Is this the way to show your respect for the law?

June 30, 2016 at 4:36 pm

Yesterday, Uber Bangalore published a blog claiming that ‘We are a law abiding company’ and ‘Uber has deepest respect for the laws of India’. Wow, that’s a real tall claim! Let’s travel a little back in time and see how they have demonstrated their deepest respect for Indian laws time and again.

  1. Reserve Bank of India has been greatly ahead of their peers in building safeguards against credit card frauds by mandating two factor authentication for all online payments way back in 2010. All Indian internet companies strictly followed this practice once these regulations were introduced. In 2013, a hugely funded company called Uber enters India with a payment system that does not adhere to 2FA and calls it a great technology innovation. This isn’t even some smart method of finding a loophole in the RBI guidelines but a blatant breach of the law of the land. RBI took almost a year to finally call their bluff and forcefully put a full stop to this violation.
  2. Rides done in taxis have been subject to service tax. Knowing this fully well, Uber did not pay service tax for a long time and vehemently denied that it is applicable to them, until the service tax authorities finally cracked a whip. Not paying the taxes in the country that you operate surely sounds like deepest respect for the law of the land.
  3. In 1998, Supreme Court directed that no taxi will run on diesel with effect from April 2001 and all taxis will be running only on CNG. All B&Y taxis and radio taxis followed this regulation since then, even though installing a CNG kit put a big hole in their pocket. Knowing this regulation fully well, Uber arrived in India with billions of dollars of VC funding and incentivized over 30,000 car owners/drivers in Delhi to put diesel cabs. They always claim that laws should not stifle innovation that improves the lives of riders and drives. Any sane person cannot figure out what is innovative in polluting the city to death and how it improves the lives of the citizens. It is an irony that finally a multibillion dollar corporation has been allowed to go scot free and continues to use thousands of diesel cars on Delhi road, while poor auto and local taxi drivers have to live with the additional burden of higher CNG kit cost. Taxi regulators in Mumbai also mandated use of CNG cabs for over 15 years now and every single auto, B&Y taxi, cool cab and radio taxi (cumulatively over 2 lac vehicles) follow this religiously, but Uber continues to put tens of thousands of diesel cabs in Mumbai. The self-created aura of most innovative company definitely helps one to be considered above the law.
  4. The law clearly mandates that All India Tourist Taxi Permit (AITP) cabs can’t be used for point to point service within a city. But does it matter?  Uber actively encourages the drivers to buy an AITP car (to avoid local taxi regulation) and ply within city.
  5. In Mumbai, there is a mandatory requirement for drivers to have taxi badges and the badge gets assigned only to those drivers who have a domicile in Maharashtra state for a minimum of 15 years. This applies to all B&Y and radio taxis in the city. Radio taxis struggled for years and shortage of drivers with taxi badges was the single largest bottleneck to growth for years. Most of Uber taxi drivers in Mumbai do not have a taxi badge. Did the laws of the land ever said that a law is applicable only to a poor taxi driver but not to a multibillion dollar enterprise?
  6. Cities like Bangalore and Delhi have banned surge pricing for months now but are struggling to get this implemented in letter and spirit by Uber.

Their play book globally is the same: First break the law – then use billions of dollars of funding to kill the competition through unrealistic and predatory pricing to consumers and massive incentives to drivers – then if regulators react to any violation of laws, create huge social media campaigns using the consumer base created though subsidized pricing to put pressure on regulators to change the laws.

RBI governor Raghuram Rajan’s assertion gives a guiding light on how one should deal with regulations that are found to be stifling innovation, when he said “I want to be very very clear here. We did move against one of the taxi providers because they were violating our regulations as they stood. We needed to bring them in to compliance to the regulation. And this is something I want to emphasize. Our intent is whatever regulations are on the books — good, bad, ugly — they have to be complied with …if regulation is a bad regulation, we change the regulation. But what is on books has to be enforced. We don’t want to be a paper tiger. We should not be a paper tiger.”

Here is a simple analogy: In ‘70s and ‘80s, India had very high rates of import duties for gold. This created organized mafia gangs who smuggled gold and then got into many other illegal activities. They could have also justified their action on the grounds that the regulation was unfair and hence they broke the law. Doesn’t this sound silly? Then why allow others to first break the law and then muscle their way to amend the law?

Two  weeks back, a Paris court ruled that Uber was guilty of ‘misleading commercial practices’ and ‘complicity in the illegal exercise of the taxi profession’ as it fined the US company €800,000 for running UberPOP service that used drivers without professional license and also held two of their top execs personally liable. This clearly demonstrates that the leading European democracies do not allow the moneybags to make a mockery of the law.