For some time, London looked like a shining exception to the anti-innovative, anti-consumer tendencies of European taxi regulators. Mayor Boris Johnson’s initial support for new transport options, and the capital’s status as Europe’s digital hub, seemed to shield it from Luddite protectionism. No longer. It now looks like Transport for London will follow the example of its continental counterparts and introduce strict rules for ride-sharing apps. These would include – as outlined in a draft document – a minimum five-minute wait time for all bookings, a ban on showing available cars in the user’s area on the app, a mandate to offer the possibility to pre-book seven days in advance, as well as restrictions on how many services drivers may work for at a time, and on ride-pooling by passengers.
The fact that public authorities would seek to regulate ride-sharing apps like Uber comes as no surprise. After all, innovative industries are by nature disruptive, and they tend to elicit vociferous opposition from established players and vested interests. Normally, however, regulatory intervention is justified on grounds of consumer protection – for instance, to prevent market abuse by firms with a large market share, or to ensure firms are not endangering user safety or violating anyone’s intellectual property rights. Old incumbents are protected from new entrants – who, it must be remembered, are offering customers something they want to buy – but normally, the decisionmakers at least pretend to have the best interest of consumers at heart.
No such attempt has been made by TfL in this case. On which safety grounds could a five-minute mandatory wait be justified? The risk of what, exactly, is diminished by waiting? (If anything, it endangers passenger safety. Is a female user trying to find a ride home late at night safer getting in the car as soon as possible, or is she safer waiting in the street?) The same goes for all other prospective rules. They are either unnecessary – one can already pre-book cabs via Addison Lee and dozens of other private minicab services, not least by using the Kabbee app to see the best deals – or they make the passenger’s experience worse – not knowing whether there are cars close-by, not being able to split a cab ride with someone else – or they make drivers’ lives more difficult – by mandating that they work solely for Uber, when many of them alternate between the app and other firms.
There are no consumer protection grounds for the proposed regulations, which exposes the true intent of regulatory intervention: producer protection. Not just of traditional black cabs, but also private minicab services, and perhaps even public transport (since many passengers would not use private transport were a low-cost alternative like Uber not available). London cabbies and private hire companies argue that ride-sharing apps have an unfair advantage because their drivers are contractors who cover their own insurance and maintenance costs, and who have not had to learn the Knowledge. It may be true that app-based transport services can offer more competitive prices to passengers, but this is innovation and competition at work: it is decidedly not the job of the state to try and “level the playing field” by making consumers worse off. It is the job of the state, on the other hand, to review outdated regulations which were designed before the advent of GPS and smartphones, and to remove them so that no competitor is subject to undue restrictions. Alas, it is easier for TfL to cave in to the pressures of the taxi lobby, even though such measures only give them a temporary lease of life rather than allowing them to react to competitive pressures and adapt to technological progress.
European politicians often wonder aloud why it is that the United States is so innovative, productive and so competitive. Why was Google born in California, and not Duisburg? There are of course many reasons for America’s exceptional record of innovation, but one decisive factor is its openness to change, its willingness to embrace it. Europe, on the other hand, often opts for the easier path: first, ignore new technologies; second, protect incumbents and regulate newcomers; third, turn newcomers into vested interests who will in their turn oppose the next challenger. Make no mistake: TfL’s regulatory move will, over the long run, entrench a diminished Uber and prevent others from entering the London transport market. Time and time again, regulation has been turned into a weapon of the regulated to oppose new competitors.
For quite some time, London politicians have thought of the city as different from, and in many ways superior to, other continental capitals: more attractive to entrepreneurs, more open to change, a hub for the best and brightest. It is moves like TfL’s prospective regulatory drive that tarnish London’s reputation as one of the most dynamic places in the world. As our city prepares to elect its new Mayor in 2016, they should think long and hard about what it is that makes London a magnet for capital, people and ideas. We don’t need a ‘pro-business Mayor’, we need a pro-innovation and pro-consumer Mayor.
Diego Zuluaga is the IEA’s International Research Fellow, and Deputy Director of EPICENTER.