Australia: Uber a threat to rule of law and regulation of the taxi industry

Last Updated: 7 May 2015

By Oliver Talbot and Heath Manning

As most Australian smartphone users are aware Silicon Valley success story Uber is now offering its application and services in capital cities, in competition with the traditional taxi industry.

Despite a few missteps like implementing 'surge pricing' during the Lindt Café siege, Uber's passengers seem impressed with its slick offering and public relations offensive, and its market share is growing. Taxi operators and the section of the economy they support are less enamoured.

Taxis have for a century or more played an important role in passenger transport in Australia, offering a 24 hour door to door service that complements other private and public systems. They are of particular importance for trips during irregular hours, to remote places or by the least mobile members of the community.

As such, they have been heavily regulated on a state by state basis, with operators required to obtain licences and comply with statutory standards to ensure accessibility and safety.

Significant capital has been deployed across the industry, and licensing has long been a source of state government revenue.

Uber does not comply with taxi regulation. It claims to be operating through loopholes, but also driving the 'sharing' economy while providing employment and a better passenger experience. An alternative view is that it is in repeated and deliberate breach of the laws of each state and territory, and is at best providing substitute employment for some displaced taxi drivers.

State governments seem to be slowly moving to this latter characterisation, with most states issuing penalty notices and Victoria and New South Wales implementing formal legal proceedings against drivers.

Uber has responded by blocking booking access to phones and credit cards used in enforcement attempts, offering to pay fines levied on drivers and aggressively defending court proceedings on their behalf.

Governments are stuck between a rock and a hard place. Voters like Uber, and the 'start-up economy' as a whole needs and deserves promotion. On the flip side, Uber's growth undermines the policy objectives of taxi industry regulation.

A serious government move against Uber is some way away, particularly given the fickle political climate in most states. However, allowing Uber's proliferation poses a challenge to the rule of law, or at the very least capital's reliance on it.

Unfortunately, Uber will not become easier to deal with as it grows, or be an isolated threat. Other disruptive 'new economy' businesses will push legal boundaries and challenge governments and incumbents in similar ways.

Happily, the Westminster system and Australia's constitutional separation of powers provide avenues for private action where governments are unwilling or unable to enforce the law themselves.

In the Uber scenario, the special harm suffered by the taxi industry provide grounds for incumbents to obtain an injunction restraining Uber's unlawful conduct. Australian Courts have previously granted such remedies where 'an offence is repeated in disregard of an inadequate penalty'.

Any contravention of an injunction would put Uber and its drivers in contempt of court, facing an undoubtedly unimpressed judge or bench with a broad penalty discretion.

If a plaintiff wanted to go further and seek some Silicon Valley funding for itself through a damages claim, the underdeveloped tort based on intentional interference with business through unlawful means might be enlivened. The plaintiff would need to show that the harm it suffered was a foreseeable consequence of Uber's unlawful action. There is supportive and well grounded precedent on this point.

Further, passengers who have been misled by Uber's public relations claims and also paid its 'surge pricing' might access Australia's ever-growing class action system to recover their loss.

Surge pricing seems a trivial issue now. That could well change if the upstart is allowed to take advantage of sleeping governments for long enough to displace the incumbents and the regulations they have laboured under.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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