London’s Uber ban is a message to a reckless tech ethos | Arun Sundararajan

It was an extraordinary decision for Transport for London (TfL) to announce on Friday that it would not be renewing Uber’s private hire operator licence, effectively banning the service after 30 September. But the ruling was an indictment of Uber the company rather than the broader ride-hailing concept or labour model, and judges the embattled platform on a tumultuous past rather than its promise of new beginnings.

It is a decision that hurts Londoners more than it protects them. However, convincing London that Uber is deserving of the public trust – in its appeal against the ruling – will be a critical test of whether its new leadership can navigate the company beyond the stormy waters weathered over the past few months. No stranger to regulatory strife, Uber’s approach to dealing with government has matured considerably since its early days of rampant permissionless innovation, but the backlash continues, especially in Europe. Uber was banned entirely in Denmark in April and some or all of its services have been suspended in Bulgaria, Hungary, France, Germany, Italy and Spain.

The London ban has greater potential for long-term damage. Regulators in other countries have generally opposed Uber because the transportation service it enables violates local (typically taxi licensing) laws. TfL’s objections are to the company itself. So, other companies may receive licences to offer Uber-like services in London, but Uber has been found “not fit and proper” to hold such a licence, a stunning indictment of the ride-hailing pioneer.

And there’s the rub. The discussion is not about a misfit between innovative business models and antiquated regulations. It has little connection to other familiar points of gig economy contention, such as whether Uber’s drivers are independent contractors or employees. Rather, like many cities around the world, London has already expanded its regulatory structure to accommodate ride-hailing services, adopting a now-familiar approach that delegates some responsibilities – setting fares, conducting criminal background checks, collecting data about drivers and rides and managing certain safety affairs – to the platform. TfL contends that Uber is not paying adequate attention to these responsibilities. As well as other shortcomings, the regulator calls out Uber’s controversial Greyball technology, a system designed to identify and thwart regulatory “sting operations”, although Uber denies that this has been used in London.

The decision comes at a moment of particular weakness for Uber. The company is recovering from a wrenching management transition following numerous internal governance challenges and scandals, the departure of its founder, Travis Kalanick, and other senior executives, a trade secrets lawsuit from Google’s Waymo and a boardroom battle between Kalanick and influential investor Benchmark.

Although London’s mayor, Sadiq Khan, has signalled unequivocal support for TfL’s ruling, Uber has many allies as it assembles an appeal, ranging from the trade minister, Greg Hands, to union boss James Farrar, a leader of the efforts by its drivers to be classified as employees. As of Friday night, 400,000 people had signed a change.org petition supporting a reversal of the impending ban.

It remains to be seen whether the consumer support that Uber has historically relied on in its regulatory battles will persist in light of the recent damage to its image and brand. Nevertheless, there is little doubt that Uber provides tremendous benefit to its estimated 3.5m users in London. More than 40,000 drivers in the city depend on it for all or part of their income.

Although Uber has cultivated the image of a pugilist in its past dealings with government, and this approach has no doubt ruffled many a regulatory feather, the conciliatory tone adopted by its new CEO, Dara Khosrowshahi, who appealed to TfL via Twitter to “please work with us to make things right”, reflects a significant departure. Rather than shutting the service down completely, TfL must give the new executive team a chance to demonstrate that they can perform the regulatory tasks delegated to them with greater responsibility and care. A one-year probationary period could be a good starting point.

Uber’s London experience holds an important lesson for Silicon Valley startups that take pride in asking for forgiveness rather than permission. As digital technologies continue to permeate our physical world lives, platforms such as Uber, Airbnb and Facebook will increasingly be called upon to take on regulatory roles that government used to perform. The future of regulation is delegation. Nurturing a corporate reputation worthy of this public trust will be far more valuable to tomorrow’s tech pioneers than the short-term glory and financial gains that come from casting oneself as a rule-breaking disrupter.

Arun Sundararajan is a professor of business at New York University and author of The Sharing Economy