A court bashes Uber into compliance-again
The latest blow may mean vast bill for back taxes
Uber has tried repeatedly to persuade others to see it the way it sees itself.
Its drivers, the ride-hailing giant has said, are independent contractors with no right
to minimum wage, holiday pay or pensions. The drivers, for their part,
point out that they are managed algorithmically and cannot set prices or routes.
Courts have taken their side. In 2016 the Employment Tribunal ruled that Uber drivers
were entitled to minimum wage and holiday pay. Uber lost three appeals,
most recently in the Supreme Court in February.
On December 6th it was dealt another legal blow when the High Court, in effect,
ruled that its entire business model broke the rules.
Uber brought this latest judgment on itself. During the Supreme Court hearing the
presiding judge had suggested that the firm might be contravening regulations
governing private-hire vehicles in London.
Uber asked the High Court to declare that this was not the case.
Instead it agreed and said that the rules required Uber, not drivers,
to enter into contractual agreements with passengers. Transport for London,
the capital's transport regulator, instructed all ride-hailing
operators to step into line.
The change probably means Uber is liable for anything that goes wrong,
such as no-shows, and that it is eligible for value-added tax on fares.
This may be collected retroactively. Some estimates put the potential bill as high as
£2bn ($2.6bn). Rides look likely to become 20% dearer.
Uber's position in London was already shaky. In its early days it subsidised fares with
venture-capital cash in order to dominate the new market.
The same tactic bore fruit in America, where Uber and Lyft form a duopoly,
but in London Uber is just one of many ride-hailing services, including Free Now,
Bolt and Ola, and must also compete against black cabs and an extensive
public-transport network. It does not always measure up. Drivers complain that Bolt,
an Estonian Uber clone, pays better; customers,
that the licensed black cabs that Free Now hails often arrive faster.
This created a negative feedback loop.
Fewer available rides meant passengers were less likely to use Uber,
which made it even less attractive to drivers. Then came the pandemic,
which both reduced demand for rides and provided new ways to
make money behind the wheel, delivering meals and packages to locked-down homes.
As Britain reopened, the result was a shortage of drivers.
In November Uber raised fares by 10% to try to lure them back.
The firm is likely to keep muddling through in London;
stepping away from one of its largest markets would send an extremely negative signal
to investors. But for London's 2m Uber riders, the future will be pricier and slower.
The days of cheap rides and two-minute pickup times are gone,
along with the venture capital that paid for them.
For London's 45,000 Uber drivers, the future is harder to predict.
The courts have ruled in their favour, but Uber's profitability depends on
slashing costs-of which they are the biggest.