Uber: Regulation isn’t just about Encouraging Competition

by ukcivilservant

Transport for London’s (TfL’s) decision that it will not (yet?) renew Uber’s licence has upset a great many people, particularly those who had been delighted to see an innovative new taxi service competing with black cabs and minicabs.   I still shudder when I remember how hard it used to be to get a black cab to come ‘South of the River’ – across a central London bridge which is all of 10 minutes walk from my home.

But we all need to remember that even economic regulators need to worry about more than just competition and prices.  All of us who have worked in competition authorities love to show that competition lowers prices, as it so often does. But we also need to ensure that price-constrained entities do not increase their profits in other ways – in particular by sacrificing quality or service – or by risking their customers’ safety. We all focus on electricity prices, for instance.  But let’s not forget that electricity suppliers are fiercely quality controlled in that they must supply alternating current with high reliability and fixed voltage etc..

So TfL have an important duty to worry about much more than Uber’s pricing.  They have, quite properly not released the detailed decision letter that they will have sent to Uber.  But they and we have seen the Met Police’s April 2017 letter to Uber.  I also recommend this detailed analysis of TfL’s decision:

https://www.londonreconnections.com/2017/understanding-uber-not-app/ .

TfL themselves say that:  “TfL has concluded that Uber London Limited is not fit and proper to hold a private hire operator licence.”  This is because “TfL considers that Uber’s approach and conduct demonstrate a lack of corporate responsibility in relation to a number of issues which have potential public safety and security implications. These include:

  • Its approach to reporting serious criminal offences.
  • Its approach to how medical certificates are obtained.
  • Its approach to how Enhanced Disclosure and Barring Service (DBS) checks are obtained.
  • Its approach to explaining the use of Greyball in London – software that could be used to block regulatory bodies from gaining full access to the app and prevent officials from undertaking regulatory or law enforcement duties.” (emphasis added)

Much criticism of TfL’s decision seems to assume that their safety and regulatory access issues are mere pretexts for closing down the service.  This is a pretty serious charge and, if it is true, then this will become clear on appeal.  But if TfL do indeed have genuine safety etc. concerns, then surely they are acting responsibly?  Uber may not be as important a part of the London transport system as buses, tubes and trains, but none of us want our children or young friends – or indeed ourselves – to be using potentially unsafe transport.  And it is surely much better for TfL to act now than after some dreadful incident?

Equally, good regulation requires early intervention when a problem is spotted.  If weak warnings are issued, and a problem is allowed to continue, the company could later, with some justification, claim that the issue cannot be that serious or the regulator would have acted earlier.

Also, in this particular case, I rather agree with James O’Brien who tweeted “I think getting caught developing [Greyball] software specifically intended to obfuscate the work of regulators is also likely to backfire, you know”.

Mind you, the competition issues are interesting in one way. The (unlikely) disappearance of Uber from London’s streets has been treated as such a major calamity that it is all over the national news. Many London-based journalists – presumably frequent Uber customers – seem genuinely to believe that all Londoners should be concerned at this terrible threat to the city. I have my doubts, I must say, for London has one of the best public transport systems in the world.  But if the commentators are correct then maybe Uber is getting close to becoming ‘too big to fail’?  If this is so, then Uber surely has become just a bit too powerful.  Regulators including TfL must then have the guts to stand up to Uber, and not exempt it from complying with standards that have to be met by all its competitors, however powerful Uber’s PR machine may be.

Editor  Understanding Regulation