Uber Will Kill Taxi Cartels
The first lesson from the cab protests that clogged the streets of European cities Thursday: When you’ve got a government-enforced stranglehold on an industry that stifles competition and screws consumers, and then a company comes along with a product that challenges your monopoly privileges, parking in Trafalgar Square and banging on your horn isn’t going to win you any supporters. Leave the dramatic street protests to those with higher aims, like toppling autocrats and legalizing speech.
The second lesson: Taxi cartels worldwide are doomed.
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Cabbies from London to Lyon, Madrid to Milan, and Paris to Berlin staged mass protests against Uber, the San Francisco-based high-tech car service that’s upending the taxi business around the world by allowing customers to order and pay for rides with a convenient mobile app. It’s an example of how “software is eating the world,” as Silicon Valley investor Marc Andreesen likes to say. Is it any wonder taxi customers would rather not stand in the street and raise their hands in the hopes that a vacant car drives by when you can just tap a few buttons on your phone? Traditional cabbies of the world are miffed that these Uber drivers stealing their customers don’t need to take the exams, apply for special permits, or buy the pricey medallions that are required of them by local governments in most American and European cities.
London mandates that its cabbies pass a 149-year-old exam called “The Knowledge” that requires them to master the city’s maze-like streets and know the precise location of museums, police stations, and theaters. As part of the test, they have to verbally recite detailed explanations of how best to travel from one location to another through the city’s roughly 25,000 arteries. Passing “The Knowledge” takes years of study, and most drivers fail at their first few tries. The test causes the gray matter in applicants’ brains to expand, according to one London researcher.
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Perhaps the most compelling case for letting Uber thrive is that London’s brainy cabbies should devote their oversize hippocampi to contributing to fields like computer science and medical research. In an age of ubiquitous GPS devices, many of which also incorporate real-time traffic data, circling the city in a car is a profound waste of such exceptional minds. London may as well also require that cabbies master the art of saddling a horse and mending a harness.
In Paris, where cabbies protested yesterday by driving very, very slowly—an ingenious strategy for winning the hearts of the commuting public—drivers don’t even bother with the pretense that their cause is based on anything other than turf protection. Like several U.S. cities—including San Francisco, Milwaukee, and Boston—Paris caps its supply of cabs at well below market demand, ensuring that backseats never go empty. Parisian cab licenses can also be bought and sold for a small fortune. In 2008, when then-President Nicolas Sarkozy tried to add 6,500 cabs, about 80 percent of the city’s 15,900 drivers went on strike.
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“If they destroy the license’s value, they will have to pay us back,” union rep Marc Ghis told Bloomberg at the time.
How about safety? Uber’s five-star rating system lets the company carefully monitor the quality of its drivers in ways that that old-school taxi regulators could never match. In fact, the biggest threat Uber passengers face in the French capital is from traditional cabbies, who’ve been known to toss a brick or two through their competitors’ front windows.
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With such self-serving rhetoric and traffic-clogging tactics that punish commuters far more than competing drivers, is it any wonder yesterday’s cab uprising gloriously backfired, sparking a more than eightfold increase in new signups by Uber drivers in London? That statistic should be treated skeptically, because the company has obvious reasons to dramatize the backlash, and it’s not divulging the size of the driver pool. But all the publicity can only be helping. As the cabbies revved their engines and pounded their horns, Twitter lit up with messages such as this one from Parliament member Andrew Griffiths: “Hadn’t heard of Uber till the cabbie protest. I’ve just downloaded it.”
Public opinion aside, the British High Court could still kill Uber. Transport of London, the agency that regulates the city’s cab industry, has requested a rulling that will determine the company’s fate in the British capital. But just as it’s tough to imagine San Franciscans ever tolerating a return to the bad old days of trying to hail a cab when the bars close at 2 a.m., Londoners won’t sit quietly if the government quashes a service that saves them from waving their arms in the cold and rainy streets.
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Paris recently suspended a rule that briefly required Uber drivers to wait 15 minutes before picking up passengers as a way to level the playing field with traditional cabbies, who were busy trying to boost the wait time to 30 minutes. The wait rule was another unintended gift to Uber’s publicity team—it spread the message that traditional cabbies not only can’t compete, but that they also don’t have any concern for what’s in the best interest of passengers.
Another count in Uber’s favor is that its customers tend to be wealthier and more influential than the average bloke. As this week’s uproar in the U.S. over the Food and Drug Administration’s move to kill the artisanal-cheese market taught us—the agency did a quick about-face—don’t mess with stuff that rich people like.
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If the cabbies of Europe want a real shot at killing Uber, they should take a page from a more savvy interest group, such as the state-sanctioned horse masseuses of Arizona and Maryland: They know that the way to keep equine-rubbing infiltrators out of their industry is to hire lobbyists and lawyers to make their case quietly in the corridors of power. Thankfully, the cabbies of Europe may have already lost the Uber war.
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