Uber loses license to operate in London, one of its biggest markets

Uber has lost its license to operate in London, one of its biggest markets globally, with a local transport regulator reaffirming a previous claim that Uber is not a “fit and proper” operator. The regulator also found that Uber’s systems are “easily manipulated” by unauthorized drivers.

The announcement follows a two-year battle with Transport for London (TfL) that kicked off back in September 2017, when the local transport regulator ruled that Uber failed to take sufficient “corporate responsibility” when it came to safety and security. Concerns included its approach to reporting crimes and its process for driver background checks.

Although TfL conceded that Uber has since made some “positive changes,” the regulator identified a continued “pattern of failures,” including “breaches that placed passengers and their safety at risk.”

“As the regulator of private hire services in London, we are required to make a decision today on whether Uber is fit and proper to hold a licence,” said Helen Chapman, TfL’s director of licensing, regulation, and charging. “Safety is our absolute top priority. While we recognize Uber has made improvements, it is unacceptable that Uber has allowed passengers to get into minicabs with drivers who are potentially unlicensed and uninsured.”

Unauthorized

Among the issues TfL identified was the ability of unauthorized drivers to upload their photos to authorized Uber driver accounts, meaning drivers without the necessary background checks could pick up passengers. According to TfL, this workaround was used in at least 14,000 trips, meaning they were not insured to carry passengers.

TfL also noted that suspended or dismissed drivers could easily create a new Uber account and carry passengers, while it highlighted other ssues that came to light earlier in 2019 relating to vehicles without the correct insurance.

Uber has continued to operate in the U.K. capital over the 26 months since its license was original rescinded, in part thanks to a prolonged appeals process that granted it a stay of execution. In May 2018, a judge granted Uber a probationary 15-month license after the company made some notable changes to its business model. That license expired in September, at which point Uber was granted an additional two-month extension that is due to expire at midnight (GMT) tonight.

In a statement issued to VentureBeat, Uber said it had audited every driver in London over the past two months and strengthened its processes and that it will be rolling out a new facial recognition security feature similar to the one it offers in the U.S.

“We have robust systems and checks in place to confirm the identity of drivers and will soon be introducing a new facial matching process, which we believe is a first in London taxi and private hire,” said Jamie Heywood, Uber’s regional general manager for Northern and Eastern Europe.

The big five

Over the past few years, the San Francisco-based company has faced bans around the world, but London is particularly notable. In a filing with the Securities and Exchange Commission (SEC) earlier this year, Uber confirmed that nearly a quarter of its global ride-share bookings emanate from just five metropolitan areas. Three of those markets are in the U.S. (Los Angeles, New York City, and the San Francisco Bay Area), one is in Brazil (São Paulo) and the fifth is in London, where Uber claims 3.5 million riders and 45,000 licensed drivers.

The company noted in its April filing that hampering its ability to operate in any of these markets could have a significant impact on its financials at a time when its losses are already rising globally. It said:

We generate a significant percentage of our Gross Bookings from trips in large metropolitan areas and trips to and from airports. If our operations in large metropolitan areas or ability to provide trips to and from airports are negatively affected, our financial results and future prospects would be adversely impacted.

Uber has also faced significant pushback in New York, and it recently had to restrict drivers’ app access to comply with new regulations that cap the number of app-based for-hire cars that can operate in the city. The new rules also limit the amount of time drivers can spend “cruising,” the period during which they are driving or waiting to pick up passengers.

It’s worth noting that Uber will continue to operate in London while yet another appeals process is implemented, meaning that little will change for Uber drivers or riders in the foreseeable future. In effect, we will now go through the exact same process that was initiated back in 2017 an appeals process culminating in Uber presenting its case to a magistrate, who will then decide whether the license should be renewed.

“TfL’s decision not to renew Uber’s licence in London is extraordinary and wrong, and we will appeal,” Heywood added. “We have fundamentally changed our business over the last two years and are setting the standard on safety. TfL found us to be a fit and proper operator just two months ago, and we continue to go above and beyond.”

Uber CEO Dara Khosrowshahi also responded to the decision shortly after the announcement was made.

We understand we’re held to a high bar, as we should be. But this TfL decision is just wrong. Over the last 2 years we have fundamentally changed how we operate in London. We have come very far — and we will keep going, for the millions of drivers and riders who rely on us.

— dara khosrowshahi (@dkhos) November 25, 2019

Landscape

The London ride-hailing landscape has changed significantly in the past couple of years, with more rivals operating in the U.K. capital today including BMW – Only InfotechDaimler-backed Kapten, which launched under a flurry of anti-Uber rhetoric back in May, followed shortly by Estonia’s Bolt (formerly Taxify). Both companies will be watching the Uber case closely.

“We believe it is the duty of a responsible ride-hailing operator to work cooperatively with regulators in the best interests of the cities where we operate,” a Bolt spokesperson said in response to today’s news. “We spent a year working with TfL on our successful London licence application, and we continue to pay the utmost attention to the credentials of drivers we permit to use our platform. Recent events highlight the critical importance to public safety of not just checking but knowing who those drivers are and taking a deep interest in their overall well-being.”

Uber is still top of the food chain in London in terms of mindshare, so any decision that permanently pulled it offline is not like to be greeted with open arms by the millions of locals and tourists in the city. However, in that scenario there might be less of a public backlash today than two years ago simply because more alternatives are available.

“Uber pushes the narrative that consumers rely on its service and any action by regulators will be deeply unpopular,” noted Mark Tluszcz, CEO of European VC firm Mangrove Capital Partners. “The fact is that there are many other taxi apps that would happily and very quickly soak up their business and keep London moving.”