Uber in Germany: the courts decide… but in whose favor?

A court in Frankfurt has ordered Uber to suspend its Uber Pop service in Germany under threat of fines of up to €250,000 and possible prison terms for non-compliance. Once again, the driving force behind the legal action is the country’s taxi associations, which claim that Uber drivers lack the necessary licenses and insurance, and are putting passengers at risk. The ban, which will only last until Uber challenges the decision, follows another that last a few days, and affects only Uber Pop, the product that connects drivers with potential customers. Uber’s premium product, Uber Black, which uses black luxury sedans, is not affected by the court’s decision.

Both sides’ positions in this issue are clear: taxi drivers, who work within a highly regulated sector that involves significant financial outlays, can hardly be expected to stand by and watch as the rules of the game are changed. Their reaction is perfectly understandable, as long as it is channeled legally.

From Uber’s perspective, all it is doing is taking advantage of new technologies to use self-employed drivers within a significantly reduced cost structure. Uber requires its drivers to comply with current legislation covering the movement of passengers by road vehicles, and its management of the service has created significant advantages for users. Not just anybody can work for Uber: its drivers must already be either registered as taxi drivers or chauffeurs. The user is effectively getting into a hire car with driver. The service has been widely praised as superior to traditional taxis: more comfortable, more reliable, more convenient for payment, and overall, offering better quality of service.

Why does Uber offer better service?

Quite simply, because it makes the driver largely responsible for the success or failure of the business: a taxi driver can operate how he or she wishes, within certain guidelines. But an Uber driver depends on user ratings, and so is aware at all times of the need to offer the best service possible.

We could even reach a point where we shift from an artificially scarce economy, on the basis of licenses, to an abundance economy where for some people using Uber could be cheaper and more convenient than owning their own vehicle.

Or, as EU Commissioner for the Digital Agenda, Neelie Kroes, tweeted today:

The digital revolution presents us with choices: will we seize new opportunities, or shut them down?Whether #Turkey, #Uber, whatever

The question, therefore, is whose rights need to be protected here, or who would benefit from banning the service:

  • Does the current situation whereby the sector is tightly controlled, with a limited number of licenses that are expensive and that tend to be traded on the secondary market? The answer is obvious: this situation only benefits taxi drivers with a license, and in no way benefits users. This is essentially a racket run by city halls in which users have very little to gain from.
  • Is it true that Uber puts passengers at risk? To answer this question properly requires scrutiny of the stats. Is there any data about accidents or safety or security problems compared to traditional taxis? Until there is, accusations about Uber’s safety are unfounded. In which case, is it possible, based on intuition or other non-scientific variables, “just in case” to legislate a priori, just in case Uber-run cars turns out to be more prone to accidents? Obviously, the answer is no.
  • Is it true that Uber drivers do not meet the necessary criteria to carry out their activity? We’re not talking here about licenses, which are issued simply to create artificial scarcities, but about insurance for passengers in the event of an accident. Once again, in the absence of statistics, this is just more conjecture
  • Is it true that Uber drivers operate in the hidden economy? Given that they operate in an electronic environment, and record their activities on a digital application, it’s clear that this is not the case. In fact, it is more likely that traditional taxi drivers will keep part of their earnings hidden.

And so we return to the question as to just who benefits from banning Uber. Unless or until somebody can prove beyond any doubt that Uber drivers have no proper insurance, are involved in more accidents, and operate in the hidden economy, preserving traditional taxi services’ artificial scarcity will only benefit… traditional taxi services. Logically they will try to prevent newcomers, but they will have to come up with better arguments than those offered so far.

Meanwhile, strikes, traffic blockages, and other measures that only make life difficult for the public will do little to further the taxi sector’s cause, and are likely to boost Uber’s image. Whether in Germany or elsewhere, what is at stake here is the system of licensing as it stands is really necessary for the task of transporting people from one place to another safely. To answer that question, the more data and information, the better; the more bitter recriminations, empty accusations, and heated debate, the worse. For the moment, as far as I can see, the jury is still out.

(En español, aquí)

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