How Uber’s Vestager play fell flat


Uber once had grounds to hope European Commissioner for Competition Margrethe Vestager would come to its rescue in Europe. Those hopes have largely vanished.

At one point, Uber and Vestager — Europe’s top competition enforcer — appeared to be a great if audacious match: a new entrant disrupting a taxi sector riddled by cartels, state aid and bullying tactics; and a ballsy commissioner with sweeping powers hunting for a landmark case to define the second half of her term.

But Uber’s brash approach to European markets, coupled with deep political hostility in the Continent’s power centers towards the $70 billion firm, left Vestager disinclined to act on competition complaints filed by Uber in early 2016.

“You should be a business as any other paying your taxes, insuring your customers and making sure working conditions are reasonable,” Vestager told reporters on May 17, when asked if she had any sympathy for Uber’s predicament in Europe.

Vestager’s cold shoulder on the podium is the latest indication that Uber CEO Travis Kalanick’s bold strategy to use European laws and rights to pry open billion-euro markets from Madrid to Berlin is limping toward defeat. Earlier this month, a senior adviser to the EU courts recommended rejecting the company’s claim that it is a tech company, not a transport firm. And officials at the top of the Commission squelched separate complaints invoking single market rules.

Two sources said that during 2015 she went so far as to invite Uber to file a complaint — a clear indication she was entertaining the idea of intervening.

Last year, Uber filed several confidential complaints targeting France, Spain, Belgium and Italy to Vestager’s competition department, according to two people with direct knowledge of them.

The complaints allege infringements of Europe’s antitrust and state aid rules and argue that national authorities subsidize local taxi industries by granting them exclusive rights, which taxis have in turn abused — to the indifference of the local authorities. One source cited the example of Paris, where drivers with a coveted license to pick passengers up in the street dedicate more time to the more lucrative market for pre-booked rides. Many of them are part of the Groupe G7 network, which includes more than half of all taxis in Paris.

That Vestager’s team was interested is confirmed by multiple sources inside and outside the Commission. Two sources said that during 2015 she went so far as to invite Uber to file a complaint — a clear indication she was entertaining the idea of intervening.

But by the time the complaints arrived in spring 2016, Uber was beset by a series of scandals, PR setbacks and legal losses that tarnished its reputation in Europe, painting a picture of a company too ready to break laws first and ask questions later.

Uber has been beset by problems across the Continent | Geoffroy Van Der Hasselt/AFP via Getty Images

Uber has been beset by problems across the Continent | Geoffroy Van Der Hasselt/AFP via Getty Images

They “completely missed the opportunity,” said one person with direct knowledge of the discussions.

Series of setbacks

Among the issues: Uber’s tax affairs in the Netherlands garnered criticism after a report by Fortune alleged the firm, which has its international headquarters in Amsterdam, enjoys a Dutch tax ruling allowing it to funnel profits to a shell company in the Bahamas.

Uber also faces lawsuits in the U.K. accusing it of skirting local labor rules and value-added tax. The company is also under fire in the U.S. following a harassment scandal and revelations that it designed software to help drivers evade transportation regulators.

Closer to Brussels, one of Uber’s key European advisers and public champions, Vestager’s predecessor Neelie Kroes, became embroiled in a conflict of interest scandal regarding her time as competition commissioner. Kroes also launched a stinging attack on a landmark tax case that found Apple had circumvented European taxes to the tune of more than €13 billion, raising ire in Vestager’s ranks.

To cap things off, European Commission President Jean-Claude Juncker’s cabinet made clear it would not expend political capital in championing the firm against national capitals, despite support for Uber elsewhere in the Commission. Both the Commission and Uber declined to comment for this article.

In an interview earlier this month, Uber’s head of European policy and communications Christopher Burghardt said the company enjoyed some successes at the national level, citing the example of new legislation in Finland liberalizing the taxi sector. He also cautioned that the EU’s top court had yet to issue a final verdict in the case over whether it is a transport or tech company, and added that its judges do not always follow the advice of the advocate general.

The election of Emmanuel Macron as France’s president is also seen as a potential game-changer, given that he argued for restraint ahead of a crackdown by the previous French government.

New French President Emmanuel Macron | Christine Poujoulat/AFP via Getty Images

New French President Emmanuel Macron | Christine Poujoulat/AFP via Getty Images

And if competition authorities across Europe have stopped short of actively taking up Uber’s cause, they have been sympathetic to it. In an interview with POLITICO, France’s competition enforcer from 2004-2016, Bruno Lasserre, cited Uber as an example of how the internet is helping to “stimulate certain industries, which consumers may see as lacking in quality or service.” On Wednesday, Spain’s competition authority challenged a Catalan decree imposing what it described as “disproportionate” rules on companies like Uber. This Friday an Italian court lifted a ban threatening Uber’s professional driver services in the country.

Changing lanes

Uber now appears to be in a process of revising its approach to Europe. In the interview, Burghardt spoke of wanting “dialogue” with the taxi industry and national authorities, while the company has said it will give U.K. drivers the chance to subscribe to injury and illness insurance.

Senior employees overseeing Uber’s strategy are moving aside, including San Francisco-based communications chief Rachel Whetstone, general counsel Salle Yoo, and her European counterpart Jim Callaghan.

Their departure is noteworthy. Together they implemented a strategy that was unprecedented in its span and ambition — one that, with the good will of regulators and policymakers, could have revolutionized the way people move around European cities and captured markets worth billions.

The chances that their efforts will bear fruit are looking increasingly slim.

Source Politico