EconoMatters, Richter Scale

In Defense of Germany’s Decision to Ban Uber (For Now)

The company has to play by the rules.

Credit: 360b Shutterstock.com

Takeaways


  • Are laws made to be observed by all non-Americans, while US firms operate above the law?
  • We need a better balance within capitalism between the need to innovate and having everybody play by the same rules.
  • When companies think themselves above other countries’ law, it demonstrates the hyper-arrogance of U.S. businesses.

Uber, the car-sharing company, definitely has its place in the world economy. The question is how should it go about its plan to conquer the world? Currently, it operates on the same principle with which George W. Bush used to “tackle” the Middle East – invade first, ask questions later. And clearly this is a problem.

This article originally appeared in Harvard Business Review: To Succeed in Germany, Uber Needs to Grow Up.

Uber, which has entered markets in a variety of European countries, found its app blocked by a German court in early September, due to a violation of the country’s Passenger Transportation Act. While the decision is only temporary until a full hearing takes place, the case highlights Uber’s mounting legal difficulties in Europe.

Uber has vowed to disregard the court’s ruling, but the company’s own reasoning is full of holes. Uber has to contend with far more than just a foreign legal system.

The German cab market already exhibits many of the consumer benefits for which Uber deems itself a unique solution – and many deficiencies of the U.S. market simply do not exist in Germany (and most of the markets in Europe, which Uber has entered). Here’s what Uber must consider if it hopes to succeed abroad.

Different systems in the United States vs. in Germany

In the United States, cab systems in major cities feature outdated clunkers as cars, and cabs may literally disappear when it starts raining. Here, Uber can be put to good use.

As a resident of Washington, D.C., where cabbies still resent the introduction of metered fares, I know of the major shortcomings of standard cab service, which basically amount to a Soviet-style approach in terms of product diversity – and service reliability.

Uber has helped me out of a pinch many a time when I had to make sure that dinner guests could get a ride back to their hotel and there were no cabs around.

Thus, given the universality of clunkers and irregular service, the introduction of higher quality, up-market cars and a vastly improved notion of service – both of which Uber provides – is a definite benefit to U.S. consumers.

Contrast that with the basic situation in Germany. Taxi service works like clockwork. When you need a cab, you call one citywide number, and you can reliably expect a cab in front of your door within 5-10 minutes. Pretty much the same timeline as Uber.

There also are basically no clunkers on the road – most operators buy Mercedes cars for their cabs, mainly for reasons of better durability. Riding in style is hardly what the Germans are lacking. From a consumer perspective, that implies a less immediate need for Uber, although it will find its place in the market.

A disregard of national laws

The most breathtaking element of the Uber standard operating formula is to argue, as the company’s top executives regularly do, that no laws apply to the company.

Why? Because – get this – the sharing economy wasn’t invented yet when the relevant laws and regulations for taxicabs were written. Ayn Rand must feel like resurrecting herself in excitement.

Uber must follow nationally established laws and regulations. Saying it is an app and therefore it is different begs disbelief. Most nations have established rules to introduce a taxicab service.

That, by the way, is exactly what Uber offers, no matter how much the company tries to spin itself away from that and toward the fact that it is an innovative new app. (German taxis offer app-based service, too, these days, in addition to order by phone).

Uber can file applications, and once it meets the standards and tests others have to meet, it can start operating.

When companies argue that they are preternaturally above the law in other countries, it demonstrates exactly the type of hyper-arrogance that much of the world by now has come to expect from U.S. businesses. It ultimately neither helps Uber’s, nor the United States’, principal causes.

Encroaching on an existing entrepreneurial economy

According to all the breathless apostles of the sharing economy, it will do wonders to promote micro entrepreneurship. The basic hoax behind this propagandistic claim in the field of car sharing has been exposed in plenty of news stories already.

Never mind that operating a taxi system, to Uber’s likely dismay, is still only a very early example of the sharing economy.

The taxicab business in Germany is plenty entrepreneurial. Many operators are family-owned businesses – and hence represent a true blue case of entrepreneurship. Uber will thus detract from, not really add to, that equation.

Selective precaution

Another point of contention surfaces when you look at other examples of regulation, such as, for example U.S. food laws. Europeans are painfully aware of how hyper-protective U.S. authorities are about items being introduced into the U.S. food chain.

Take the absolute ban on importing non-fermented cheeses from Europe – offering such delicacies to U.S. consumers is strictly verboten, by unwavering decree of U.S. authorities. The ban is deemed a vital precaution to avoid unnecessary health risks – but it’s not so in Europe, even though it’s often said by Americans to be so much more regulation-prone.

What bewilders not just Germans, but most Europeans, is how a legal culture like that of the United States can be hyper-cautious about great cheeses, but apparently can consider operating an app-based cab service like Uber a much lesser risk that is not worthy of regulation

Uber going global: a double standard at play

That is one more reason why the battle of Uber going global also seems to be a story of a double standard at play. We do not live in a world where the laws are essentially made to be observed by all non-Americans, while U.S. firms, whether by definition or divine intervention, have a right to operate above the law.

For a long time, there were global concerns that the Germans did not show proper leadership. Given a whole host of policy issues, from a renewables-based energy strategy to data privacy, Germany is showing its willingness to stand up to the United States.

Germany’s economic might helps it to stay its course. It cannot be forced, as easily as some economically weaker nations, to roll over from determined resistance, whether from the U.S. government or U.S. firms.

Mind you, none of the arguments presented above are a case against Uber. It will find its place in the market, whether in the United States, Germany or elsewhere. But it needs to observe global differences, contradictions and obligations.

The free world definitely needs constant innovation to find a suitable way to a prosperous future. But we also need a better balance within capitalism itself between the need to innovate and having everybody play by the same rules.

The era where everybody simply rolls over when faced with the latest American fad, gig or app is over. What’s needed now is a properly understood transatlantic partnership.

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About Stephan Richter

Stephan Richter is the publisher and editor-in-chief of The Globalist. [Berlin/Germany]

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