Uber Australia agrees to AUD 272M settlement payout to Australian taxi and hire car drivers. This made the media on 18th March 2024 and came across quite unexpected.
Uber has been battling various lawsuits and challenges across a number of jurisdictions across the World and for many years. Can’t recall any that they settled prior to the trial date.
It came on the first day of the scheduled trial at the Supreme Court of Victoria. It marked the end of a 5 year class action suit launched by 8,000 drivers in Melbourne.
The settlement still has to be approved by the courts. At issue were loss of income and licence value due to Uber aggressive moves into the sector.
The lawsuit victory in the state of Victoria covers four of the six states. Victoria, Western Australia, Queensland and New South Wales.
Previous court attempts launched within Australia had failed.
It should be noted that in December 2023, Uber won a lawsuit launched by over 2000 taxi drivers in France.
Lack of regulation
Underpinning the aggressive move into Australia in 2012, one of the key arguments was the lack of ride-sharing and or ride-hailing regulations .
This was nearly 10 years ago. It allowed the disruption of then existing taxi and car hire eco-system. Where in some cases, individual licences for taxi was passed down generation to generation with increasing value until the disruption.
This lack of regulations existed worldwide and not just in Australia.
Since it’s launch in San Francisco in 2009, Uber now operates in 70 countries covering 10,000 cities.
Regulations have since been enacted in most cities and countries while further regulations are expected. Ride-sharing / ride-hailing is now intrinsic part of the daily fabric of society.
There would be a riot if ride-hailing was restricted or banned even if taxi licences were increased. The ride-hailing model is far more superior and provided confidence that the taxi or car hire industry could not provide. Jump into a metered taxis on any arrival at an airport in Australia and the cost of the ride remains significantly higher than a Uber ride. Hailing a ride on a ride hailing app is done in seconds, confirmed and the tracker is on. The convenience and confirmation is unbeatable by any measure,
The statement of claim
One interesting part of the statement of claim was Uber’s role in instigating and supporting the deliberate breaching of commercial driving laws. And the offer to cover fines incurred by individual drivers recruited by them. The evidence came from Uber’s internal documents.
In essence, an organisation prepared to break the laws to advance its commercial interest. It was quite a damning claim.
There were other claims with interesting definitions such as “greyballing” and “blackout geofences”.
Greyballing refers to the practice of impeding regulators in detecting unlawful ride-sharing activities.
It involved efforts to identify regulators or enforcement officials using their apps and tampering with their apps. The giveaway were the regulators preference for using Uber X the ability to isolate them more easily. Their Uber app did not show available cars unlike other users. They had been ghosted. This then frustrates the ability to detect offending by Uber X partners who are their drivers.
Blackout geofences were zones near buildings used by regulators and enforcement officials are located where coverage were intentionally limited or restricted. Effectively stopping Uber X drivers entering the zone for these vehicles to be hired.
Clearly we are talking about the black arts and sharp practices. This is the first time I am reading about it. It also explains why settlement was offered.
Uber’s response
Uber following the announcement of the settlement has stated that it is a legacy issue.
They have also stated they have contributed significantly to the industry, made compensations to various scheme and brought value to consumers.
The approach taken by Uber
It quite revealing what Uber and its senior executives did to establish themselves in Australia.
Their app, central to the business also became their tool in keeping regulators at bay, while they expanded their business. We are now into ethical misconduct.
And the app could not have been manipulated to this extent unless their in-house developers were the given the green light from above. Involving not just small set of individuals but staff across their tech space.
One possible argument for this approach is the genuine belief that their model does serve society at large. And certain methods had be deployed.
The Taxi Industry Inquiry
In 2010, the State Government of Victoria called to look into the Taxi and car hire industry. In May 2011, the Taxi Industry Inquiry commenced. The final report was released in September 2012. The year that Uber entered the Australian market.
The well respected Professor Allan Fels chaired the Inquiry. Professor Fels is well known as the past Chairman of the Australian Competition and Consumer Commission from inception in 1995 to 2003.
The report is very clear and lends credence to the State Government’s call for an inquiry. The taxi and car hire industry were no longer serving the general public in the manner that was expected.
Poor performance of the taxi industry pre Uber
The term “poor performance” appears early in the Report’s Executive Summary.
Here is the extract from the Executive Summary of the report and its telling. Not just on the industry but the regulations around it.
“the inquiry has found that the causes of the taxi industry’s poor performance are longstanding and deeply entrenched. Most of the industry’s problems stem from the complex and prescriptive regulatory framework within which it operates – a framework that constrains competition, stifles innovation and directs much of the revenue generated by the industry away from those providing ‘on the ground’ services”.
Manna from Heaven
I found it interesting that the Australian media did not link the year the Report was released was also the same year that Uber entered Australia. It turned out to be timely.
Uber literally re-shaped a much needed service not just in Australia but around the World. The reliability of ride-hailing sector far outweighs what the taxi industry could offer. Commuters are far better served not just on availability but on whole host of positive features. From driver’s identity, tracking to selecting options.
Uber Eats is also doing well in Australia and to me Uber will remain and its the younger generations that have taken to it not because of its bells and whistles but on its key functions and recognising its value.
Lessons learnt
It is also a lesson for regulators as well as legislators and policy makers not to assume the existing framework works. More importantly not to go into protective mode of the existing framework.
I do recall when Uber entered the UK and the European markets. The regulators were searching the laws for clauses and regulations to stop what they did not realise was innovation.
I was working in the UK during these heady times. It was obvious the taxi and black cabs conduct was clearly wanting. The fact that the mini cab industry an alternative which supplemented the taxi service served a valuable purpose that did not sink in. It too was an innovation then and also used private cars and part-time individuals mainly.
Not just in the UK, you continue to see taxi service abuses such as refusing to turn on the meter, doing circular routes, overcharging, rude conduct etc across many countries. So there are opportunities and commuters need to be served better. Taxi mafias continue to dominate Thailand and Indonesia so the opportunities to take markets share from them is there. And is the aged regulations that allowed these abuses. Time for change.