Uber and Surge Pricing

 

Britain is over-tolerant of monopolies

Jonathan Ford in The Financial Times


The old joke that asks why there is only one Monopolies Commission may no longer work now the watchdog has rechristened itself the Competition and Markets Authority. 

But perhaps it’s no coincidence that the UK’s trustbusters have dropped the word “monopoly” from their name. 

Contemporary Britain can seem oddly complacent in the face of declining competition. True, it is not the only country to face the uncomfortable concentrations of market power that new technology and global capital make possible. 

Many advanced economies struggle with the “winner takes all” nature of the internet. 

Large parts of the UK’s competition mechanism are in any case delegated to Brussels. But even so, the country often contrives to drop the trustbusting ball. 

Take the ongoing dispute between Transport for London and Uber over whether the car-booking service should retain its taxi licence. 

TfL is up in arms about safety standards. But the real scandal here is the way Uber has been allowed to hoover up the London taxi market.  

Almost unseen, the US company has been able to turn a price-regulated black cab monopoly into an unregulated one where it increasingly dominates the capital’s streets. 

Facts on market shares are hard to obtain, in part because of Uber’s un-transparent structure. 

Fares for its services are paid not to a UK company, but to a Netherlands vehicle, which remits only sufficient money to the UK subsidiary to cover its costs and pay vestigial amounts of tax. 

Nonetheless, it is clear that Uber has built a very substantial position in the five years since it received a licence, the only app-based service yet to do so. 

The service has 40,000 drivers on its network, four times the number of black cab drivers. The second largest non-black cab private hire operator in London, Addison Lee, has just 4,800 drivers on its books. 

Compare that, for instance, to supposedly highly regulated Paris. There, customers have a choice of numerous app-based services, including Uber, Taxify, Allocab and Le Cab, as well as traditional regulated taxis. 

Travis Kalanick, Uber’s founder, may talk about London as the “Champion’s League of transportation”. But it is also one of the company’s top three cities worldwide in terms of profitability. Unsurprisingly, perhaps, given that in this “competition”, the authorities have excluded its main rivals. 

Other app-based services such as Taxify have been unable so far to obtain licences. Perhaps Uber has been treated as a guinea pig by the regulators. But if so, that careless decision may have allowed it to steal an uncatchable head start. 

Taxis are not the only area where competition has been allowed to take a back seat. Take the concentration of market power that occurred in the banking sector after the financial crisis, largely prompted by the merger of Lloyds TSB and HBOS. 

The CMA has placed its faith in limp behavioural remedies and backed away from any muscular changes such as break-ups. 

Or the telecoms sector, where the regulator allowed BT, the old national network, to buy EE and create a preponderant mobile operator without proposing any material steps to redress its evident market power. 

A recent study by the Social Market Foundation shows how the cumulative effect of market concentration increasingly threatens consumers’ interests. 

Out of 10 key markets accounting for 40 per cent of consumer spending, it found that eight — including groceries, mobile phones, gas and current accounts — were concentrated, meaning they were dominated by a small number of large companies. 

Only the car industry and the mortgage market were genuinely open, with no single operator in the former sector controlling more than 15 per cent of the market. Meanwhile, in telephone landlines, BT has about 80 per cent. 

Concentration and competition are not the same thing. In some sectors, such as groceries, it can be possible to have both because of the ease of switching. 

But in many sectors the concentrated market power erodes competition to the detriment of consumers. 

The lack of competition in banking, for instance, costs customers £6bn a year, or £116 each, according to a competition inquiry in 2016. In the energy sector, another inquiry found that Britons are paying £1.7bn too much each year for their power. Despite official investigations galore, neither has been addressed. 

Like the famous line about empire, Britain appears to be acquiring oligopolies in a fit of absence of mind. It is a dangerous inattention. 

For these concentrations do not just hit consumers in the wallet. They exact a cost in terms of public loss of confidence in private business and free markets. A state that believed in either would bust more trusts.

Uber ruling is a massive boost for a fairer jobs market

Aditya Chakrabortty in The Guardian

Yaseen Aslam. James Farrar. Remember those two names, because they are giant-killers. This summer the men took on not just one £50bn multinational, but an entire business model. On Friday, they won.

As minicab drivers for Uber, Aslam and Farrar were deemed to be self-employed. The status meant they were denied the most basic rights that other workers take: no minimum wage, no sick pay, no paid holiday. But as an employment tribunal judge heard over several days in July, that classification was both wrong and unfair. And he agreed.

The obvious thing to say about Anthony Snelson’s ruling is that it is huge. It poses an existential threat to Uber in Britain. It will also send shockwaves through a string of companies using the same business model to do everything from delivering takeaways to providing cleaners to couriering court documents.

Most of all, it is a massive boost for all of us who want a fairer jobs market – and a big slap in the face for the government. For most of the past six years, ministers have turned a blind eye to the growth in bogus self-employment, zero-hours contracts and Sports Direct-style agency work. They have preferred instead to celebrate the record employment numbers as proof that austerity is doing the trick. Just before the last election, Nick Clegg claimed: “If you want a glimpse of the sort of worker that will thrive in the new economy, you need look no further than the growing numbers of self-employed people.”

On this subject too, the hapless Lib Dem was wrong. The idea that the swelling army of self-employed Britons are all budding SurAlans and Bransons, swigging lattes and toting MacBooks, is for the birds. Serious labour-market analysts agree that a large number of those now in self-employment are there as a last resort. And many believe a big chunk should not even be classed as self-employed. As with much else in our insecure labour market, firm numbers are hard to come by. But the Citizens Advice Bureaux believe that the reserve army of bogus self-employed may number around half a million.

For some Britons, self-employment doubtless means freedom. But for others, it means the freedom to be exploited, deprived of rights – and to be underpaid. According to recent research from the Resolution Foundation, the typical self employed Brit is now earning less than when John Major was prime minister.

For the likes of Uber, self-employment is hugely profitable. The giant company has 40,000 drivers working for it in Britain – and as long as they are self-employed they are almost cost-free. On that basis, Uber can keep on adding to its fleet of drivers for next to nothing, and thus rack up ever more passengers and squeeze out competitors.

But as the judge found on Friday, Uber drivers are not self-employed at all. They have little of the liberty you might expect, but are instead interviewed, recruited and controlled by the firm. Uber sets their default driving routes. Uber fixes the fares. Uber instructs them on how to do their job and runs a disciplinary procedure. The drivers work for Uber – not the other way round.
As the ruling observes, the company and its highly-paid boosters do their best to cloak this relationship in the language of chummy marketing and hi-tech piety. They use the term “gig economy”, when what they mean is casualised labour. They claim to be “disrupters”, when what they’re really disrupting are our labour laws. And Uber still markets itself like a plucky underdog when it is now worth $62.5bn – more than Tesco and Barclays put together – and numbers among its public affairs and public relations people the former advisers to Ed Balls and Michael Howard. Pretending to be the future, it is really the past: a cab company that relies on its drivers being cheap and available. Except your local cab firm doesn’t have the lobbying muscle or the Westminster contacts.

Uber confirmed that it will appeal against the decision, and you can expect this case to keep the courts busy for a few months. Other businesses that have copied the Uber model will be watching anxiously. And so will their workers.

A few months back, I interviewed a courier called Mags Dewhurst, whose job is biking urgent medical supplies to hospitals around London. Like most other cycle couriers and drivers, she’s also classified as self-employed; she’s also fighting to change her status. Next month she will be battling her company, CitySprint, in court.

Dewhurst has a strong case. She wears a uniform with a logo, clocks in with a controller each morning. And then: “For 50 hours each week, I’m told what to do.” She’s been impatient for the Uber verdict, knowing that it will be of huge symbolic importance for her own case. On Friday afternoon, I texted her: How pleased are you?

Her reply: “On a scale of 1-10? A GAZZILLLLION.”