who wins?

Germany bans Uber for all the wrong reasons

September 2, 2014
September 2, 2014

With a single court decision, Uber’s low-cost car service has been banned throughout Germany. Although the company faces potential fines of €250,000 ($328,000) per ride, it will keep operating its service while appealing the court’s decision.

It’s a familiar story: Uber faced a lawsuit by a consortium of taxi companies that sought to drive a competitor from Germany, a fast-growing market for the San Francisco company seeking to make good on a $17 billion valuation. The taxi firms say that drivers who use Uber’s platform to find riders and accept payments don’t have the appropriate operating licenses, background checks or insurance. One spokesperson for the taxis said the rules “also apply to neo-liberal firms like Uber.”

Ah, the politics of Uber. The challenge, as always, is figuring out who actually benefits. On the one hand, taxi regulations are typically designed to protect passengers, such as  background checks and liability insurance. On the other hand, there are rules designed to protect industry incumbents and create an artificially low supply of cabs. These drive up fares for consumers and often lead to worse service in poor areas—benefiting the owners of taxi franchises more than the drivers themselves.

These rules are intertwined, making it hard to figure out whether customer service or capitalistic greed is motivating each side’s moralizing.

In this case, Reuters reports that the court made the decision not out of concern for the safety of passengers, but because German law says that people without commercial drivers licenses can only charge for the operating costs of giving other people rides, not attempt to make a profit.

If that seems like a way to restrict competition, it probably is: Uber says it already performs background checks on its German drivers and provides blanket insurance for anyone using its platform to provide car services.

If recent history is any guide, the ruling won’t slow Uber down: Where regulators have made these objections, it has quickly adapted, ensuring, as it does in New York City, that all of its drivers have professional driving licenses.

Then again, Germany is not the US, and Uber’s “forgiveness is better than permission” approach to government relations may not sit as well in Germany, where following the rules is something of a civic religion and labor unions wield more power and work closely with companies.

But those labor unions might want to look at the experience of drivers in the US, where competition among car service platforms for drivers has made their labor a hot commodity, and ask themselves whether Uber is bad for them or for their employers.

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