Why Procurement People Should Celebrate the TFL Uber decision

This week’s post has been written by Peter Smith, Chief Research Officer, Managing Director – Spend Matters UK/ Europe.

I’m not an Uber user, but my daughter (and many friends) are and I can absolutely see the consumer benefits that the firm offers. However, I was pleased to see the Transport for London decision on Friday not to renew Uber’s licence to operate in the city.

TfL cited issues around safety following concerns about Uber not reporting criminal offices, insufficient background checks on drivers and similar transgressions. However, and somewhat ironically given the decision, Uber has been innovative in providing passengers with far more detail about their drivers than taxi firms ever did previously, so most people I know feel safer in an Uber than in mini-cabs or even black cabs.

My concerns about Uber are really longer-term more strategic. First of all, it is clear that their aim is to dominate the market and create a de facto monopoly, global if at all possible. Many customers don’t realise that the low fares come at the expense of not just low income for drivers, but also huge losses for the firm. But their investors are working on the basis that if Uber can develop a very dominant market position, then profit will follow, presumably on the back of higher fares or finding other revenue sources.

In the past, creating a monopoly was difficult, because it involved huge investment and considerable time – firms had to physically build factories, oil wells, shops or whatever. So there were physical constraints on monopoly construction. In the digital world, it is much easier – look at how quickly firms such as Google and Facebook have built virtual monopolies in their markets.

But as a procurement person, I intrinsically do not like monopolies. I’ve been a buyer faced with a monopoly supplier on the other side of the table and it is not a pleasant experience. So anything that leads to Uber’s position being threatened somewhat (and I have no desire to see the firm fail completely) might be positive in terms of future market dynamics that ultimately will affect the consumer.

Secondly, many of us feel that the digital giants somehow don’t think “the rules” apply to them. Whether it is a question of paying appropriate tax in the countries in which they trade, or applying influence on lawmakers, some of those giant firms (probably rightly) seem to feel they are more powerful than individual national governments. So it is good to remind them that there are still actions states can take to push back. I’d like to see a lot more of this on the tax front, certainly!

We suspect Uber will be back in London within months. But this is a positive reminder that rules, regulations and laws do apply to everyone, including even the sexiest, fastest growing, best-funded and best-connected silicon valley giants.


About Peter:

Peter has been around procurement for 30 years as a manager, CPO and consultant. He has an MA in Mathematics from Cambridge University, is a Fellow and was 2003 President of the Chartered Institute of Purchasing and Supply. Peter is a regular speaker at conferences and workshops, and his first book, co-authored with Fiona Czerniawska, was published in June 2010 by The Economist Books; “Buying Professional Services; How to get value for money from consultants and other professional services providers.”

Post by: Koble