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The Brown Political Review is a non-partisan political publication that seeks to promote ideological diversity. All of the views reflected in BPR’s content are views held by authors and not reflective of the views held by the wider organization or the Executive Board.

Why Uber Failed in Europe

Uber, the San Francisco based transportation network company founded in 2009, has been incredibly successful in the United States, racking up a revenue of almost $20 billion. The well-known startup provides a platform for drivers and those who need  transportation to connect through a sharing economy. In spite of its popularity in the U.S, however, the company has not proved nearly as successful in Europe. In several European nations, in fact, the service has had legal charges filed against it or, in some cases, been made illegal.

The individual governments of the several European states are torn on how to approach the service, and different countries have chosen to deal with the company in different ways. In Germany, where there are extensive car-sharing and innovative mobility services, Uber was deemed a disruptive addition to the overall transport system. In Italy, the company was seen as problematic, denounced a threat  to the economy and job security of public taxi drivers. In Bulgaria, Denmark, and Hungary, the startup was ruled illegal. In the Netherlands, Finland, Italy, Spain, and France the company is not officially banned although it has nevertheless faced suspensions and still arouses heated controversy.

Why did the startup fail in Europe?

There are two main reasons why Uber has not been able to function in European countries as it does in the United States: labour protection institutions and consumer rights laws. In the United States, these two social security measures are much less regulated, allowing for innovative startups to enter the market without restrictions. This is not the case in Europe.

Labour protection institutions are much more abundant in Europe than in the United States. For example, trade unions are active and have high levels of collective bargaining power. Due to this, workers have leverage over policies which restrict competition to their businesses. With these provisions in mind, taxi drivers unhappy about competition from Uber drivers have lobbied to ban the startup. This was precisely the case in Italy, throughout 2017. Taxi drivers went on strike twice during the past year, protesting for their rights as workers. Given the impending economic crisis in Southern Europe, which has brought unemployment rates to very high levels, taxi drivers saw an increase in competition as a large threat. Nevertheless, the government settled the matter with a policy compromise rather than banning the startup.

In several countries, the company has been ruled as not conforming to laws relating with transport, because Uber drivers do not always hold the appropriate licenses needed to work as motorists for others. In France, for example, the company was fined €800,000 for running “Uberpop” with unlicensed drivers. The European court of justice’s advocate general Maciej Szpunar said “the Uber electronic platform, whilst innovative, falls within the field of transport. Uber can thus be required to obtain the necessary licenses and authorizations under national law.”

Labour protection laws have many advantages and prevent firms from gaining too high a proportion of profits while leaving consumers behind. These laws are a way for the state to control the level of inequality. However, they should not impede progress, change, and innovation from happening. Uber is an example of a tech start-up which thrives in an environment with limited regulations and bureaucracy, as it is simple and widely accessible in nature.

Recently, certain countries have come to a compromise which allows for Uber to function, under certain regulatory frameworks. If you go to any city in Italy, and use uber, you will notice that it is more expensive than in the United States. The governments of European countries should allow for a popular and convenient innovation such as Uber to develop, without reducing the safety and protection laws in place. This compromise can be made by making unilateral arrangements with the firm by each country, to satisfy its needs and concerns.

Therefore, the startup’s business model is largely incompatible with the rigid European markets and economic laws and  regulations, as it requires economic, social and consumer flexibility. This model is much more applicable in the free American market. Both market policies provide important advantages which should not be overlooked; therefore, a balance between market regulation and protection laws would be the best solution to this problem.

 

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About the Author

Anna Corradi '20 is the Associate Section Manager for the Culture Section of the Brown Political Review. Anna can be reached at anna_corradi@brown.edu

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