Uber vs. Colombia: in defense of the ridesharing market

In a press release, the company announced in the first hour of February 1; it would stop operating in the country in compliance with the ruling of the Superintendence of Industry and Commerce.

The year started badly for Uber in Colombia. In a press release, the company announced in the first hour of February 1; it would stop operating in the country in compliance with the ruling of the Superintendence of Industry and Commerce (SIC) of December 20, 2019.

Uber’s exit from Colombia is a unique case in Latin America. Although the company maintains legal conflicts in other Latin American countries such as Argentina and Chile, this time is the first time that a transport service is expelled from a country in the region.

Colombia is the first country on the continent to close the doors to technology.

Uber in a press release

The ridesharing battles

Since its inception, app transport services have had to deal with regulators around the world, with mixed results for companies. Some of the conflicts that Uber has had are the following:

  • After mass protests by Bulgarian taxi operators, Uber had to leave the country, where he had about 40 thousand users. The country’s tax and transport authorities imposed a fine of 50 thousand euros, while new legislation required that transport companies have qualified drivers with formal contracts.
  • In May 2016, Uber and Lyft had to leave Austin, Texas, when city voters rejected the ridesharing services from self-regulating, instead of requiring fingerprint-based reviews. This situation allowed a local application called RideAustin to emerge in the city, but Uber and Lyft returned a year later. Republican Governor Gregg Abbott signed a law that gave the state the regulation of transportation services, formerly the domain of local governments.
  • In July 2016, the Hungarian nationalist government passed a law that allowed blocking Internet application services, which affected Uber after numerous protests against him by taxi drivers.
  • In March 2017, Uber had to leave Denmark. The country’s new regulations required the company to include seat sensor taximeters in vehicles. Also, the company was accused of helping its drivers to bypass national laws.
  • Since May 2017, Italy is the only country in which Uber operates without a low-cost option because the Italian court determined that only licensed drivers could work in the country. For this reason, only the Uber Black service is available.

As a company, Uber is used to reverence. However, the case of Colombia is the first in Latin America. With two million users and 88,000 driving partners in the country, Uber will want to recover the fourth largest market in the region at any cost.

A history of conflicts in Colombia

The exit of Uber from Colombia is the outcome of almost five years of conflicts in the country. Since September 2015, the taxi drivers’ union went out to protest the lack of regulation in the service, even reaching physical violence against drivers and users of the application.

Uber announced its departure of Colombia

However, just last year, things ended badly in court for Uber. In August 2019, the company was fined more than $ 600,000 for obstructing a regulatory visit in 2017. This caused Uber to give up investing $ 40 million in a support and service center in Colombia, given regulatory uncertainty.

At that time, the general manager of Uber Colombia Nicolás Pardo mentioned that.

“After six years of seeking avenues for dialogue and in the absence of a road map to advance regulatory stability and legal certainty, we regret having to relocate the destination of this investment.”

Finally, in December 2019, the SIC ordered the company to stop operating because of unfair competition.

Uber calculates losses of $ 250 million due to the cessation of operations in the country. At the moment, Uber plans to take the case to international courts. On the one hand, his departure can be considered a violation of the Free Trade Agreement with the United States. The company also called the decision of the Colombian authorities an act of censorship that violates the American Convention on Human Rights. George Gordon, an Uber executive, said they are considering this and other legal outlets.

Uber’s biggest concern is that, while they leave the market, competitors such as Didi or Cabify stay in the country, who can take advantage of their main competitor’s exit to increase their market share.

At Davos, the president of Colombia, Ivan Duque, said that technology companies are welcome in Colombia, as long as they play under the same rules as the other competitors.

For some members of opposition parties, the decision of the Superintendency seeks to win over the taxi drivers’ union, following protests against the Duke presidency last year. The Superintendency is elected directly by the president.

Uber expansion in Latin America starts with the left foot.

In August 2019 alone, Uber CEO Dara Khosrowshahi announced on CNBC News his intentions to expand in Latin America, after a disastrous Q2 where losses of 5 billion were recorded.

For Khosrowshahi, the region is promising thanks to the growth of its Gross Domestic Product, which goes hand in hand with the growth of its cities.

In the face of Khosrowshahi’s optimism, a harsher reality is imposed: the market for ridesharing apps is very fragmented in Latin America. Expanding in Latin America will not be so easy if Uber insists on breaking the rules, as he has done in other parallels and meridians.