Should Uber be Banned in London?

3143 words (13 pages) Essay in Business

21/02/19 Business Reference this

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On September 22nd, 2017, the city of London, England declared that it will not re-issue Uber Technologies Inc.’s (“Uber” or the “Company”) private-car hiring license that was set to expire on September 30th, 2017. The months following led to an appeal to Transport for London (“TFL”) by Uber, which become a stalled and slow process that ultimately could take years to move forward. While the appeal could take up to a year to fully process, the commissioner of TFL, Mike Brown, and Uber were able to converse in early November over potential resolutions prior to Uber’s hearing in December (Smith, 2017). Although talks between the Company and TFL ultimately have not become deciding factors in the appeal, they are important in creating a professional dialogue between the two bodies.

As the Company has tried its best to develop a relationship with the city of London, two Uber employees came into the public eye. Yaseen Aslam and James Farrar, two Uber drivers based in London won a legal dispute on behalf of a group of nineteen Uber drivers in early November. The dispute, which involved the category in which Uber drivers were to be placed, ended with upholding regulation to deem all drivers as workers for Uber rather than self-employed. This regulation enforces the Company to pay all of its workers a minimum wage, allow time off, and holiday pay (Rao, 2017). Another defeat in UK’s court system has not only damaged Uber’s reputation in the island nation even more but made the company’s London division increasingly susceptible to an unfavorable outcome in its upcoming December hearing.

Financially, Uber has done very well, especially in the United Kingdom. Boasting over 3.5 Million users in London alone (Cummins), the giant ‘ride-share’ service company keeps over 40,000 people employed in the city (Rao, 2017). Simply put, Uber’s status as a licensed taxi or ‘ride-share’ service is very important to the economy of London and its people. Stakeholders in the company’s continued operation in the British capital include local users as well as far-reaching shareholders spanning the globe. It is because of Uber’s large role that we need to pose the question, “Should Uber be allowed to operate in London with less restrictive regulation than other taxi services?”.

Stakeholder(s) Stakes
Transport for London, governmental organization TFL’s stake is the well-being and protection of its citizens from malpractices and the legality of business operations dealing in transportation. Due to their power as the decision maker in renewing Uber’s license in London, they are considered one of the most powerful stakeholders.
Uber driversDrivers of Uber are one of the most urgent and legitimate stakeholders because of the direct impact the decision would make on their jobs and careers.
Uber drivers outside of London While not directly impacted by the outcome, Uber’s international drivers are affected by the possibility of other cities following in London’s footsteps of barring Uber.
Uber clients in LondonUber is fairly popular in London, with 40% of the population having used Uber at one point. Their clients would have to find an alternative, such as using Black Cabs, which are generally more expensive. They are directly impacted by the outcome and therefore can be considered an urgent stakeholder as well as a legitimate one.
Uber Shareholders/Investors As 5% of all of Uber’s revenue stream, London’s consumer base for Uber is a considerable market. Losing this market could dissuade potential and current investors and shareholders through lost faith in the company. These investors and shareholders are responsible for Uber’s existence as a company which makes them a very powerful, urgent, and legitimate group of stakeholders.
New Car sales companies Since most Uber drivers use their own cars for transportation, and some Uber drivers buy and lease cars specifically so they can get potential discounts, the outcome of this decision will materially impact car sales.
London Public Transit Commuters If Uber loses its license, there is a good chance that previous Uber clients will opt for public transportation which is a cheap alternative, causing a large influx of commuters and crowding the already crowded public transportation options.
London police Uber is well known to use anti-law enforcement business tactics. There is the distinct potential that if Uber’s right to operate is revoked, they may still operate under-the-radar causing more work for London’s police to make sure Uber is compliant with their laws.
London’s air qualityLondon is notorious for having one of the worst air qualities in the EU, and reducing the number of people driving will help improve the air quality situation. This affects all Londoners and tourists.
Gas stations Uber contributes to a decent amount of various gas station’s revenues, as their business is to drive all day which consumes gasoline. Reducing the amount and frequency of which people drive will affect their revenues as well.
Black cab companies Black cab companies want the rule to be upheld, as they will directly benefit from Uber losing their license, as they are (an albeit expensive) substitute for Uber’s services.
Black cab drivers Similar to the Black Cab company itself, black cab drivers only make money (generally) when they are driving clients. Since they will see an increase in volume, the black cab drivers will make more money.
TX4 Hackney Carriage Black Cab manufacturers As the manufacturer of ‘black cabs’ TX4 has a direct stake in the decision determining Uber’s fate in London. With Uber gone the company can continue producing the same black cab’s that are part of London’s large private taxi service.
Rental car companies Uber has a rental car program with some rental car companies so not all Uber drivers have to own their car. If Uber were to get pulled out of London, the revenues of London rental car companies would suffer as a direct result.
The London Underground transportation service and system The London Underground will similarly profit as the black cab companies due to the relationship of being a substitute to Uber as well.
London Banks When people or car sales companies buy cars, they get a loan from a bank. Fewer cars being sold reduces new loan volume. Additionally, Uber drivers relying on their job to pay off the car loan may be forced to sell or remit their car to the Bank.
London Car commuters A reduced volume of drivers on the road will favor car commuters, reducing traffic and congestion. However, Uber clients who are new or are returning to driving their own car could pose a risk to current car commuters because of driving inexperience and unfamiliarity.
Local wildlife, in and surrounding London. (Hawks, Foxes, Badgers, Ducks, Deer, and Others) Poor air quality, light pollution, and noise pollution all affect the local London wildlife. With more Uber drivers, especially those who are new to the London area, comes a greater chance of local wildlife having incidents with motor vehicles.
Environmental activists (Love Clean Air, Client Earth, EPUK, EEA, LSx, WWF, and Others) Since London’s air quality and wildlife will not speak for itself, activist groups that represent both of these stakeholder groups will likely push for Uber to lose its operating license for the reasons that are stated in their respective sections.
London Tourists Since Uber is the current combination of the cheapest and most convenient option for tourists, they will have to find alternate forms of transportation which may be either more expensive (cabs) or less convenient (transit).

Potential Actions & Implications

There are three clear potential actions that the Transport for London can take to resolve our ethical question, “Should Uber be allowed to operate in London with less restrictive regulation than other taxi services?” along with doing what is best for the Stakeholders involved on a legal and economic scale. They have the option of continuing to treat Uber as they currently are and apply no extra regulation or restrictions to Uber’s operations, create new regulation to specifically address Uber’s operations, or decide to let Uber’s operation permit expire thusly eliminating Uber from London.

For the first option, letting Uber retain its current operations and re-instating its operations permit, Transport for London would continue to support Uber as “ride-share” service as opposed to a taxi service. The implications of this are that Transport for London would be encouraging the demise of the Black Cab industry in its current state, forcing either closure of said companies or a prompting the creation of new business models. In doing so, there could potentially be long-term benefits for the general London community who use ride-share and taxi services as their primary mode of transportation. This is because the Black Cab companies would be now directly competing with their modified business plans against Uber and any competition between companies is always good for consumers. Other stakeholders, such as car sales companies, other services that compliment car sales, gas stations, Uber drivers, Uber Investors, and London Tourists would similarly benefit from this decision.

If Uber was allowed to continue operations as it currently is, this would have repercussions on stakeholders such as London’s police, The London Underground, the Black Cab companies and associated stakeholders, Transport for London as a governmental body, London’s air quality, London’s local wildlife, and the local London activist groups for the environment and wildlife such as detailed in the stakeholder table above.

Uber is well known for its practices regarding law enforcement evasion through its “Greyball” program, which its sole purpose is to identify and blacklist any law enforcement personnel from using Uber’s services which is both a short-term issue and if it persists, can turn into a long-term issue. It can turn into a long-term issue because as well when trying to make sure Uber is compliant with government regulations, as it will be difficult to get an unbiased audit of Uber’s operations that are conducted by a law enforcement agency.

The Black Cab companies and associated stakeholders along with the London Underground will continue to lose profits and employees unless they change their business models. This can make or break the Black Cab industry, as these Black Cab companies are almost as old as London itself and have not changed their business model since then.

The environment and wildlife in and surrounding London will continue to have a deteriorating quality-of-life, because of the stated reasons in the Stakeholder table. These will have some measurable immediate impact, but the long-term effects are the most worrisome where pollution reaches a point of no return and is incurable. Because these detriments exceed the benefits that would be provided by letting Uber retain their operations license, this is not a recommended answer to our question.

For the second option, letting Uber continue operations but with additional regulations, the Transport for London body would invoke regulations regarding Uber similar to those that apply to the Black Cab industry. Contrasting with the first option, this would potentially allow the Black Cab industry to survive under its current business model, albeit with a shift in pricing to efficiently compete with Uber. This would benefit the Black Cab industry to an extent, Uber and Black Cab users, car sales companies and associated services, gas stations, Uber investors, and Uber drivers.

However, this decision would have repercussions on other stakeholders as well. Similar to the first option, the London police, The London Underground, Transport for London as a governmental body, London’s air quality, London’s local wildlife, and the local London activist groups for the environment and wildlife would also be negatively impacted by this course of action.

Letting Uber continue operations but being restricted by additional regulations is a better solution than the first option because it benefits more stakeholders. However, it is still not our recommended solution. The negative impact that stems from letting Uber operate in London is too great a cost compared to letting their operations license expire.

The third solution is to let Uber’s operation license expire. This recommendation is the complete opposite of the first solution and as a result, would imply Transport for London is condemning Uber. This would have inverse benefits and drawbacks as the first solution as well, meaning it would benefit London’s police, The London Underground, the Black Cab companies and associated stakeholders, Transport for London as a governmental body, London’s air quality, London’s local wildlife, and the local London activist groups for the environment and wildlife.

Since Uber would no longer be able to operate in London, it would be a huge win for the Black Cab industry as a whole and would help London preserve its age-old transportation of choice. Additionally, the surrounding wildlife and atmosphere would benefit from the reduction of cars on the road and new drivers to the area. London’s police would no longer have to conduct wild-goose chases to make sure Uber is compliant with Transport for London’s regulations. Overall, it would be a benefit to the local London community. This would imply that Transport for London has London’s best interests at heart.

Like with all decisions, there are costs associated with making said decisions. Uber moving out of London would be bad for Uber as a company, its employees, its investors, gasoline companies, and car sales and associated stakeholders. Most of these stakeholders are not from London, nor are residents in the UK. However, they are having a large negative impact on London as a whole, compared to the benefits they bring. This is our recommended solution.

Recommendation & Cost of Implementation:

As chair of Transport for London, I, Sadiq Khan, believe that the most ethical and overall best way to proceed with Uber in London is to recommend that they remain ineligible to renew their license and that no change be made to their status. With their current disregard for minimum wage and basic benefit packages for their employees, they violate London’s idea of operating under business practices deemed, ‘fine and proper’. By doing so I believe that we will be upholding the quality that Londoners have come to expect out of everyday businesses while also doing what we at TFL believe is best for our historic city. This will, in turn, mitigate possible blowback by the community for allowing Uber to continue operations that financially damage London’s public transportation and Black Cabs.

There is a multitude of costs associated with this option, many of which must be estimated due to Uber’s financial records being strictly private between the company and perhaps investors (non-public corporation). As a company, which has over 40 thousand employees in London (as stated prior), it is fairly obvious that many people who work full time as ‘ride share’ drivers will be negatively affected by this decision. Since Uber has been deemed a taxi service in early November and thus must pay minimum wage (£9.15 an hour) to employees in the United Kingdom, there is a possibility of a people losing upwards of £380,640,000 (Assuming only half of all drivers in London are full time) each year and more, should they apply for unemployment due to the decision. This is, of course, an estimate and not a real working number of pounds lost by employees but while an estimate, it is not a figure that we at TFL take lightly.

Since keeping this decision would essentially be changing nothing in terms of a recommendation, financial costs by the city of London, and Transport for London would be minimal to non-existent. That being said some businesses would suffer somewhat, such as car companies and automobile dealers in our city who have deals with Uber to rent and sell cars for the sole purpose of being used by the Company’s drivers. To add, there could be a small loss in terms of sales by gas stations, though it would possibly be partially offset by the increased use of Black Cabs and personal vehicles by the general public.

Finally, a cost in terms of tax lost by Uber’s exile from operating in London would go unnoticed except for in the case of employee’s taxes, seeing as the company does not pay a large amount in taxes. In 2015, Uber’s London division only paid £411,000 in taxes while making over £23 Million (Bowers 2016). It’s safe to say a city such as ours, will not miss what little Uber had to offer both London and its people.  

Overall the costs of implementing a solution that is already in effect register no change in current costs. Since finding Uber to be an unethical business dealing in unfair and otherwise unregulated business practices since this decision, we know that the Company is not one that we as a city can stand.

References:

Smith, Rebecca. “TFL Boss Plans Fresh Talks With Uber’s Chief Executive Officer Over Loss of London License” City AM (November 6, 2017) <http://www.cityam.com/275207/tfl-boss-plans-fresh-talks-ubers-chief-executive-over-loss>

Rao, Prashant. “Uber Hit With New Blow in London as Panel says Drivers Aren’t Self-Employed” The New York Times (November 10, 2017) <https://www.nytimes.com/2017/11/10/business/uk-uber-london.html>

Cummins, Chip. “Uber Is Losing Its Car-Hire License in London. What Happened?” The Wall Street Journal (2017). <https://www.wsj.com/articles/uber-is-losing-its-car-hire-license-in-london-what-happened-1506082630>.

Bowers, Simon. “Uber’s Main UK Business Paid Only £411,000 in Tax Last Year” The Guardian (October 10, 2016) <https://www.theguardian.com/business/2016/oct/10/ubers-main-uk-business-paid-only-411000-in-tax-last-year>

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