Uber Claims to Have Changed. A London Judge Will Decide.
Posted June 24, 2018 4:03 p.m. EDT
LONDON — Dara Khosrowshahi’s 10-month tenure as Uber’s chief executive has been marked by a prolonged public relations campaign to apologize for the company’s past misdeeds and portray the once proudly combative startup as a reformed corporate citizen.
Starting Monday, a judge in London will test the success of his strategy.
Uber this week begins an appeal to reverse a decision by the British capital’s regulators to revoke its operating license. If it cannot make its case, that ruling could ultimately ban Uber cars from the city of 8.8 million, one of the company’s most lucrative markets. Uber will argue that new policies installed under Khosrowshahi show a newfound willingness to address government concerns.
The case before Westminster Magistrates’ Court has ramifications far beyond London, and, given changes the city has already wrung from Uber, it could embolden others grappling with how to regulate ride-hailing services. The ruling will offer a hint as to whether governments and regulators are becoming more receptive to Khosrowshahi’s conciliatory efforts as he seeks to move past the brusque manner associated with his predecessor, Travis Kalanick.
“The trial is one of the first big tests of Khosrowshahi’s leadership of the company and new approach,” said André Spicer, a professor at the Cass Business School at City, University of London, who has been tracking the case. “The judgment will show whether authorities are willing to accept Uber with some of the harder edges knocked off, or whether there are more fundamental questions about the Uber model.”
Of all the issues that Khosrowshahi has confronted since taking over at Uber — allegations of a sexist company culture, government investigations, management turnover, a data breach affecting millions of customers — London’s potential ban is one of the most pressing for the company’s financial health.
With more than 3.6 million people using Uber at least once every three months, and 45,000 drivers transporting them, the British capital is Uber’s largest European market. The company has so far been able to continue operating pending its appeal.
But a ban would be Uber’s biggest regulatory setback to date. It would bruise its business at a critical time as Khosrowshahi is scaling back the company’s operations in money-losing markets in Asia and laying the groundwork for an initial public offering.
Khosrowshahi was less than a month into the job when London transport authorities revoked Uber’s license in September. Regulators said Uber was not a “fit and proper” company, an important classification for businesses in Britain. They accused the ride-hailing service of having poor safety standards, of not conducting sufficient background checks on drivers and of using software to avoid government oversight.
Khosrowshahi, former chief executive of Expedia, was in the midst of contentious negotiations to settle a boardroom feud between Kalanick and Uber investors at the time. He flew to London to discuss a potential compromise, calling into board meetings in San Francisco during the brief dash to Britain.
A deal could not be reached at the time, but the trip provided an early opportunity to underline the need for change at Uber. In a letter to employees after the London license was revoked, Khosrowshahi said, “There is a high cost for a bad reputation.”
Uber has since tried to address many of the criticisms from the London authorities, and a deal of some sort is likely to be reached to keep the company’s cars on the roads. It has introduced limits on how long a driver may continuously be behind the wheel, offered tools to report incidents to police, and agreed to share traffic data with the city. A new management team was installed to run the company’s London operations, while three independent executives were recruited to a board that oversees operations in Britain.
The company is also seeking only an 18-month license, rather than the typical five years, as a concession that it says will allow regulators to ensure its reforms will last.
The question is whether the steps go far enough. At a pretrial hearing, Senior District Judge Emma Arbuthnot, who is presiding over the appeal, asked whether the changes were a “smoke screen.”
London is not the only area where Uber has made changes under Khosrowshahi. The company has settled a protracted legal battle with Waymo, owned by the Google parent, Alphabet, over self-driving car technology. It has offered drivers new insurance protections in some markets, and it proposed a fee on ride-hailing services in New York to pay for a “hardship fund” for struggling taxi drivers.
The trial beginning Monday is expected to last several days, with testimony from Uber representatives and officials from Transport for London, the city’s regulator. Khosrowshahi is not expected to attend. The case could drag on for years. If Uber loses this appeal, it can take the case to higher courts, and the company’s cars would be allowed to remain on the road throughout the process.
Uber and Transport for London declined to comment.
London’s actions are being closely watched as a potential model for regulators elsewhere who are seeking to extract concessions from Uber. Nine years after the company was founded, policymakers continue to struggle with fallout associated with the success of Uber and similar ride-hailing services, including more congested streets and devastated local taxi groups.
In New York, where six taxi drivers have killed themselves in recent months, Mayor Bill de Blasio and the City Council are under pressure to adopt stricter rules against ride-hailing services. Uber has also faced restrictions in other U.S. cities, such as Austin, Texas, and in countries like Canada, Denmark, France, Ireland and Italy.
Court rulings have also had a major impact on Uber’s development. In a case in December, the European Union’s highest court ruled that Uber was a transportation company, not just a digital platform, a decision that could force the company to meet tougher licensing and worker-benefit requirements.
“The wild-West era of platform companies skirting regulation seems to be coming to an end,” said Mark Graham, a professor of internet geography at Oxford University who has studied how Uber and other companies that make up the so-called gig economy affect workers and traditional industries.
A new license for Uber would be a blow to London’s black-cab drivers.
They argue that rivals working for Uber have an unfair advantage because they do not have to meet the same car specification requirements or pass an exhaustive exam, known as “the Knowledge,” that tests a cabbie’s ability to navigate city streets without a map. That, they say, allows Uber to keep its prices lower than those of black cabs — Uber can be up to 30 percent cheaper than London taxis.
Steve McNamara, general secretary of the Licensed Taxi Drivers’ Association, which represents about half the city’s 23,000 cabbies, said he was unconvinced by Uber’s efforts to project a friendlier corporate image.
“They are only saying what they have to say to get a license,” McNamara said.
Yet many experts say that banning Uber entirely is unrealistic.
In London, the company’s service has become a central mode of transportation, and removing its cars would be an unwelcome change for many commuters. More than 850,000 people signed a petition supporting Uber in the wake of the ban last year.
Tony Travers, a professor at the London School of Economics, said he expected Uber to win the appeal. In April, the judge presiding over the case asked Uber and Transport for London to negotiate terms of a new license in the event that she rules in the company’s favor.
“Uber has accepted it needed to make improvements,” Travers said. An outright ban, he said, “is hard to imagine.”
He added, however, that while the appeal would mark an important moment for Uber, the company would inevitably face more such challenges around the world.
This fight, he said, “won’t be the last.”