© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
September 2, 2014 9:32 am
Uber is facing its biggest legal challenge so far after its most popular service was banned throughout Germany, marking the first time the disruptive taxi app has been hit with a countrywide restriction.
The temporary injunction imposed by Frankfurt’s Regional Court prohibits the fast-growing company, valued in a recent funding round at $17bn, from operating its Uber Pop “ride-sharing” service.
Uber said it would continue to operate in defiance of the injunction, but it faces fines of up to €250,000 ($328,000) per trip if it is caught violating the ban, which does not affect its higher-priced "Black" limousine service.
The San Francisco-based start-up is one of a number of Silicon Valley firms, including Google and Facebook, to face a regulatory backlash in Europe, where authorities have led the way in questioning the practices of California’s leading technology companies.
Ride-sharing companies allow anybody who passes a background check to act as an ad-hoc taxi driver after being hailed by a smartphone app. Critics say the model poses safety risks and skirts regulations that licensed taxi drivers must adhere to, while Uber and other start-ups say it increases consumer choice and creates jobs.
Amid escalating regulatory challenges and battles with taxi operators around the world, Uber last month hired David Plouffe, election campaign manager to Barack Obama, to lead its strategic and policy response. Mr Plouffe said he was drawn to the Uber "insurgency" because the start-up "won’t take no for an answer".
Just last week Uber said that Germany would be a focus of its European expansion. It had planned to double in size to five more German cities by the end of 2014 after seeing five-fold growth in the country so far this year.
The Frankfurt court granted the injunction following a challenge brought by the German taxi industry for non-compliance with German passenger transport laws. The judgment said that Uber’s fare structure contravenes passenger transport law, as the remuneration is not set in advance but is based on a fare estimate provided at the start of the journey.
June 2014: London’s black cab drivers have caused gridlock in the capital as part of Europe-wide protests over the legality of Uber, the cab-hailing app. The FT’s Sally Davies rides with two taxi drivers to hear their views
Dieter Schlenker, chairman of Taxi Deutschland, a co-operative founded by taxi companies to provide services to the industry, said in a statement: “The Passenger Transport Act regulates the protection of drivers and consumers. That can’t easily be overturned no matter how neoliberal the company.”
Mr Schlenker added: “Uber operates with billions in cash from Goldman Sachs and Google, wraps itself in a start-up-look and sells itself as a new economy saviour.”
He described the sharing economy as a “locust”, which was harmful to “the state, society and employees alike”.
The backlash against taxi apps like Uber has come to be seen in Silicon Valley as a test case for new digital services that are often welcomed by consumers but draw fierce resistance from established industries that risk being disrupted.
Uber is a “very easy way to understand innovation” and the importance of keeping the internet open for new services, Eric Schmidt, chairman of Google, which is among the start-up’s backers said in an interview with the FT. “Premature regulation” in the US or Germany could have prevented the company from even getting off the ground, he said.
The court action in German was part of the process the country needed to go through to resolve its attitude to services like these, Mr Schmidt said: “Now people can debate whether they want Uber as a service or not.”
The countrywide ban is the latest in a series of regulatory setbacks for Uber in Germany. Authorities have ruled against Uber in Berlin and Hamburg, citing both safety concerns and the threat to licensed taxi drivers posed by Uber’s competition.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in