It seems the legal turmoil for Uber is a never-ending saga. The latest news is that the ride-hailing company is facing a major legislative challenge in Brazil that will render its business model unworkable. Brazil is the second-largest market for Uber behind the United States.
Brazil’s senate has passed a bill, with 46 members voted in favor and seven voting against, the decision to regulate companies like Uber, Cabify, 99 and Lady Driver as taxis and not technology companies. This new rule will create a bureaucracy in the driver community, causing the entire model to be disrupted.
The new regulations from Brazil bring an added challenge for CEO Dara Khosrowshahi, who is already facing many issues after taking over the company from Co-Founder Travis Kalanick. The company is facing a ban in London, a lawsuit over driverless technology, allegations of a sexist company culture and other government investigations. Even though the company has provided job opportunities in South America, Uber has faced lawsuits over its employment practices.
Uber argues that it has filled a gap created by inadequate public transport and neglect by local taxis to serve in certain neighborhoods. This has not been well-received with the local taxi drivers in Brazil, and they say Uber has been undercutting their business.
Humberto Costa, a Brazilian senator, said, “In effect, Uber is a form of public transport, and it has already resulted in a loss of income for mass transit.”
In April the company was defined as a taxi-service provider, which is categorized under public services and is regulated by the municipal authorities. This means that Uber drivers will need to acquire the red license plates, just like other taxis, through a city permit process.
Even before the vote on Tuesday, lobbyists from both sides were putting pressure on their respective senators.
A local taxi driver, Antonio Pascal, said, “We’re not afraid of innovation; we’re not afraid of competition. But it must be fair.”
If the bill is passed, President Temer can sign and incorporate it into the law. If altered, then it goes back to the lower house for a second vote.