Uber is the future for taxis... so live with it, says the EU
The European Commission has come down decisively in favour of firms in the 'sharing economy'
Published 05/06/2016 | 02:30
The European Union executive has thrown its weight behind the "sharing economy", saying governments should only ban services such as the ride-hailing app Uber and Airbnb as a last resort.
In new guidelines intended to foster the development of internet-based services in Europe, the European Commission said any restrictions on such businesses by EU member states should be proportionate to the public interest at stake, such as public safety or social policy.
Although not legally binding, the guidelines are an attempt to set a Europe-wide approach to the fast-growing sector, instead of the patchwork response that has been adopted by European cities so far.
Some cities have responded with curbs and bans on companies like Uber and the home-sharing site Airbnb, which challenge traditional industries, such as taxi services and hotels, and have drawn complaints of unfair competition.
"Absolute bans and quantitative restrictions should only be used as a measure of last resort," the Commission said in a statement.
The guidelines were welcomed by Airbnb, which called them "a valuable tool to ensure a clear, stable and consistent regulatory environment for sharing economy users across Europe".
The Commission said it would use the guidelines to ensure that any national legislation does not violate the EU treaties - a veiled threat to any government seeking to impose overly restrictive measures on the sharing economy.
The Commission is assessing complaints from Uber against France, Germany and Spain.
"Limiting the possibility for new transport operators to use new technologies, such as geo-localisation services, is one clear example of bad practices," said EU Transport Commissioner Violeta Bulc.
"Some restrictions could run contrary to EU law and the Commission might have to take action."
The Commission also wants to foster European sharing-economy start-ups. Commission vice-president Jyrki Katainen said the sector could produce Europe's next unicorn, or start-up company valued at more than $1bn.
"Our role is to encourage a regulatory environment that allows new business models to develop, while protecting consumers and ensuring fair taxation and employment conditions," he said.
US firms Airbnb, which was founded in 2008, and Uber, launched a year later, have faced regulatory battles around the world.
Uber said the guidelines were an encouraging sign.
"The European Commission has made it clear that EU laws protect collaborative-economy services against undue restrictions and member states should review regulations that undermine the development of such services," said Gareth Mead, Uber spokesman.
Uber is effectively barred from rolling out its full suite of services to the Irish market because laws here prevent private cars offering lifts for money.
"We think Ireland is a perfect market for Uber," said country manager Kieran Harte. "It would significantly reduce costs for users, address traffic issues in cities and reduce the country's carbon footprint.
"It is not the case that Uber would take large chunks of business from Irish taxi drivers. Taxis will still be what you hail on the street, taxis will still be found at ranks.
"Uber will connect communities, places where taxis don't always go, taking you that last step home from the suburban train station, for example. The idea is so simple and powerful that we are confident it will progress in Ireland."
It has appealed to the National Transport Authority and Department of Transport for a relaxation of the rules and has sought a temporary repeal in Limerick so that it can attempt a pilot run of its ride-sharing model in the city.
However, there appears to be little will to change the current system.
Briefing documents prepared for new Transport Minister Shane Ross reportedly showed "strong official resistance to facilitating the arrival of most Uber services".
Any legislative moves to accommodate Uber in Ireland would be fiercely opposed by the country's taxi drivers, as well as rival app Hailo, which relies heavily on a regulated taxi market.
Taxi drivers have staged high-profile protests against Uber in many European countries.
Last year, French prosecutors raided Uber's Paris offices in a showdown over whether the company was violating a law to curtail online taxi services.
Regardless of regulatory challenges and protests, Uber is growing fast. It has raised $11bn in funding as it spends heavily to expand globally and battle well-funded rivals, such as Lyft and China's Didi (which Apple is backing).
The ride-hailing company's latest infusion of cash - a record $3.5bn from Saudi Arabia's sovereign wealth fund last week - means chief executive officer Travis Kalanick has the finances to continue avoiding a listing of his company any time soon. "I'm going to make sure that it happens as late as possible," he told CNBC earlier this year.
It's unclear how long the Saudi money will last Uber, however. Over the first three quarters of 2015, it was reported to have lost $1.7bn on $1.2bn in revenue.
In February this year, Kalanick said at a conference in Vancouver the company was spending more than $1bn annually in China alone to avoid losing market share - a figure previously reported to have been written in a letter to investors in 2015.
The money from Saudi Arabia is a new wrinkle in the shifting way the world's largest technology start-ups are being funded.
The $3.5bn raised by Uber last week is far larger than what most companies are able raise when they hold public offerings. Twitter netted $1.82bn during its 2013 IPO and First Data raised $2.56bn in the largest technology IPO of the past 12 months.
In 2004, Google raised $1.67bn during its stock-market debut.
Other start-ups are also remaining private longer. Snapchat (which now has more daily users than Twitter) raised $1.8bn in its most recent round and the corporate messaging start-up Slack Technologies raised $200m.
Meanwhile, Uber's biggest rivals have been stocking up. Apple invested $1bn in Didi last month (Didi is working to close a total $3.5bn soon), General Motors backed Lyft in January and Volkswagen pledged $300m to Israel-based ride-hailing company Gett last month.
There is a seemingly endless roster of investors anxious to buy into Kalanick's vision for upending the transportation sector.
"Uber is in a class by itself," said Anand Sanwal, co-founder of CB Insights, a firm that tracks start-up investment.
"There is insatiable appetite for Uber stock," he said, referring to the company's ability to continually raise large amounts of money.
There are competing schools of thought on the subject of holding an IPO. Proponents of going public argue that the added scrutiny of the public markets gives a company more discipline, while rewarding employees and early investors.
An IPO also brings in money to invest in acquisitions and expansion.
Yet entrepreneurs who want to remain private contend that it gives their company more leeway to grow without the unpredictable demands of managing a roster of new shareholders.
"There's a lot you can do in the private markets, where you're not subject to quarterly earnings releases and all that good stuff," said CB Insights' Sanwal.
The sluggish performance of several technology stocks has made going public even less appetising.
Twitter is down more than 40pc since going public, while file-storage company Box Inc is down more than 17pc since its 2015 debut.
While Uber has demonstrated growth over the past several years, many other start-ups don't have strong enough business models to go public, said Sanwal.
The fewer than 40 corporate listings this year in the US is the slowest since 2010, according to data compiled by Bloomberg.
At some point, Sanwal said, Uber will have to join the ranks of public companies in order to reward investors who have been funding its costly expansion.
"Going public is the only route for them, but they don't seem to be any rush to," he said.
"It doesn't seem like management is under any pressure to."
Sunday Indo Business