Business

Uber Recovers Its London License, a Win for Its New CEO

Posted June 26, 2018 6:41 p.m. EDT

LONDON — Uber won an appeal Tuesday to regain its taxi license in London after agreeing to stricter government oversight, a crucial victory for efforts by its new chief executive to revamp the company’s grow-at-all-costs culture.

The closely watched case could serve as a template for other cities looking to extract concessions from Uber, the ride-hailing service that has upended the taxi industry worldwide, often by ignoring the concerns of regulators. The company suffered a major setback with that approach last fall, when transport authorities in London — its most lucrative European market — withdrew its license. It has been able to continue to operate through the appeals process.

The court case has been a test for the conciliatory approach toward regulators taken by Dara Khosrowshahi, Uber’s chief executive. Khosrowshahi replaced the famously combative Travis Kalanick last year, and he has made it a priority to show officials throughout the world that the San Francisco-based Uber can comply with local rules.

On Tuesday, a judge at Westminster Magistrates’ Court in London bolstered Khosrowshahi’s campaign, reissuing Uber’s license, albeit for 15 months — less than the five years that is typical for taxi licenses. Uber had agreed to install new leadership in London, adopt rules to report incidents to police, keep tired drivers off the road, and share traffic data with the city. The company also named a new independent board to oversee British operations.

In reading a statement, the judge, Emma Arbuthnot, laid blame for Uber’s misdeeds at the feet of former managers who had a “gung-ho attitude” to “grow the business come what may.”

Arbuthnot added that the 15-month license required Uber to prove its cultural changes were lasting. “The question,” she said, “is whether Uber can be trusted.”

The mayor of London, Sadiq Khan, whose office oversees transportation in the capital, declared victory in a statement. Along with the relatively short license, Uber was also ordered to pay court costs for London’s transport authorities.

“Uber has been forced to overhaul the way it operates not just in London but across the world, including completely changing its global governance structures and implementing new systems for reporting alleged crimes,” Khan said.

Tom Elvidge, Uber’s general manager in Britain, said in his own statement that the company was “pleased with today’s decision” and would work with city officials to “address their concerns and earn their trust.”

With more than 3.6 million people who use the service at least once every three months, London is one of Uber’s most lucrative global markets and biggest success stories outside the United States. The appeal removes a black eye as Khosrowshahi scales back in Asia and prepares for an initial public offering as early as next year.

But the company’s size also makes it politically risky for government officials to take its cars off the road. Uber says it provides millions of rides per week in London, and with roughly 45,000 drivers, its fleet nearly doubles the number of black cabs. More than 850,000 people signed a petition supporting Uber after the ban was announced last year.

Steve McNamara, general secretary of the Licensed Taxi Drivers’ Association, which represents about half the city’s 23,000 cabbies, criticized the city for allowing Uber to become “too big to fail.” The union lobbied to prevent Uber from regaining a license, and some of its members were in the audience during the hearings.

Uber’s experience in London tracks closely with its experience in other major cities. It gained popularity among customers who enjoyed the app’s convenience and comparatively low prices, Uber’s strategy was to grow as quickly as possible so that it became indispensable.

But with its growth came criticism over poor treatment of drivers, inadequate passenger safety and harm to incumbent taxi industries. In September, frustrated by a raft of global scandals, London revoked Uber’s license. Transport for London, which regulates ride-hailing services in the city, said Uber was not a “fit and proper” business, a designation required to operate in Britain.

“We’ve had five years of a very difficult relationship where Uber has felt it didn’t require regulation,” Helen Chapman, Transport for London’s director of licensing, regulation and charging, said during testimony Tuesday.

The initial decision to revoke Uber’s license focused attention on the fast-changing dynamics of London’s taxi industry. Drivers of the British capital’s iconic black cabs are predominantly white, and have to pass an exacting exam known as the Knowledge by memorizing thousands of city streets over the course of several years. Uber drivers, by contrast, are mostly immigrants and are quickly able to sign up and navigate London’s streets with the help of smartphones and GPS software.

The two-day trial in London allowed regulators to make their case. Uber managers were questioned about the use of software to avoid government oversight. The software, called Greyball, was developed in part to aid entrance into markets where the company’s service was not permitted. The tool allowed Uber to deploy what was essentially a fake version of its app to duck law enforcement agencies that were cracking down on its service.

The managers were upbraided over instances in which sexual assault allegations against drivers were not reported to police. And they were criticized for a data breach that exposed millions of customers but that was not reported to authorities for months.

In each instance, company representatives accepted blame and outlined the changes made under Khosrowshahi to address those issues.

Elvidge said regulators had been right to revoke the company’s license given its past behavior. Over several hours of testimony Monday, he called decisions made by the previous leadership team “entirely regrettable,” “a bad idea,” “not appropriate,” and “fundamentally wrong.”

“It was really clear that the corporate culture of the previous leadership had to change,” Elvidge told the court. Testimony during the trial described an unrestrained company culture, where leaders in San Francisco made decisions that managers in London had to explain to regulators. When a data breach was reported last year, Elvidge said he learned about it from news reports. He first told British regulators that only one driver had been exposed, but several hours later shared that in fact information from 2.7 million people in Britain had been taken.

Uber said it created new rules for reporting problems to regulators, including an unusual policy to notify government officials when the company is aware of potentially negative news coverage.

To address safety concerns, the company also worked with London’s Metropolitan Police to create a policy for reporting possible crimes by drivers. In the past, Uber left the decision about reporting wrongdoing to customers. The company also said it would be more aggressive about barring drivers when riders complain.

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 to pay for a “hardship fund” for struggling taxi drivers in New York, where Mayor Bill de Blasio and the City Council are under pressure to adopt stricter policies against ride-hailing services.

Laurel Powers-Freeling, appointed last year as chairwoman of Uber’s independent board in Britain, testified that Uber was seeing major cultural changes.

“I’ve seen a real will to take on a new set of values,” she said.