MarketLine Blog

El Taxico: Madrid and Barcelona clash with Uber

Two of Spain’s largest cities have launched punitive measures in order to combat the rising popularity of the ridesharing app.

Uber launched its services in Barcelona in April 2014 and Madrid in September 2014, and has been met with fierce resistance from local taxi drivers. Barcelona effectively banned the app in June 2014, and Madrid has implemented an equally hostile policy response only a month after introduction. Fines will range from EUR 4,000 to EUR 6,000 and could rise to EUR 18,000 plus seizure of the vehicle if there are repeat offences according to Spanish daily 20 Minutos.

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Source: GERARD JULIEN/AFP/Getty Images

Uber has provoked controversy since its introduction, with regulatory scrutiny in many of the countries it has expanded into, and its domestic turf of California. Local taxi drivers have staged protests in France, Germany, the UK and Spain. Their grievance is Uber’s rates are severely undercutting them. As self-employed chauffeurs, the Uber drivers are not subject to the same regulations (including taxes, license, and insurance) that the taxi drivers are.

So far policy response has been mixed. While Spain’s largest cities have banned its use, the Economy Minister Luis de Guindos has come out in favor of the app. In Germany, a Frankfurt court overturned the ban sought by the German Taxi Association against the company. The Association is seeking to appeal the judgment, but otherwise would have to go to a court case, which would take longer and permit Uber to continue operating. At a supranational level, the EU remains ambivalent to Spanish calls for a continent wide regulation, still taking the view that it countries need to do more to promote innovation which Uber is providing.

The company’s legal position is still a matter of debate, expanding from providing large luxury vehicles to more regular vehicles. As of October 2014, the company operates in over 200 cities worldwide and is one of the most valued tech prospects, drawing investment from Google and Goldman Sachs amongst others. In a blog post on June 2014, Uber declared it had raised $1.2bn of primary capital with a pre-money valuation of $17bn, a meteoric rise for a company founded in 2009.

While successful, it is has attracted criticism and controversy given its opaque legal status and occasionally aggressive tactics; Uber drivers were found to be making false orders with a New York based competitor Gett, before cancelling them last minute in an effort to waste rival drivers’ times, strain supply and also allegedly offered them cash incentives to defect.

It is unlikely that these regulatory crackdowns or allegations are likely to diminish in the near future; Uber continues to relentlessly expand, with even the negative publicity of Taxi strikes misfiring. When London drivers went on strike in June 2014, Uber experienced an 850 per cent increase in new user registration on that day alone. If consumers remain price sensitive, Uber will no doubt continue to flourish in areas where it is left unchallenged by regulators.

Check out our Uber Technologies, Inc. Company Profile for further reading.

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