Uber stalls in London

Controversial transport tech giant Uber hit another bump in the regulatory road this week when Transport for London (TfL) declined to grant the company a new private hire operator’s licence in response to its latest application.
TfL said that while Uber has made a number of positive changes and improvements to its culture, leadership and systems in the period since the Chief Magistrate granted it a licence in June 2018 it has identified a pattern of failures by the company including several breaches that placed passengers and their safety at risk. Despite addressing some of these issues, TfL said it does not have confidence that similar issues will not reoccur in the future, which has led it to conclude that the company is not fit and proper at this time.
In September Uber was granted a two-month licence as further information was required on these issues, some of which emerged late in the process of its reapplication. A key issue identified was that a change to Uber’s systems allowed unauthorised drivers to upload their photos to other Uber driver accounts. This allowed them to pick up passengers as though they were the booked driver, which occurred in at least 14,000 trips – putting passenger safety and security at risk. This means all the journeys were uninsured and some passenger journeys took place with unlicensed drivers, one of which had previously had their licence revoked by TfL. Another failure allowed dismissed or suspended drivers to create an Uber account and carry passengers, again compromising passenger safety and security.
TfL said that it recognises the steps that Uber has put in place to prevent this type of activity. However, it is a concern that Uber’s systems seem to have been comparatively easily manipulated. TfL identified other serious breaches, including several insurance-related issues. Some of these led TfL to prosecute Uber earlier this year for causing and permitting the use of vehicles without the correct hire or reward insurance in place. While Uber has worked to address these issues, they highlight the potential safety risk to passengers of weak systems and processes.
This pattern of regulatory breaches led TfL to commission an independent assessment of Uber’s ability to prevent incidents of this nature happening again. This work led TfL to conclude that it currently does not have confidence that Uber has a robust system for protecting passenger safety, while managing changes to its app. Legislation means that Uber now has 21 days to appeal, during which it can continue to operate pending any appeal and throughout any potential appeals process. Uber may seek to implement changes to demonstrate to a magistrate that it is fit and proper by the time of the appeal.
While Uber continues to operate, TfL will continue to closely scrutinise the private hire operator, which includes the need for Uber to meet the 20 conditions set by TfL in September 2019, and particular attention will be paid to ensuring that the management have robust controls in place to manage changes to the Uber app so that passenger safety is not put at risk.
There is no question that the TfL decision is a serious setback for the company. Being found by the transport authorities in one of the world’s largest cities to not be a fit and proper operator will further damage its reputation even if it can successfully address TfL’s concerns and ultimately secure a licence following an appeal. However, the decision will have been closely watched by both regulators in other countries, and the company’s numerous critics. The controversy around the company shows no signs dissipating. Uber investors will recognise that regulatory and political risks are key ESG factors when looking at the company.

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