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Archive for January 6th, 2016

Uber and Transport for London: a case study in regulatory behaviour

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My admittedly modest resolution for 2016 was to read (at last!) Transport for London’s proposals for the regulation of the private hire sector (aka the Uber proposals). Uber is an immensely popular service that works lawfully, and in the interest of consumers, in London. It is affordable, reliable, and works around the clock.

I genuinely thought that, at least as far as London is concerned, there was no way back. I know it is immensely difficult to change regulation to allow a disruptive service. And I appreciate that managing change is even more difficult. But once the service is lawfully up and running, as Uber is London, I did not think that regulators would try to re-regulate a service to penalise consumers.

Having read TfL’s proposals, I realise that I may have underestimated the power of regulators to adopt rules that harm users for no compelling reason. In this sense, these proposals are a useful case study on the behaviour of regulators and possibly a template of what the current obsession with the regulation of ‘platforms’ (whatever that means) may bring about in the near future.

The most controversial proposals advanced by TfL are the following:

  • ‘Operators must provide booking confirmation details to the passenger at least five minutes prior to the journey commencing’. In other words, it is necessary to wait five minutes before getting on a car. What if there happens to be an Uber car around the corner? The rule would still apply. The alleged rationale for the five-minute rule is that it would ‘reduce the risk of a customer getting into the wrong car and/or into an unlicensed vehicle’. Really.
  • ‘Operators must offer a facility to pre-book up to seven days in advance’. TfL believes that ‘increasing absence of advance booking facilities will restrict the choice for passengers’ and therefore that it should require all operators to provide this service. This says much about how regulators see competition. TfL does not expect competition to bring about the services that consumers want and value. It is for the regulator to do that.
  • ‘Operators must not show vehicles being available for immediate hire, either visibly or virtually via an app’. This proposal seeks to prohibit one of Uber’s most interesting features. The application displays the cars that are in the vicinity and allows users to see where the car is any time. Apparently, this feature creates ‘the impression of vehicles being available for immediate hire’. And apparently, this is a bad thing.
  • ‘Operators must specify the fare prior to the booking being accepted’. Something strange must be going on in this city. For some reason, consumers use (massively and enthusiastically) Uber without knowing exactly how much the trip will cost.

The picture that emerges from the above is clear. TfL ostensibly intends to create a level playing field. But it seeks to do so in the wrong way. Instead of changing the regulatory regime with consumers’ interests in mind, it seeks to eliminate some of the competitive advantages of new entrants to protect incumbents (including cabs and large minicab companies).

We have seen this story many times before. My favourite example is that of cable television in the US (here is a great article about it). For years, the FCC prevented the growth of cable systems (which have transformed television, for good and for the better, around the world) simply to protect incumbent broadcasters.

This discussion begs two questions, and I would love to read your views on them. One is whether good regulation is the exception rather than the rule.

The second is whether, paradoxically, good regulation tends to be treated more harshly than dubious initiatives. Right before Christmas Day, the ECJ ruled on Scottish legislation setting a minimum price per unit of alcohol. This is an example of government regulation at its best. It seeks to address a serious concern in a way that is sensible and proportionate. Alas, there is no guarantee that the regime will be upheld after the preliminary ruling.

 

Written by Pablo Ibanez Colomo

6 January 2016 at 3:11 pm

Posted in Uncategorized