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IN FOCUS |
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by Matthew W. Daus, Esq. |
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by Brook Taye |
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*Mr. Taye assisted in the preparation of this article and is the law firm's international and European liaison
I recently returned from a European academic and policymaking jaunt that included a variety of different perspectives and opportunities to contribute to the ultimate outcome of smartphone app disruption issues in Europe and beyond. The speaking engagements included:
addressing taxi fleet owners from all over Europe at the Eurocab conference in Antwerp, Belgium;
a keynote speech before the International Travel Managers group in London; and
participation in the International Transport Forum of the Organization for Economic Cooperation and Development (OECD) in Paris, France.
In the last year or so, significant pushback against unlicensed operators has occurred in Amsterdam, Brussels, Paris, London, and Barcelona, including massive labor actions in London and Paris. Back in June 2015, irate Parisian taxi drivers blocked roads, burned tires and attacked drivers who they thought were Uber drivers during a day of protests that disrupted the city and slowed traffic to a standstill.1
In France, the UberPOP service that allows anyone who wants to become a driver to sign up without a professional chauffeur license and to pick up fares through the Uber app, is illegal.2 Other Uber services are permitted under strict conditions and the company is contesting the constitutionality of parts of the law limiting UberPOP.
Shortly after the demonstration by Parisian taxi drivers, French police detained Uber's top two executives in Paris for alleged violations of a new transportation law in France that bans operating a service such as Uber's low cost offering, UberPOP.3 The new law makes operating such a system punishable with a fine of as much as $334,971 and two years in prison.4
In September 2015, Dutch police raided the office of Uber in Amsterdam for the second time this year and seized documents as part of a criminal investigation that alleges Uber is breaking public transportation laws by using UberPOP. The UberPOP service was banned by a Dutch court in December of last year because the drivers lack professional licenses required under local law.5
In Brussels, after a continued and sustained protest from taxi drivers and following a complaint filed by local taxi operators, Uber was forced to suspend its UberPOP services after a court ordered the company to immediately seize its operations.6
The most significant push back to Uber's expansion in Europe came as a result of a Frankfurt regional court decision to ban Uber as a result of the company's decision to use unlicensed drivers to provide transportation service in several German cities. The court's order not only prohibits Uber's utilization of unlicensed drivers, but it also imposed a fine of $270,000 for each violation of the ban in the future. As a result, Uber announced it is pulling out of Frankfurt, Hamburg and Düsseldorf, leaving active operations in just Berlin and Munich.7
In London, the transport regulator Transport for London (TFL) brought a case to the high court after pressure from the city's black cab and minicab drivers to determine if the Uber app was being used as a taximeter, a privilege afforded only to black cab drivers.8 A few days before I arrived in London, the courts ruled that the smartphone app calculating fares would not breach the taximeter prohibition if used by private hire vehicles. I received a firsthand briefing from stakeholders that are involved with the matter and was informed that the claimant had lodged an immediate appeal against the ruling in the Supreme Court, the highest court of the United Kingdom.9
In Spain, a judge in Barcelona referred a series of questions to the EU's highest court, the European Court of Justice, that relate to how Uber and similar so-called Transportation Network Companies (TNCs) should be treated for regulatory purposes and to determine if they should be considered a transport company or a digital service. If the court finds that Uber should be considered a transport service, it may be forced to make fundamental changes to its business model which may significantly increase operational costs. The decision by the court is expected in late 2016.10
The de facto European Union capital of Brussels is located shortly outside of Antwerp. This city has a long history as a major port to the English Channel which was closed after the Inquisition and only re-opened by Napoleon for strategic military reasons. The inhabitants, in addition to making possibly some of the finest beer and chocolates anywhere on the planet, take their transportation safety and efficiency seriously.
The organizers of the Eurocab conference were FMS, one of the largest taxi dispatch companies in Europe and they brought together the largest and most influential industry fleet owners from 10 European countries. I delivered a keynote speech entitled the "Evolution of the App Revolution" discussing the Darwinian nature of app genesis or creation, the theory of technological and consumer natural selection, to possible extinction or other evolutionary events and genetic transportation mutations.
I focused on, for example, the technological replacement of meters and Dinosaur like dispatch technology by better apps, autonomous vehicles, messenger/logistics and aggregator services, and the possibility of failed IPOs. I also briefed the attendees on the potential impact of litigation rulings, changing views in the media or in public opinion, and a possible change in direction by public officials, legislators and regulators.
My take away from this important gathering and conference was that the taxi operators of Europe are highly organized, motivated and prepared for a political and technological battle. So far, the operators and the drivers of Europe appear to be winning, but they will need to deliver real improvements in basic service delivery, customer service and efficient app dispatch services on platform or through aggregation networks or models.
In London, similar to NYC, Uber drivers are mostly licensed private hire drivers. Uber bypassed private hire operators to directly poach their drivers. Uber entered the market in 2012, and black cab drivers engaged in a job action which backfired and caused a tremendous amount of passengers to download the Uber app as they had no other way to get around.11 Since then, the London Assembly commenced an inquiry into the London cab system and most recently, Transport for London (TFL) announced a series of proposed reforms that are part of a consultation, including:
the introduction of a mandatory five minute wait time before a passenger can be picked up by an e-hailed vehicle;
a ban on showing animated cars on a map like the Uber app and many other apps;
a proposal to show a mandatory fare estimate before each ride;
a proposal that TFL would receive notification of consumer complaints reported to ride-sharing industry companies and the option to take regulatory action against the operator if the company's response was not adequate or fair; and
a cap on the number of companies private hire drivers could work for.12
I continue to engage in meetings and consultations with the TFL, the London Assembly, the UK Law Commission, as well as industry stakeholders and groups, to share information, contribute ideas and advice. In London, I also delivered a presentation to the International Travel Managers group, an association of United Kingdom travel managers for very large corporations who are accustomed to highly vetted solicitations to enter into contracts with mostly high end corporate private hire car services.
Travel managers and professionals have for decades developed processes, procedures and due diligence methods for ensuring the most cost effective, efficient, secure and safe ground transportation options for both executives and all other employees at their corporations and firms. The advent of new technologies, including:
enhanced Business to Business software,
the use of smartphone apps and geo-location information poses innovative opportunities to save money, ensure employee accountability and lead to greater cost savings while boosting employee morale.
My speech pointed out not only the benefits of such new technologies, but also identified the new and increased risks associated with doing business with new untested transportation technology companies. These risks include new threats to employee safety, a lack of cost controls, potential privacy and data security breaches, and increased exposure to liability for negligence and other causes of action resulting from potentially preventable incidents.
The bar for vetting and due diligence in corporate travel is much higher than the baseline set by government regulatory authorities and the higher standards imposed by corporations can and should remain in place. However, the process for ensuring compliance and maintaining safety standards is much higher due to the additional risks that accompany the use of new smartphone app technologies.
The travel manager's duty of care must remain high and become even more vigilant, and I am helping the travel management community to identify new recommended best practices for ensuring vendor accountability. These recommended best practices for corporate travel managers vetting new technology companies may include:
enhanced auditing, driver vetting and data sharing obligations;
demonstrated cost and service efficiencies;
enhanced corporate data security measures;
more comprehensive hold harmless agreements, and
imposing liabilities upon transportation vendors for corporate brand damage due to negative media exposure through association with the provider.
I was asked to serve on the Board of the Global Taxi Network (GTN),13 a group of advisors selected to provide advice on the vetting and coordination of smartphone apps and to participate in a global dispatch network under the auspices of the International Road Transport Union (IRU).
The IRU is the world road transport organization which upholds the interests of bus, coach, taxi, and truck operators to ensure economic growth and prosperity via the sustainable mobility of people and goods by roads worldwide. The GTN was coordinated by the IRU to serve as a worldwide dispatch platform to technologically compete as a "universal app" with the leading TNCs, namely Uber and Lyft. So far, TaxiEU of Germany and e-Cab of France and 9 other companies have joined the network, and many others are up for our consideration and review.
The way it works is, simply put, a back end network will link apps in different world markets, so that when a passenger is in Paris, using e-Cab on a daily basis and then travels to Germany, he/she can still use e-Cab (the app with which they are familiar). This network would allow E-Cab to piggyback on the network of cars deployed by TaxiEU's app, with the passenger not paying any extra costs. Both app providers would work out their fair share of the taxi fare behind the scenes without any consumer hassle or involvement. This model allows independent and local taxi and limo brands to flourish while potentially enhancing their global stature and footprint.
Then, I was invited to participate in a two day long meeting and brainstorming session to provide input and advice to the International Transport Forum of the Organization for Economic Co-operation and Development (OECD) which is developing a major report and policy statement for consideration by member countries.14
The OECD is a member organization, currently with representatives from 34 countries15 from around the world. The organization provides a forum in which governments can work together to share experiences and seek solutions to common problems. OECD works with governments to understand what drives economic, social and environmental change by measuring productivity and global flows of trade and investment.
The organization utilizes and analyses data to predict future trends and set international standards on a wide range of issues, from agriculture and tax to the safety of chemicals. The report highlighting the workshop is expected to be published in 2016, and will be provided to member countries for consideration when legislating on TNC related issues in their respective countries.
The people of Europe have a more progressive social orientation than many countries and do not necessarily share the same raw capitalism values as Silicon Valley companies. Europeans place an emphasis on equity, labor rights, social and environmental justice, as well as fair competition in their approach to policymaking.
Many European government officials have taken offense to the smartphone disruption methods undertaken in the U.S. The actions of various European countries and cities, such as Paris, France, Amsterdam, The Netherlands, Brussels, Belgium, and several German cities demonstrate a zero tolerance approach for unlicensed UberPOP operations. Labor unrest and protests have placed political pressure on various officials, especially since many taxicab drivers are able to vote in several European countries. In the U.S. many drivers are recent immigrants who are not able to exercise their political voting rights. I visited Europe many times over the past few years, warning several years ago of the impending app invasion. Now it is happening and Europeans appear to be holding their ground or battle lines against unlicensed smartphone application transportation services.
What will happen next in Europe will depend on a number of factors, which include:
the various litigation matters pending on the meter issue and before the European tribunal;
whether Uber sticks to its usual playbook of not compromising, then pulling out of cities (like it just did in Germany), and resorting to the "political process as usual" - like its modus operandi in the U.S.;
how quickly the Global Taxi Network and/or new aggregator services (such as Karhoo from London) can expand and deliver services for consumers in time to offer a truly safer and equally efficient app-based service to compete with Uber;
whether regulators will be subsumed by the political process or continue to stand up to disruptors; and
the future of the London regulatory consultation, and what various influential reports underway (including both the ITF-OECD report as well as the travel manager risk report that I am finalizing). will conclude and recommend.
Basically, the determining factor will be whether the political influence of drivers, as well as tolerance by the general public and passengers, will influence the debate in a different direction than the U.S.
will legislators, public officials or regulators and the courts side with stopping tax avoidance, "Luddite-like" job replacement of drivers and exercise their moral compass to ensure a level playing field? Or,
will the government be unduly influenced by technology crazed resources and political contributions, like in the U.S.?
The result will depend on whether Uber is smart enough to adapt its strategies to the different value and political system in Europe and also whether the incumbent industry can change quickly enough to compete.
The wild card in all of this is whether the Global Taxi Network platform, or transportation aggregators, like start up Karhoo (modeled somewhat after Expedia or Kayak), will offer an app not just with the closest taxi or limo, but with selections among many different licensed taxi and limo companies and the cheapest prices as well, becoming a true competitor on behalf of the incumbents against Uber?
Remember, in the soda wars of many decades ago, Pepsi gathered major and long term market share when Coke changed its special formula, and Coke consumers chose an alternative. While to some these soft drinks may all taste the same today, there was a point in time when mistakes were made and competitors moved in. This could very well happen with Karhoo, which just raised a reported amount of $250 million and has plans to raise an additional $1 billion in 2016.16 If successful, Karhoo could become the next universal app overnight which offers a potentially safer, licensed and cheaper alternative that disgruntled Uber and Lyft consumers may be looking for.
Other countries, especially regulators in Canada and Asia, are following closely the developments in Europe and depending on how the EU or its member countries handle the smartphone insurgency, it could be significant in terms of the global expansion of Uber and other like minded apps.
Could it be the death of a movement, or at least a big momentum loss affecting valuation and IPO dreams? All eyes are on Europe right now, and I am hopeful they will do the right and fair thing for everyone and that the continent's handling of the issue will influence other countries. Remember, they said the Titanic was the unsinkable ship deploying immeasurable resources and the best in maritime technology at the time, yet tragically and ironically, it sunk on its maiden voyage within a very short period of time, and with significant loss of human life.
Reckless and well funded start ups with sleek app technology that are now cutting licensing corners and posing safety risks to consumers, could sink or be grounded under the right circumstances. It is my hope that the sea will be level and everyone can stay afloat with no further injury to hard working incumbent industry members and drivers, and that passengers will not be further injured as these human tragedies, including assaults, motor vehicle accidents and rapes,17 continue to mount around the world. This is my "Audacity of Hope" for the ground transportation industry!
