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LSE undergraduate Jeremy Wong gives a brief insight into why authorities worry about ride-sharing
A few weeks ago, riots erupted in Colombia’s capital, Bogotá. Dozens of yellow cabs thronged the streets and blocked several major roads in the city. The protestors caused massive disruption throughout the city and assaulted those who did not join their cause. Eventually, they had to be dispersed by the police using tear gas.
The reasons for the riots are probably obvious to many. The protests erupted after the government announced a decision that forced every taxi driver to replace their taxi meters with GPS-based software applications that can calculate and collect fares. While this may seem to be a trivial reason for taxi drivers to be angered, it must be noted that these regulations do not necessarily apply to drivers in Uber and the regional equivalent, Cabify. The protestors also argue that, unlike regular drivers, Uber and Cabify drivers do not pay any insurance and other levies. Thus, they possess a significant and unfair advantage in the transportation industry.
Such sentiments against ride-sharing apps have risen to prominence of late. In late September, Transport for London (TfL) refused to renew Uber’s operating license due to “a supposed lack of corporate responsibility” in screening drivers and reporting serious criminal offences. In addition to this, Uber has been operating in a “grey” legal area across many regions of the world. A single ruling can essentially wipe the company from a city or even a whole country that it has been operating in for some time. As a result, many drivers and hundreds of thousands of people who rely on the app to get around may be affected. The app has even been made illegal in some countries like Denmark and Finland.
It appears that based on recent events, the future of ride-sharing seems bleak and dull. It is quite likely that as time goes on, this innovation of technology and transport may soon face sufficient pressure from governments and certain quarters to be banned outright, which may include many European countries and major cities in the US.
As consumers, it seems obvious to us that those who are against ride-sharing apps are usually disgruntled taxi drivers or unions, who pressure local authorities and national governments. These apps do threaten their source of income and livelihood. However, why should we give in to these drivers, whose services sometimes tend to charge more? Why can’t we consumers be allowed to have a choice between whether I should hail a black (or yellow if you live outside of London) taxi or a private vehicle? It may even be more convenient to call an Uber driver compared to a regular taxi. Yet, at times, the authorities often view these services with much scepticism. Sometimes ruling against allowing these companies to operate in certain areas; seemingly agreeing with the anger of the cab drivers rather than the wishes of the people.
Why do governments worry so much about these services? Let’s take a look at why they don’t just approve ride-sharing apps as soon as they appear in your city or country. The issue isn’t necessary related to the background checks on its drivers or criminal offences committed. While these are some of the contributing factors, it should be noted that regular taxi drivers are also known to do fleece and commit crimes on their passengers.
One of the primary issues that governments and regulators often worry about is the fact that ride-sharing companies are often not very transparent about their operations. This is crucial to regulators as they cannot protect passenger interests if they cannot know the entire process on how ride-sharing is done by both the driver and the passenger. Regular taxi operators are usually owned and/or operated by some local governmental agency who is able to control and monitor all of its operations. However, multinationals like Uber often lack this crucial transparency required by the regulators, let alone the control.
To demonstrate, we can see that price comparison services exist for regular taxi operators. This is due to the availability of the necessary information by the authorities like the fares and how it’s calculated. Unfortunately, the same isn’t true for ride-sharing apps as such information are all determined by algorithms and models that the authorities simply do not understand or have no access to. Hence, information to consumers becomes limited. In a way, this can be anti-competitive as consumers have no access to real-time information about fares between various operators.
In addition, information about driver hiring policies and their handling of user privacy is also not well-known by the authorities. US Senator, Al Franken has personally expressed his concerns about Uber’s data privacy policies. In a letter to Uber’s CEO sent in 2014, he mentions that a certain tool called “God’s View” that is used by Uber to track customer movements, is widely available to most Uber corporate employees without the user’s prior consent and is still operational on users who have deleted their accounts. Furthermore, the admission of one employee that Uber has been using this tool to track journalists has also raised concerns on the extent of data abuse by such companies. Additionally, data breaches are more likely in a company than with governments and if one occurs, such as in 2014 with Uber, may lead to devastating effects.
This isn’t to say that Uber and other ride-sharing apps are inherently bad. After all, if the consumers want such services available to them, why shouldn’t governments supply it? The problem lies primarily in the regulation of such services. Historically, transport services that have been supplied by local authorities are non-profits as they aim to benefit the population. Having a for-profit company that cannot be directly controlled to operate transportation services in a city or a region can be a worrying prospect. Enforcement of laws and regulations that keep consumers safe and informed becomes a much harder task to achieve.
This barrier can be seen as merely a regulatory challenge that once overcome, can allow many ride-sharing companies to start operating legally. This is true for a number of countries. Once the regulatory hurdle had been dealt with sufficiently, ride-sharing apps are given complete legal status by the local authorities despite the continued protests by regular taxi drivers. In Malaysia, Uber and the regional equivalent, Grab, has been legalized since mid-2017. However, these companies are subject to local regulatory requirements such as a need to obtain a business intermediation licence and requiring all drivers to carry a “Driver’s Card” issued by the local authorities. Similar initiatives have also been taken in Singapore and parts of Australia in order to ensure accountability of the company and its drivers.
Based on this perspective, it is quite clear that a compromise between ride-sharing companies and the local administration must be reached in order to ensure a quality and affordable service to the consumers. Consumers should be given choices, but at the same time, their safety and rights must never jeopardised. The mix between technology and transport is definitely a major plus point in a progressive society. But the rules and regulations should not be left behind as a result.[/vc_column_text][/vc_column][/vc_row]
