Tuesday, May 16, 2017

Uber Suffers Major Setback In Efforts To Conquer European Market

by Arthur Foxake
16 May 2017

For several years the dodgy 'ride sharing' service Uber has been getting away with murder because politicians around the world feared being accused of standing in the way of progress by holding a high - tech startup to the same laws as other companies with a more traditional business model. While undrer the Obama administration, Uber seems to possess a free pass to ignore federal and state laws, in Europe the right of Uber to do what the fuck they liked because science' had a head on with European Union workers rights laws and regulations covering insurance and passenger safety.

Currenty the first globalised taxi service that claims it is not a taxi service but a socil media app for people who want to get into cars with total strangers and play carpool karaoke has been battling with Barcelona taxi drivers who have argued that UberPOP engages in unfair competition by using unlicensed (and therefore uninsured) drivers that are not subject of the same regulatory hurdles as a regular "transport company." And while Uber has historically taken the approach of just entering new markets and leaving drivers who signed up to the ride sharing app to deal with the regulatory hurdles, it looks like the lawmakers are finally catching up with them ...which we suspect will not be good news for Uber's private investors who recently shovelled $68 billion of money into the IPO of a company that had no reliable business model, no track record of profits and dividends and no real product or service to sell but earned revenue by taking a cut of monies illegally obtained by private car owners posing as taxi drivers from people too self interested to pay fares that allow properly registered and monitored drivers to make a decent living.

As Reuters reported earlier this month, the Court of Justice of the European Union's (ECJ) Advocate General Maciej Szpunar issued a preliminary opinion that Uber is actually a "transport service" under the terms of EU law and not just a ride sharing app. And the moment an Uber driver asks a passenger for money, it becomes a regulated transaction rather than a personal favour. The ruling is significant because, if it stands, it would require Uber to operate effectively as a taxi company and thus provide insurance to drivers and guarantee that they are properly licensed and complying with all safety regulations. Per Reuters:
"Although the opinion of the Court of Justice of the European Union's (ECJ) Advocate General Maciej Szpunar is non-binding, its judges usually follow such advice and are likely to reach a final ruling in the landmark case in the coming months."

If the ECJ rules that Uber is a transport service, this will impact on the Silicon Valley firm's operations in Estonia, Poland, Czech Republic, and Finland where it still runs UberPOP, using amateur drivers to pick up riders.

The ECJ's final ruling cannot be appealed by Uber

While Uber has always argued in similar disputes that they are merely a 'market maker' offering an app for matching demand for rides with supply, the ECJ's Szpunar saw it differently finding that moment money changes hands the legal position of all involved in the transaction changes, the passenger is uninsured, the car owner, unless a licenced taxi operator, has invalidated private car insurance and the middle man is seen by law as a taxi service operator and an employer which requires it to comply with local employment laws. "Uber does much more than link supply and demand: it created this demand itself" adding that "Uber can thus be required to obtain the necessary licenses and authorizations under national law," the ECJ judgement stated.

The ECJ's Szpunar said that Uber's argument that it merely matches supply and demand between drivers and passengers was a "simplistic view of its role."

"The Uber electronic platform, whilst innovative, falls within the field of transport: Uber can thus be required to obtain the necessary licenses and authorizations under national law,"

"In effect, Uber does much more than link supply and demand: it created this demand itself," Szpunar wrote.

The service provided by Uber amounts to the "organization and management of a comprehensive system for on-demand urban transport," the ECJ said.

Regulating the software company as a "new economy" information service meant treating Uber as if it was simply an air traffic controller or market maker connecting drivers to passengers.

Instead, by forcing Uber to comply with myriad local transportation regulations – some dating back as long as a century – it must take more responsibility for certifying, insuring and paying its drivers, as taxi firms now do.

Meanwhile, Uber representatives were dismissive of the initial ruling saying that such decisions only serve to "undermine the much needed reform of outdated laws..."

A spokeswoman for Uber said it would await the ECJ's final ruling, but added it "would not change the way we are regulated in most EU countries as that is already the situation today".

And a ruling against it would "undermine the much needed reform of outdated laws which prevent millions of Europeans from accessing a reliable ride at the tap of a button," she added. Well whatever Uber may lack in terms of regulatory compliance, track record, proven business model and so on, they are not short of arrogance.

The real question as far as news reporters are concerned is just how long the negative news can continue to pile up for Uber before all those investors who just added nearly $13 billion to company coffers over and above the $68 billion opening valuation start to get a little nervous that the company is still burning a couple billion dollars a year after while not showing even an operating surplus let alone a balance sheet surplus from which dividends could be paid. Do we smell a repeat of Enron or Worldcom brewing?


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