25 October 2016
If Uber prevails in Hong Kong, it will set a judicial precedent on which to build its legal infrastructure globally. Photo: Bloomberg
If Uber prevails in Hong Kong, it will set a judicial precedent on which to build its legal infrastructure globally. Photo: Bloomberg

Let Uber legal saga play out and set a judicial precedent

After the arrest of several Uber drivers, the police carried out a massive raid on the company headquarters a few days ago and arrested three staffers and another five drivers.

A police spokesperson later said they have enough evidence to press charges and that they will continue to make arrests.

Uber is taking the world by storm by revolutionizing taxi services using the internet.

The company operates under a membership system and charges a 20 percent commission on each ride.

Uber is highly popular in more than 300 major cities around the world thanks to its service quality, coupled with a still evolving regulatory regime.

It’s estimated that Uber, which is yet to go public, is already worth US$50 billion.

Obviously, the high-profile police action against Uber is intended to protect vested interests in the taxi industry.

Taxi licenses have skyrocketed to HK$7 million (US$902,576) each after the government stopped issuing them.

There are about 18,000 taxi licenses in Hong Kong worth about HK$126 billion, mostly in the hands of a few oligarchs that control the industry.

If Uber continues to flourish, taxi license prices could crash, which is why license holders have reason to put Uber out of business.

As the old saying goes, maggots only descend on rotten flesh.

Uber would not have the slightest chance of getting a slice of the Hong Kong market if taxi drivers were offered satisfactory service.

Instead, they’re notorious for being rude and scheming, refusing hires, taking detours and basically ripping off unsuspecting passengers.

The only way they can deal with the unprecedented challenge from Uber is by improving their service and boosting their own competitiveness, rather than relying on the government to do things for them.

Still, I think it would be a good thing for Hong Kong if the Department of Justice did press charges against Uber.

That would reaffirm our reputation as a cosmopolitan city under rule of law.

If Uber is determined to establish itself in Hong Kong or Greater China, it needs to hire the best lawyers to defend itself in court.

If Uber prevails, it will set a judicial precedent on which to build its legal infrastructure globally.

In Canada, Uber has already caused taxi license prices to fall by half, and that trend is likely to be repeated in Hong Kong.

Hong Kong license holders could consider selling their permits while the price is good, use the money to buy vehicles and join Uber when it becomes legal.

Frontline drivers who don’t want to join Uber could wait until taxi license prices plunge then buy them from operators.

Regardless of Uber, taxi drivers are here to stay.

But Uber is expanding the market and introducing more competition. The taxi industry needs to transform in order to adapt to the new operating environment.

In fact, what Uber is doing is nothing new.

So-called “20 percent discount gangs” in the Hong Kong taxi business operate an Uber-like revenue model.

But Uber goes a step further by revitalizing the market and revolutionizing taxi services, breaking the decades-old monopoly of a few tycoons in the business.

Ultimately, Uber benefits both drivers and passengers. 

One of the potential beneficiaries of the Uber service is the disabled.

Costly taxi licenses have been the biggest obstacle to the development of taxi services for the disabled.

If Uber is legalized, the disabled will not have to struggle for a taxi. It will be at their beck and call.

This article appeared in the Hong Kong Economic Journal on Aug. 14.

Translation by Alan Lee

[Chinese version 中文版]

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Former radio talk show host; Columnist at the Hong Kong Economic Journal

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