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Why Are Uber and Ola Not Pleased With the New Guidelines For Online Cab Aggregators?

Editor, TRANSFIN
Jan 4, 2021 12:02 PM 5 min read
Editorial

The success of operators like Uber and Ola is largely attributed to the ease of digital interface, convenience of transaction and minimal interactive requirement. 

However, above all else, the criteria that has favoured them largely in comparison to radio taxis, kaali-peelis or other rivals in the commercial transport sector, is the safety and authenticity of usage. 

To be fair, their records haven't always been spotless when it comes to enforcement of safety regulation (remember the Delhi-wide ban of Uber enforced after sexual assault of a female passenger by the driver?). But, the fact remains that digital availability of location, real-time tracking and in-app monitoring measures are better suited to consumer interests than hailing cabs the traditional way. 

Denting the visible synergy in the above arrangement, Uber and Ola appealed to the Indian Government yesterday to review the recent guidelines issued by the latter, in particular, the ones requiring the companies to enforce drivers' qualification standards. They argue that by nature of their "facilitator" character, they must be absolved from these obligations which should predominantly rest with the authorities. 

Well, the Ministry's jury's out on that. But our critical analysis begins here. 

Why the Discord?

Last month, the Ministry of Road Transport and Highways issued a host of regulations, intending to bring operators like Uber and Ola under the ambit of increased governance. They can be summarised as follows:

  1. Operators like Ola and Uber can charge up to 20% commission on rides.
  2. Apps must be available in both English and Hindi, plus in one other official language in states where the official language isn't Hindi.
  3. Must ensure that drivers don't drive on the app for more than 12 hours per day.
  4. Maximum surge pricing capped as 1.5 times the base fare.
  5. The maximum penalty for a cancelled ride is set at 10% of the fare, not exceeding ₹100 ($1.3).
  6. Operators should mandatorily establish test facilities with simulators to check drivers' abilities and to conduct training programmes. 

While the legislative intent behind these guidelines may have been multi-faceted, all of them achieve the same objective of tightening regulations for operators like Ola and Uber who had benefited and prospered so far in a $10bn-strong market with a comparatively lax regime. 

Capping driving hours and surge prices will impact their ability to maximise profits. Similarly, mandating professional vetting by asking the operators to conduct training and quality-check procedures will require increased costs.

 

Current Regulatory Framework in Place

Road transport in India is under the State of the Seventh Schedule of the Indian Constitution, indicating that road transport is primarily within the domain of State administration. However, all matters concerning Information and Technology are governed under the IT Act, 2000, which is a central legislation. This puts regulation of operators like Ola and Uber in a slight fix.

The Motor Vehicles (Amendment) Act, 2019 (hereinafter referred to as "2019 Act"), in a significant way, brought all ride operators under a single regulatory umbrella for the first time. Not only did it recognise aggregators as "digital intermediaries or marketplaces used by passengers to connect with a driver", it also enabled mechanisms for their registration and licensing. 

However, one of the stickier points of conflict that emerged then was the interplay between motor transport and technology. Ola and Uber have historically detested the idea of being clubbed under the motor transport regulation, insisting upon their identity and character as IT companies.

Reason: Digital regulatory framework is relatively broad and emergent, often liberating new-age players from increased scrutiny. This argument has been rejected time and again, beginning with a 2017 ruling by the European Court of Justice which branded Uber as a "transportation company".

The latest guidelines aren't any new amendments, but simply extensions of the 2019 Act. Guidelines are the delegated legislations that help regulate the day-to-day operations in any industry.

 

 

 

Issue in Contention

Section 93 of the Motor Vehicles (Amendment) Act, 2019, while ongoing the drafting procedure, had in essence, intended the operators to act as "agents" or ”canvassers" in the digital transportation sector.

Therefore, the idea of Ola and Uber calling themselves "facilitators" between passengers and drivers isn't far-fetched. 

What is far-fetched however, is the idea of operators abdicating the responsibility of monitoring their own personnel and vetting them, a requirement that is fundamental in the services industry. 

Either in an effort to minimise expenses or to outsource responsibilities, they are using the title "intermediary" to their advantage that is conferred upon them under the 2019 Act. Since the IT Act, 2000 already provides a "safe harbour provision" for digital intermediaries who merely facilitate and relay information, it seems imminent that Ola and Uber are planning along similar legal appropriation to wash their hands of the cumbersome fact-checking and compliance process.

However, it is important to note that the courts in India have expounded a number of times on the multiple connotations of the IT Act, 2000's Section 79 intermediary provision. Even if they aren't held liable for third-party violations on their platform, their failure to observe "due diligence" could amount to conspiring, aiding, abetting or inducing unlawful conduct and could disqualify them from the safe harbour exemption as provided under Section 79(3)(a).(Christian Louboutin SAS v. Nakul Bajaj and Ors)

By that application, conducting "due diligence" on drivers' credentials and documentation is incumbent upon the operators themselves, even if they identify themselves as merely facilitators of transport. 

 

The Logic Jump

One of the circumstances under which an operator's license can be struck under the 2019 Act is a "systemic failure" to ensure safety of drivers and passengers. It seems that ensuring drivers' credentials, availing them with permits and certificates is crucial to the channel of authentication that ultimately ensures passenger safety too. So does the provision of insurance coverage for drivers.

Nevertheless, however socially sound and ethically compliant it may be to necessitate fool-proofing bi-party credentials by the operator companies, the heightened costs and complexities of doing so can't be undermined, especially keeping in mind the trickle-down economics of those costs percolating to the consumers. 

It remains to be seen what the Ministry's reviews ultimately lean towards - accepting outsourced responsibilities from the operators' backend or standing by its decision to implement necessary regulations?

FIN.

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