Inside Big Taxi's Dirty War With Uber
David Sutton is looking for the worst possible news about Uber Technologies. An accident in San Francisco, an assault in Boston: Such bad tidings for Uber are ammunition for Sutton, a 48-year-old publicist. “Uber is a creep magnet,” Sutton says in a news release sent to U.S. local and national media outlets in February.
Sutton is a hired gun in the dirty war that’s broken out between old-line taxi companies and Uber, the ride-share phenom. His client, a powerful trade association, represents 1,000 taxi and limousine firms worldwide. These firms want to kill the young juggernaut—or at least buy themselves enough time to develop rival car-hailing apps.
Probably no amount of media spin will win this one for Big Taxi. Uber is a textbook example of what happens when an aggressive newcomer enters a business that’s gone unchallenged for decades. But compared with the hubbub about Uber—its tactics, its safety, its pricing, its legality, and, most of all, its $40 billion valuation—Big Taxi has been operating in stealth mode. Publicly, its campaign has been led by the Taxicab, Limousine and Paratransit Association, or TLPA. The group has retained Sutton’s Bethesda (Md.) -based public-relations firm, Melwood Global, to create a media campaign called “Who’s Driving You?” The goal is to bring attention to what taxi companies say are Uber’s unsafe and illegal business practices. Uber’s response: The taxi industry is basically a cartel, and the cartel wants to protect its turf.
Behind the scenes, one of the world’s largest private transportation companies—a firm few people have probably ever heard of—is exerting pressure through operators like Sutton. The company, Transdev, is Uber’s single biggest competitor. It has 10,000 vehicles in more than 100 cities worldwide, including Denver, London, and Paris, as well as shuttle services to 50 airports in North America. Transdev is co-owned by two French companies—Veolia Environnement, a public utility company, and Caisse des Dépôts et Consignations, a state-owned bank. And it’s lobbying hard to contain the disruption to the $11 billion global taxi market.
“We survived two world wars and the Great Depression; we will survive Uber,” says Mark Joseph, the chief executive officer of Transdev North America, who has been president of the TLPA eight times. Joseph says Transdev subsidiaries have prompted investigations into Uber by sending letters to regulators in core markets like Colorado, Maryland, and Pennsylvania. Transdev was also among the companies that took the battle to a commercial court in Paris, which last year resulted in a 100,000-euro ($107,000) fine for Uber’s UberPop ride-sharing service, Europe’s equivalent of UberX. “They have been lobbying to be self-regulated on the grounds that they are a technology company, but then they market themselves as cheaper than taxis,” Joseph says of Uber.
New York, where Uber generates the most revenue, was the first market where Uber complied from day one with the law, hiring drivers with commercial licenses also for its UberX ride-sharing service, whose drivers elsewhere are mostly commuters driving their own cars. New York has the most modern regulation, which allows companies to charge less than limousines as long as you have a commercial license, says Corey Owens, Uber head of global public policy. Las Vegas and Kansas City, Mo., where Transdev has a strong presence, are the toughest, he says. “The way that they protect their business is by trying to use laws to keep out competitors, rather than improving the rider and driver experiences,” says Owens.
Elsewhere in the U.S. and abroad—where most transportation regulations dictate things like minimum pricing and advance booking times—Uber’s strategy has been to launch services regardless of the rules and then leverage its popularity to force regulators to adapt. So far, that approach has succeeded in about 30 markets in North America, including Colorado, Illinois, and California, where new laws on licensing and safety have been created for so-called transportation network companies like Uber, or are in the process of being approved.
Pennsylvania is experimenting with similar rules, pending formal legislation, while a Transdev subsidiary, Yellow Transportation, is fighting such regulation in Maryland. “If the government protects the public, providing a level playing field, competition should increase, and maybe these companies will last 100 years—or they can become the next Webvan,” says Joseph, referring to the online delivery company that went public in 1999 and filed for bankruptcy in 2001, becoming one of the symbols of that tech bubble.
Amid all the bickering, taxi companies confront an obvious dilemma: They say Uber is a taxi company, rather than a technology company, but they wouldn’t mind being technology companies themselves. Many in the taxi industry praise Uber’s app-driven business, and some, including Transdev, want to replicate it. “The app system is the future, absolutely. There’s no going back,” says Mike Fogarty, the TLPA president and head of Tristar Worldwide, a global limousine company with operations stretching from London to Boston and Hong Kong. “Users love Uber’s technology.”
For now, at least, Uber’s business model has been validated by investors, as well as by brand-name companies that have adopted the young company as a business partner. Starwood Hotels and Resorts Worldwide, for instance, is giving extra points to preferred guests who link their accounts to Uber’s, while American Express credit card holders can spend points on Uber rides. Morgan Stanley and Citigroup have adopted Uber for Business as their corporate black car service.
Nonetheless, Transdev’s Joseph criticizes Uber’s app for only serving people with smartphones and credit cards. He also takes issue with its so-called surge pricing algorithm, which drives up fares during busy times. Joseph expects Transdev to partner with a technology company to improve its own mobile reach. Its taxis are already connected by the TaxiMagic app, recently renamed Curb. In California, Transdev has launched ZTrip, a ride-sharing app. “Uber's technology can be easily replicated,” Joseph says. “This is an early chapter in the battle.”