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London’s Uber Ban: A Blessing in Disguise for Uber’s New CEO?

 5 min read / 

The tone of Uber’s reply to Transport for London’s (TfL) decision to revoke its London operating licence was perhaps most striking for its humility. CEO Dara Khosrowshahi has hardly had the time to get his feet under his desk, having taken up his new position less than a month ago, when he faced the prospect of a suspension of operations in his largest European market, and one of the few where the loss-making ride-hailing giant is making a profit.

But whatever the merits of TfL’s case for revoking the licence, Khosrowshahi’s straight up “I apologise for the mistakes we have made” is a significant departure from the management style of his combative predecessor, ex-CEO and founder Travis Kalanick.

Khosrowshahi’s conciliatory stance, and the way that both he and TfL approach upcoming negotiations over Uber’s appeal, could mark an important turning point in Uber’s relationship with regulators around the world. And, considering the ongoing battles with Kalanick at the company’s board level, London could present him with an opportunity to establish his authority at Uber by starting to repair the company’s tarnished reputation.

London Politics at Play

TfL’s decision does look political. It gave an official reason of “potential public safety and security implications” for the revocation but other issues, some strictly speaking outside of its remit, must have come into play. Uber’s avoidance of VAT, by routing bookings through a Dutch company, the employment status of drivers, including a 25% rate of commission that drivers pay to Uber compared with 10-15% in the US, and the alleged use of its illegal “Greyball” software to evade regulators were undoubtedly factors. London’s 3.5m Uber users are well aware of its gaming of the system – why else are the fares so cheap – but safety is a real enough concern for TfL to start an argument.

And the argument has certainly started. Close to 900,000 Londoners have signed a petition supporting Uber, and even UK Prime Minister Theresa May has called the action “disproportionate.” TfL, who have been caught between intense lobbying by London’s politically influential black cabs and the popularity of the ride-hailing service, had previously seen discussions with Uber as a “closed door”, and on-going court cases have not helped. Under the aggressive and belligerent Kalanick, this situation would probably have escalated into a war of words and further court cases.

Dara’s Opportunity

But this time, Khosrowshahi quickly accepted an invitation from London Mayor Sadiq Khan to come to London, and he is due in on Tuesday for talks with TfL’s management. Khan has already given Uber’s new boss the right hints as to how the talks should proceed: “I want disruptive technology coming to London, but you’ve got to play by the rules.”

This should all be music to Khosrowshahi’s ears. He has come in with a remit to reform Uber’s corporate culture and image, which has been dogged by harassment allegations, a reputation for an “arrogant” corporate attitude and running battles with regulators over everything from failures to report sexual assaults to the illegal use of software to gain an unfair competitive advantage. London is a significant enough market for him to make his mark, and TfL’s actions provide him with a catalyst to push through changes at the company.

Uber’s shareholders would probably agree. It may be coincidental that the influential Japanese technology giant Softbank, who are weighing up a $10bn investment into Uber, have this week publicly backed shareholders Benchmark Capital and Goldman Sachs in their attempts to reduce Kalanick’s shareholder control, effectively blocking him from taking up a CEO or chairman role again. But the timing is uncanny, and Uber’s problems in London are symptomatic of its controversies elsewhere.

Time to Play by the Rules

Uber is as popular in London as it is in many other cities around the world. The company has brought down the cost of taxi services, and hailing an Uber on a mobile device has become fundamental to the transport choices of millions of people. But the disruption that it has brought to London’s transportation system was bound to butt up against regulators, incumbents and public opinion. Londoners want Uber and the disruptive competition it represents, but they also value safety and a level playing field for this competition to play out. And London’s black cabs may be expensive and a little traditional for the tastes of some, but they do provide a high-quality alternative that is also integral to London’s tourist scene.

TfL’s move should be looked at as a blessing in disguise for Uber, and Khosrowshahi’s conciliatory stance looks like the right approach. Employment rights, taxation, safety and consumer choice have become focus issues both in London and around the world as the “gig” economy and new business models emerge. Politicians are sharpening their pencils to introduce tougher regulations, and Travis Kalanick-style stonewalling and arrogance will not work now that Uber has become so big, and dominant, in so many major cities. Uber will need to learn how to play by the rules and if Khosrowshahi plays his cards skillfully, it can help regulators set a new rulebook for the urban transport services of the future.

It is a normal part of any cycle that new disruptors push the envelope and game the system as they grow their business to a commanding market position. But now that Uber is in that position, it will need to reel back some of its sharp practices and will face regulators and politicians whose instincts are to reel them back too far. But maybe London, with a history of reasonable market legislation, and Dara Khosrowshahi, with his reputation for integrity and diplomacy, will be able to strike a right balance to serve as a model for Uber’s regulatory issues in other cities.

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