An Uber problem: when innovation clashes with regulation

International expansion of on-demand car service is not going as planned

An Uber employee holds an Apple iPhone 5S showing a map on the Uber app. Photograph: Junko Kimura-Matsumoto/Bloomberg

An Uber employee holds an Apple iPhone 5S showing a map on the Uber app. Photograph: Junko Kimura-Matsumoto/Bloomberg

Sat, Apr 19, 2014, 01:00

Innovation and regulation have a shaky relationship. Regulation aims to keep a level playing field, whereas innovation aims to disrupt the status quo. Right now, regulation can’t keep pace with innovation, and where it does, clashes are happening.

Uber is a case in point. The mobile app connects passengers with drivers of vehicles for hire and ridesharing services. Basically, it’s a taxi alternative you can hail with your smartphone, one that’s valued at more than $3.5 billion (€2.5 billion).

Uber hopes to disrupt the taxi business in Ireland, by enabling the public to secure transit in privately owned cars using an app. It is currently operating in Dublin.

While the service is huge in the US, the company’s international expansion is not going as planned. The service has already faced several battles with regulators.

In Belgium, a court banned Uber’s services in Brussels, because the company did not have the correct approvals to operate. The court said it would fine Uber drivers €10,000 if they picked up passengers using the company’s app.

A Berlin court also banned Uber from providing taxi services via its smartphone software, while France passed a law forcing Uber drivers to wait 15 minutes before picking up customers, even if those customers are only metres away.

It’s understandable that taxi companies and associations throughout Europe are upset by Uber’s arrival and competitive edge thanks to cheaper prices.

It’s also understandable that regulators and governments want to protect certain industries.

In doing so, however, are they discouraging innovation?

They would argue they are protecting the public. However, Jambu Palaniappan, Uber head of EMEA expansion, says part of Uber’s secret is its “vetting process”, which ensured both the cars and drivers it provided were of a high standard.

One thing for sure. Uber likes a good fight and won’t give up too easily. The company is prepared to operate at a loss in France, offering drivers bonuses of more than $1,100 per week, just to lure them to the service.

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