“The judges said the company was more than just a go-between connecting drivers and customers, and therefore should have a rental car licence of its own. “From the passenger’s point of view, Uber is providing the service,” Judge Annette Theimer said, pointing out that Uber could pick the drivers and set the prices.
“The court also noted that not all drivers returned to their head office in between rides as required by law, and accused Uber of not adequately checking the car rental firms it works with…”
Yes, the Frankfurt court argument and discussion appears to be very similar to what’s playing up in London. The judgement states: “From the point of view of the passenger, Uber itself provides the service and is therefore an operator within the meaning of the Passenger Transportation Act” – and as Uber doesn’t have the relevant permission, it must cease operation.
The case was brought by German taxi associations, which managed to show in court that many vehicles ordered via the Uber app were systematically violating certain regulations (especially who can pick up where). Uber claimed to be simply a broker, and thus not responsible for any issues with the actual operations by its partners. Uber argued that the small print in the app made it clear that the contract is between the passenger and the actual taxi operator. But the court noted, for example, that Uber’s advertising speaks a different language – essentially it applied an Ententest – and found Uber to be an unlicensed operator.
Uber response is that it thinks that with some small changes it can carry on trading: Firstly it will change its app processes to make it much clearer for users that Uber only facilitates taxi services but does not provide them. Secondly it will use its app to do more to ensure that the actual operator follows relevant regulations. And thirdly, Uber has said that in future it will only work together with one taxi firm per city. Which altogether seems somewhat contradictory to me…
The taxi associations, on the other hand, say the judgement shows that Uber’s business model is illegal in Germany. Uber can now appeal, but once the judgement is final, it allows fines of up to ¼m€ to be levied for each further infringement…
Re the Frankfurt court ruling. I think something got lost in translation in the DW article. I don’t think Uber was connecting anyone with car rental companies (the likes of Avis / Hertz). Surely a better translation would have been ‘connecting with local PHV (private hire) operators ‘
Pedantry aside, I agree it’s another blow to Uber.
Christian Schmidt
it applied an Ententest
OK, that is going straight into the vocabulary – magic.
Of course, in German “Ente” means – Duck, but it also means … a Citroen 2CV – “ein Ente”.
Which might, or might not be appropriate under the circumstances.
Birmingham is also considering banning Uber:
“Uber’s licence renewal in Birmingham is being denied. This news comes as the dispute around the safety and security protocols of the ride-hailing company continues in London. Come February, Uber will no longer have a licence to operate in Birmingham. Uber has applied for a five-year licence extension, however the council is waiting for the outcome of the London appeal before making a decision. The company has continued operating in London since November when its licence was stripped, while it opened the appeal process.
“As the appeal continues, Uber will continue to operate in Birmingham, even beyond the end of January, albeit on an appeal-pending basis…”
https://twitter.com/imrankhan/status/1230193712199802882
Is this legal? Especially if drivers are seen as Uber employees?
A case along similar lines is brewing out in the provinces, Northampton to be precise.
https://www.northamptonchron.co.uk/news/people/court-date-set-union-suing-northamptons-bounds-taxis-workers-rights-1889457
CS – I looked at the link in your recent message in this discussion but failed to see what point you are making, or the relevance of the item.
@Twopennytube – Uber paying someone else but the driver directly is what I meant…
C Wolmar has opined that … the ride-app/hailing market is completely unsustainable, for good economic reasons
@Greg T
I think Christian Wolmar is partly right in that the current level of service and fares is unsustainable as all the companies are making a loss. In Uber’s case the losses are huge and over a number of years. I feel sorry for those who have invested in the company. Something has to give, but I don’t think it’s the concept. With car ownership so low in London, taxis in one form or another will continue to be a major mode. The black cab sector is protectionist, expensive and offers poor service. I think it will be lucky to survive outside Central London and a few major destinations such as Heathrow, unless it changes dramatically. The likely outcome is that fares will go up and that the market will settle down to an oligopoly of a limited number of competing firms plus numerous local minicab companies.
French court rules against Uber to class drivers as employees, not independent contractors
“France’s top civil court dealt ride-hailing giant Uber a setback on Wednesday with a ruling that it had effectively employed one of its drivers. Uber has long argued that it is merely a platform linking self-employed drivers with riders, a model which allows it to avoid paying certain taxes and social charges as well as provide paid vacations.
“However that practice, which underpins the gig economy, has increasingly come under legal attack in many countries. In Wednesday’s ruling, the French Court of Cassation rejected Uber’s appeal against a 2019 decision that found a former driver who sued the firm effectively had a work contract.
“The court found that Uber BV had control over the driver by his connection to the app which directs him to clients, and thus should not be considered an independent contractor but an employee…”
The US State of Califirnia is about to sue Uber & Lyft over employment law & the ride-hailing companies (apparent) refusal to comply with same …
A Court ruling in California has no bearing on proceedings in the UK, but is probably worth noting as it increases the overall pressure on the Uber financial operating model.
California rules that Uber drivers are employees.
https://www.theregister.com/2020/06/10/californian_regulator_rideshare/
Uber’s appeal against TfL’s revocation of their private hire license was to be heard on July 6th according to news articles from a few months ago.
I can’t find any mention of the case or its outcome – has it been postponed due to coronavirus, and if so does anyone know if there’s a new date?
Uber and Lyft face new lawsuit from California’s Labor Commissioner.
Another hit for Uber and Lyft as California judge rules that Uber and Lyft must classify drivers as employees.
About the upcoming Supreme Court/TfL decisions, there’s good Articles in Forbes (yes, shock) https://www.forbes.com/sites/daviddawkins/2020/07/30/uber-vs-london–the-courtroom-battle-the-world-is-watching/#48116d466973
And in Wired https://www.wired.co.uk/article/uber-london-rivals
The Magistrates Court decisions will occur in mid September by all accounts – def a interesting few weeks ahead for Uber…
@James Scantlebury
Indeed. Even the Financial Times is sounding the death knoll for Uber and Lyft as Ride hailing’s collapsing house of cards.
Oh dear
Uber found to have used fake ID for its drivers.
Jolyon Maugham (Barrister, Director of the Good Law Project) has just tweeted that in the latest filing of their accounts to the SEC, Uber have confirmed that HMRC have assessed them (at 20%) on “gross bookings or on the service fee that the company charges drivers”. This would be claimed retroactively as well as on future bookings. The text of the Uber filing asserts that they are still contesting this with HMRC, but Mr Maugham seems to think (in his tweet) that it’s game over. I can’t say I understand why he is so confident, but I do acknowledge that he’s a barrister and I’m emphatically not.
@IslandDweller
Probably best summed up by the expert John Bull – In winning the court case against London they’ve had to admit to HMRC that they actually are a cab firm. Cue a large backdated VAT bill.
Snowy & Island Dweller
Indeed … according to my in-house tax expert, this is only the start of the fun.
Uber are now on a modern version of “Morton’s Fork”
They can either put up & shut up & pay up … or they can, of course, appeal the “tax” judgement to a formal Tax Tribunal.
But … this is VAT, which comes under the “Excise” portion of taxes, which means that, if they want to appeal, before any case or hearing starts, they must deposit the entire “Assesed Sum” ( effectively in escrow ) with HMRC, before even the first negotiations or hearings can commence.
And this is without any discussion of back-payment, or Interest & Penalties on the accrued sums over the years.
Whatever happens, it’s going to be (very) expensive.
*HMRC cackles in delight*
Excellent article. Never heard of this website before, but if this is the general standard then I’ll be revisiting regularly.
Just to note, I’ve put up a short article about the ruling today here.
Flagging it here for anyone with questions, as it’s probably easier if I answer questions over there to keep them in one place!
Uber worker creates UberCheats Google Chrome extension that helps workers spot pay discrepancies.
“Drivers for Uber, Lyft, and other firms are building apps to compare their mileage with pay slips. One group is selling the data to government agencies.
“ARMIN SAMII HAD been biking for UberEats for a few weeks last July when he accepted a delivery he estimated would take 20 minutes, tops. But the app led him up one of the steepest hills in Pittsburgh, a 4-mile one-way trip that clocked in at an hour. Then he noticed that Uber had only paid him for 1 mile—the distance between his origin and destination as the crow flies, but not as the man bikes.
“I’d only done 20 deliveries, and this already happened to me,” Samii says. “For people who do this full-time, are they going to look this deeply into this statement? Are they ever going to find this issue?”
“Samii is a software engineer. So he created a Google Chrome extension, UberCheats, that helps workers spot pay discrepancies. The extension automatically extracts the start and end points of each trip and calculates the shortest travel distance between the two. If that distance doesn’t match up with what Uber paid for, the extension marks it for closer examination.
“So far, only a few hundred workers have installed UberCheats on their browsers. Samii doesn’t have access to how couriers are using the extension, but he says some have told him they’ve used it to find pay inconsistencies. Google briefly removed the extension last week when Uber flagged it as a trademark violation, but reversed its decision after Samii appealed.”
Another reason to avoid uber …
[ £332 for 1.75 miles ]
Dutch court rules Uber drivers are employees not contractors.
Update:
From the Grauniad … Black Cabs making a comeback – as Uber/Lyft prices go through the roof ….
UPDATE:
Another blow to Uber’s “business model”
– 20% fare increase possible
Great article, except for the bit about Los Angeles being easier for driverless cars to negotiate. I am there right now, and I can say with some certainty that the level of AI that would be needed to cope with the terrible roads, appalling signage, and insane human drivers, is not remotely achievable for at least another thousand years…
https://www.ft.com/content/8fcb5279-5494-4006-ba2c-287de27c1fab
Farewell to the servant economy. Unprofitable “on-demand” services like someone bringing a coke to your door gave people a sense of affluence in a decade of stagnant wage growth. But they were subsidised by investors, and now the money is drying up.