Consumers want regulation – and Uber shows why markets regulate better than the state

 
Ryan Bourne
Follow Ryan
US-IT-LIFESTYLE-TRANSPORT-UBER
Through the ratings system and ways of getting redress, Uber is fulfilling consumer expectations (Source: Getty)

Waiting in the sweltering heat of Washington, DC for 10 minutes for an Uber, I was desperate to get into an air conditioned car.

So when one pulled up right in front of me bearing the Uber sticker, my immediate reaction was relief. It was five minutes into the journey, when I glanced at the “28 minutes remaining” journey time on the driver’s satnav, that I realised something was amiss.

I love Uber – especially the possibility of a door-to-door service at short notice. But this journey was my first bad experience. Not only did I have to wait much longer than usual, with my driver seemingly circling the pick-up point (I was tracking on the app) like an in-bound Heathrow flight on a busy morning. But usually, when you get into a car, the driver asks you to say your name, or to say theirs, so that they can see they have picked up the correct passenger. This DC driver had cut that corner and, unluckily for him, he’d simply picked up the wrong guy.

Upon informing him, however, the response was rapid. He cancelled the trip on his phone and explained to me that, as a result of doing so, Uber would prevent him from picking up other passengers for a set period. He agreed to drop me at my preferred destination – recognising that failure to do so could result in me noting down his licence plate and informing the Uber app immediately of what had happened, with the company having a log of his whereabouts and where he cancelled.

My actual driver had in the interim turned up at the pick-up point, waited for a while, and then charged the $5 penalty fare for a no-show. Flicking into my trip history, I notified Uber with a two-line message about what had occurred there and I was swiftly compensated and credited, no further questions asked.

Read more: Business and entrepreneurs pile pressure on Sadiq over Uber red tape

The initial experience was annoying and I was part-culpable, of course. But the process of dealing with this misunderstanding was swift, and the “punishment” for the driver for ignoring protocol harsh but instant – providing a strong deterrent against such mistakes. As I sat in my hotel, I wondered how I would even go about dealing with a complaint or mistake with an ordinary taxi in a different country. I’d probably have to sit googling for a customer services number, and then sit on the phone or send a long email. And then wait days or weeks for the matter to be dealt with, probably giving up.

The sterile debate engineered by existing taxi drivers about being regulated versus unregulated misses the point. In fact, regulation and mechanisms for redress are things that customers desire in a service, and Uber (through its rating system, the complaints mechanism on the app, and the driver-customer recognition and verification procedures) shows markets themselves can provide them. The real distinction is not regulation or deregulation, but whether regulation is better provided within a market or by government agencies.

Read more: Sadiq Khan’s Uber crack-down pledge smacks of the worst of crony capitalism

Rather than talking about a regulatory “level playing field”, we should instead ask: are passengers safe? And do they have effective procedures to get redress? If the answers to these questions are different for different providers, it is clearly not always appropriate for companies to be regulated in the same way.

What those who instinctively reach for more state regulation of companies such as Uber assume is that a few laws and rules can “perfect” perceived failures of markets without unintended consequences. In other words, they assume markets are “imperfect” but “perfectable”. They judge markets by anecdotal failings and interventions to correct them by intentions.

Those of us who believe that markets tend to work well have more humility about our judgement. We recognise that achieving a perfect market by design is impossible. In life, things go wrong. What we think examples such as the above show is that markets work better than government regulators in developing innovations and institutions for dealing with problems, because that is in fact part of the service customers want. And the best bit? Over time, these new innovations, by enhancing competition, raise the game of everyone else too.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

Related articles