Uber's latest setback: Loss of license to operate in London

Uber once wore its reputation for being a rule-breaker as a badge of pride. In London, that reputation became a liability when the British capital’s transport authority said Friday it will not renew the ride-hailing company’s license to operate, arguing that the San Francisco firm demonstrates a lack of corporate responsibility that undermines public safety and security.

Transport for London said Uber was not “fit and proper to hold a private hire operator license.” Uber’s current license will expire Sept. 30.

The regulator cited Uber’s approach to handling serious criminal offenses, although it did not specify what those offenses were, and its explanation of software called “Greyball" that was used to block regulatory bodies from gaining full access to the app, preventing “officials from undertaking regulator or law enforcement duties.” Uber said the Greyball feature was never used in London.

London Mayor Sadiq Khan supported the decision, saying any operator of taxi services in the city “needs to play by the rules,” and that “providing an innovative service must not be at the expense of customer safety and security.”

Uber will have 21 days to appeal the decision, and can continue to operate until “any appeals processes have been exhausted.”

Uber said it would challenge the decision in court.

“If Transport for London and the mayor’s decision stands, it will put more than 40,000 licensed drivers out of work and deprive Londoners of a convenient and affordable form of transport,” said Tom Elvidge, general manager of Uber in London. “An independent review has found that ‘Greyball’ has never been used or considered in the U.K for the purposes cited by [Transport for London].”

The decision comes only weeks after Uber appointed a new chief executive, Dara Khosrowshahi, to help overhaul the company’s culture and usher in a new era of corporate responsibility and maturity.

While Transport for London was vague in explaining its decision, business strategy experts pointed to Uber’s track record of being uncooperative.

Last month, the city’s Metropolitan Police accused Uber of failing to report a sexual assault committed by a driver, which led to the driver striking again. “Had Uber notified police after the first offence, it would be right to assume that the second would have been prevented,” inspector Neil Billany wrote in his letter to Helen Chapman, head of taxis and private hire at Transport for London.

In addition to allegations that the company failed to report sexual assaults, the Sun newspaper reported that some Uber drivers had allegedly obtained falsified medical documents that gave them the all-clear to drive for the service, and that the background checks of around a tenth of Uber’s driver workforce are invalid.

“There’s a belief that Uber hasn’t matured,” said John Colley, a professor at Warwick Business School in Britain. “To some extent they were welcomed in cities like London because they did bring down fares, and they did create another viable option. But as the business got bigger, more was expected of them in terms of behavior. They continue to behave in much the same way."

Uber has been banned in countries such as Spain, Denmark and Italy for unfair business practices and for failing to comply with local permitting regulations. In the United States, Uber has faced temporary bans in cities such as Austin for refusing to fingerprint its drivers as part of its background check process.

What’s unusual about London’s decision to not renew Uber’s license is that regulators haven’t cited a specific violation. Instead, the decision takes aim at the company’s “approach” to transparency and safety, which business and branding experts said is more an indictment on the company’s culture.

“It’s not any one thing, it’s the totality of their actions,” said Daniel Hill, the founder of D.C. public affairs firm Hill Impact.

“Their market approach was to spread as fast as possible and to try to penetrate the market quickly, then let the regulators catch up to them,” Hill said. “It’s all catching up now."

While business experts said Uber’s recent spate of scandals in the United States — including allegations of a toxic culture, the firing of employees and executives implicated in sexual assault and discrimination allegations, and the lawsuits alleging the mishandling of passenger medical data — are unlikely to have played a significant role in Transport for London’s decision, there’s little doubt that it colored regulators’ view of the company.

“We’re entering an era where corporate culture and reputation will be a factor in what regulators do,” said Andrew Gilman, president of crisis communications firm Commcore Consulting Group.

Experts in Britain said this is unlikely a political move driven by the incumbent black cab industry because regulators have left alone Uber competitors such as Addison Lee and Gett. It’s more likely, according to Colley, that regulators were sick of Uber’s lack of cooperation.

Uber’s best bet now, in addition to appealing the decision, is to mobilize drivers and customers to petition regulators, and to ask for an extension on its license so it can prove that it can be cooperative, analysts said.

Uber has already taken the first step: On Friday morning it launched a Change.org petition, urging the mayor of London to reverse the decision. By the afternoon, more than 350,000 people had signed it.

Customers took to Twitter to lament the forthcoming loss of a relatively affordable and convenient transportation option.

James Farrar, an Uber driver, told the BBC that the decision was “devastating,” and that thousands of drivers are now facing unemployment.

The second step — proving that Uber can be trusted and that it has changed — will largely fall on the company's new CEO, Colley said.

"Uber might conceivably have its new CEO come over and meet Sadiq Khan and ask for one last chance," Colley said. "Although there's a feeling that Transport for London has already given them a fair chance, and they failed to take it."

tracey.lien@latimes.com

Twitter: @traceylien

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UPDATES:

3:35 p.m.: This article was updated to include comments from Andrew Gilman, president of crisis communications firm Commcore Consulting Group; Daniel Hill, the founder of Washington, D.C., public affairs firm Hill Impact; and John Colley, a professor at Warwick Business School in Britain.

This article was originally published at 3:25 a.m.

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