How Uber won the battle in one of its most important cities

Key Points
  • Uber was granted a 15-month license to operate in London.
  • Regulator Transport for London initially refused to renew Uber's operating license in September. 
  • The whole saga was a win for both Uber and TFL. 
London judge grants Uber 15-month probationary license
London judge grants Uber 15-month probationary license

In September 2017, London transport regulators failed to grant Uber a license to operate in the British capital. It said the U.S. ride-hailing giant was not "fit and proper" to hold a license and raised concerns over its corporate culture and safety procedures.

Chief Executive Dara Khosrowshahi, who was less than a month into the job at the time, took some important next steps. He apologized to Londoners, admitted Uber "got things wrong," and then traveled to the city to meet with regulators.

It marked the start of a humbler Uber that was willing to work with authorities. And it was a far cry from the Uber under ex-CEO Travis Kalanick, whose reign was littered with scandals.

An important move, it was the start of a change in culture that played a part in a judge overturning the ban on Tuesday and granting Uber a 15-month license to operate in London.

But the whole saga was a masterclass in political posturing.

Since Uber launched in London in 2012, the drivers of the city's iconic black cabs have been lobbying Transport for London (TFL), the regulator, to make Uber play by the same rules that they have to. This led to protests in London in 2014 from black cab drivers.

When Uber's license in London came up for renewal in September, it gave TFL and Mayor Sadiq Khan the perfect opportunity to put pressure on Uber and look like it was addressing the concerns of the incumbent taxi drivers.

And to an extent it worked. Uber was forced to make some changes to address the regulator's initial concerns. It brought in a new policy to report serious incidents to police and also a maximum working hour time for its drivers.

Dara Khosrowshahi, CEO of Uber speaking at the 2018 WEF in Davos, Switzerland.
Adam Galica | CNBC

In a court hearing on Monday to Tuesday regarding Uber's license, Judge Emma Arbuthnot said that the company's previous attitude was to "grow the business come what may." But she also noted that it had made changes.

TFL can now say that it had pressured Uber into making big changes, while at the same time making sure London remains a competitive place for innovative companies. Indeed, London has for a long time touted itself as the tech hub of Europe. If the regulators had been too harsh on Uber then it would have looked anti-competitive and perhaps anti-innovative.

For now, it seems to have appeased many of the people who lobbied TFL to bring action against Uber, including the GMB union.

“The devil will be in the detail but it’s quite clear now that Uber has been forced to change its ways," Mick Rix, GMB National Officer, said in a statement Wednesday.

It's also a huge win for Uber and Khosrowshahi. When he took over the reigns as CEO, Uber was in disarray. He promised to clean up the company and work with regulators, which is what he tried to do when he visited London last year to talk to TFL. Winning in London, a market with 3.2 million regular Uber users and 45,000 drivers, was a big step.

If Uber didn't win, many other U.K. cities could rethink the way that they license the company. And other major cities in Europe could have also done the same.

Major cities like London are also increasingly important for Uber's international revenue since the company has retreated from China and sold its Southeast Asia business too.

And Khosrowshahi has also pledged to take Uber public in 2019, so will need to prove to current and future investors that it can expand into markets without facing massive regulatory problems.

The real losers could continue to be the incumbents, particularly the black cab drivers, who seem unable to compete on price and technology. The decision to give Uber a 15-month license could be a temporary reprieve for the company, but it's likely to face continued opposition in the future.