The car-hailing app Uber has been expanding rapidly across the globe since its launch in San Fransisco in 2011. To date Uber has raised 12.5 billion at an implied valuation of $66 billion.
Much like companies like Airbnb, born out of the sharing economy and cheered on by the urban masses, Uber has faced difficulties winning over the hearts and minds of European bureaucrats.
What many US based companies forget when expanding to Europe is the impenetrable and pervasive mindset of keeping things as they are. In essence this means the following: technology is great as long as it doesn’t threaten the public sector. As we know, the public sector and its unions are the guardians of the hotel industry (threatened by Airbnb) and taxi services (government monopoly with taxi drivers as the holy untouchables).
Adding to the chagrin of the consumer, often a tourist whose interests are not the interests of local politicians, is the low likelihood that local politicians would intervene to help Airbnb disrupt the livelihoods of local hoteliers who also happen to be tax-paying constituents. Indeed, there’s very little appetite for European politicians to seriously take on taxi unions and hotels on behalf of American giants like Uber and Airbnb.
Uber’s likely failure in Europe
Uber targets big cities. Cities like Berlin. Earlier this month Airbnb was banned from Berlin.
Under the ban, in effect since 1 May, people who let more than 50% of their apartment on a short-term basis without a permit from the city risk a fine of €100,000 (£78,000).
The decision coincided with Uber’s announcement to leave “Hamburg, Frankfurt and Düsseldorf last year after a German court banned the company from running services using unlicensed cab drivers” according to The Guardian.
The keyword here is licenses. In Europe you need a license for everything.
For Uber and Airbnb to make it in Europe, they need to go through local governments and courts. Although Brussels has been voicing quiet support for both companies, it’s unlikely Brussels can superimpose its will on European towns and cities. After all, local politicians are elected by locals whereas Brussels’ faceless bureaucrats do not have to worry about accountability.
A few recent examples of Uber’s misfortunes in Europe:
New vs. Old Europe
You might recall Donald Rumsfeld’s New Europe/Old Europe distinction between those European countries that supported America’s plans in Iraq and those that didn’t. When it comes to Uber, the differences between new and old are clear.
Uber’s headwinds in Europe come down to a pretty common distinction: Civil law countries versus Common law countries. France, Finland, Norway, Sweden, Spain, and others all use civil law systems and are much stricter, both in law, and in terms of culture that has developed around the legal systems. These countries are less accommodating with new technologies and innovations like Uber.
Uber simply does not fit into the existing framework and thus judges, whose roles are more investigatory than in common law countries often tend to side with the plaintiffs. Common law countries – US, Canada and the UK – are more flexible, and where there isn’t a law that exactly addresses something, they build off the precedent of similar and related cases, allowing more flexibility around an issue.
Expect to see Uber do well in North America and the UK, but its troubles in Old Europe have only just begun.