Friday, 19 September 2014

Uber Toronto Battles Regulators Over Its Ride-Sharing Service

Uber, a San Francisco-based company estimated to be worth $17 billion (U.S.) is aiming to shake up the taxi business in Toronto.

Uber is reported to operate in more than 140 cities in 40 countries around the world, offering taxis, limos and car-sharing services, allowing customers to bypass traditional taxi companies and brokerages to request a ride using their smartphones.

When Uber first set up in Toronto in 2012, city of Toronto officials informed the company that it needed to get a brokerage licence. Uber disputed the request and has been insisting that it is not a taxi service, but rather a technology company, and therefore not subject to licensing requirements. The city has since hit Uber with 35 bylaw infractions and the parties are headed to court. Although, there are some indications that parties are holding discussions.

Hailo, a British company, launched a similar service in 2012 but took a much different approach to Uber. It chose to obtain a brokerage licence. The Hailo app connects customers with taxi drivers, without the need to go through a central dispatch system. This allowed Hailo to be onside with regulators but not with traditional taxi companies who typically charge drivers an average fee of about $600 a month for dispatch services. Hailo is reported to have 2,000 drivers signed up which works out to about 20% of all licensed taxi drivers in the city. Some companies have disciplined drivers for using the Hailo or Uber app.

 In London, England, the transport regulator has ruled that Uber be allowed to operate legally until the courts consider a challenge filed by a local taxi drivers’ association. Other jurisdictions are trying to block Uber from operationg. Virginia issued a cease-and-desist order this year and in Pittsburgh, a judge order a halt to operations until the state’s public utility commission has completed a review.

Uber currently operates limo services under UberBLACK and Uber SUV and a taxi service is called UberTAXI. These are traditional services in a sense but use a smartphone app rather than a dispatcher. The drivers carry appropriate auto insurance for a taxi or livery service. The problem arises under UberX which allows ordinary drivers who have been pre-screened to pick up passengers in their own vehicles. Uber claims that drivers undergo criminal background checks and although the vehicles are not mechanically inspected, the do undergo a visual inspection.

The problem with UberX is that their drivers’ personal auto insurance policies are likely invalid while carrying a paying passenger. Uber says it has a $5 million insurance policy that will cover any liabilities that arises while transporting passengers.

In California, state regulators threatened to shut down Uber and other rider-sharing companies over the insurance issue. A deal was finally worked out regarding insurance coverage after a bill was introduced in the state legislature dealing with the issue. The problem gained prominence after an Uber driver struck and killed a 6-year-old girl in San Francisco while on his way to pick up a passenger on New Year's Eve. Because no passenger was in the car yet, Uber denied responsibility.

In each jurisdiction they operate in, Uber has confronted and won over regulators through a combination of negotiations, hardball tactics and making use of consumer demand for their service. It is only a matter of time before Toronto falls under the Uber spell.


  1. Disclaimer: I work for Uber rival Hailo. Great post. But let's not give Uber more credit than they are due. The "spell" you reference in your last sentence is a technology that improves personal transport. It's called GPS and it creates great convenience and efficiencies for passengers and drivers alike. Uber, Hailo, Taxi Magic, Gett, Lyft and MyTaxi...many companies are offering services based on this. Uber's main contribution to this area is NOT innovation, however, they are unique in two principal areas: shafting their drivers (by asking them to commit insurance fraud by taking paid rides on personal insurance ahead of legal changes, paying them $1 per mile when they have a passenger, minus gas, and not passing on to drivers the "tip" they tell passengers they have covered), and by fleecing passengers with advertising that promises fares of "up to" 40% off compared to taxis but then implementing 'surge pricing' with fares of up to 800% - eight hundred per cent - MORE than taxis when it rains or when the bars let out. In two years we'll be asking ourselves how on earth these short-termist, land-grabbing Silicon Valley juveniles managed to get away with it all. And we will then experience some well-deserved collective shame.

    1. Thanks for the comments. I agree with everything you've said. I wasn't trying to idolize Uber. My final comment was merely reflecting on how Uber's hard-nosed tactics will likely win out in Toronto as they have elsewhere.

  2. The UberX app does not abide by local regulations that require taxi drivers to hold commercial insurance and licences.

    Rim Sanson,
    Premkumar V


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