Uber struggling to stay on the road in Hungary

Uber struggling to stay on the road in Hungary
Hungary's roads have been blocked by taxi protests several times this year
By Blanka Zoldi in Brussels May 13, 2016

Protesting competition from the likes of Uber, taxi drivers have been paralyzing Budapest on an almost weekly basis recently. A new bill will be presented to parliament on May 17 that will make it possible to block the website of the ride-sharing service in Hungary.

With the Hungarian government moving ever more firmly to support the taxi drivers, Uber appears to be seeking to open up more routes for compromise. However, the government's fears of the growing protests may mean it's too late for the ride-sharing service to avoid being run out of town.

Already backpeddaling due to protests over its marshalling of the education system, and having performed a U-turn on the Sunday shopping ban rather than face a referendum, the Fidesz government has good reason not to want to provoke a re-run of the only protests since the fall of Communism to force a Hungarian government to back down entirely. In 1990, a protest organised by taxi drivers against fuel price rises was the first big demonstration after the system change, and brought Budapest to its knees for three days.

"The protest in 1990 lurks large in every political decision maker’s mind,” a political consultant who worked for Uber as it entered Hungary in 2014 tells bne IntelliNews.

Little wonder then that in the wake of the first of the recent taxi demonstrations in January – which has been followed by more than half a dozen - state secretary Janos Fonagy made a promise to regulate taxi services and prevent unlicensed activities. That is clearly a commitment that would be difficult to abandon.

If the bill is passed by the parliament, unlicensed Uber drivers can be stripped of their driving license for six months if caught by officials, and for up to three years upon repeated offense. The government would also have the power to block those websites that facilitate unlicensed ride-sharing services for up to 365 days.

“This is a very harsh message from the government, but it’s mainly addressed to the protesting taxi drivers,” Zoltan Fekete, Uber’s operations manager in Hungary, claims to bne IntelliNews.

The political lobbyist, who spoke on condition of anonymity, suggests that the company has been happy to see the protests. “They offer cut price rates during the demonstrations and downloads of their application spike,” he said.

He also claims that the company has changed its tune significantly compared to 2014. On arrival, the company displayed an arrogance that as part of the wave of “business disrupters” it could operate as it liked. The lobbyist, who asked for anonymity, told bne IntelliNews that Uber rejected efforts by the officials to offer compromises. "They insisted that compromise is not in their business model," he says.

Indeed, despite the mounting pressure, Uber still displays little diplomacy. Fekete claimed recently to local press that the government’s proposed measures seek to please “150 loudmouth taxi drivers”, and are "unfavourable for approximately 150,000 Hungarian Uber users”.

Ad hoc

That's the sort of "very rigid” approach that the lobbyist says was evident in 2014. “There was never a formal proposal from the government, but there was an openness for a step by step approach; an offer to sort out a way of working that would not upset the taxi industry too much. For instance, they could have worked with the larger taxi companies to split the taxi drivers,” he points out.

However, Fekete claims that in 2014 there were only “ad hoc meetings” between Uber and the government “in order to get to know each other”. The company "has always missed proper negotiations,” he claims. For that reason, he cannot confirm the government’s openness at that time, he adds.

However, as the very real risk of being outlawed rises, Uber appears trying to refresh relations. Fekete invited state secretary Janos Fonagy for a personal negotiation on May 9. “Some communication has already started,” the Uber chief suggests, although he admits he can't predict when it will be possible “to sit down at the same table”.

Uber has also repeatedly pointed out recently that it has made considerable improvements in its service in order to operate lawfully. “Since February, all of our drivers have a tax number, they provide an electronic invoice after each ride, and most of our drivers have already obtained their licence for passenger transportation," Fekete insists. Those, who don’t have the appropriate paperwork yet, will have to obtain it within weeks he adds.

Fekete also outlines alternative proposals on regulations and tax in a letter sent to the National Development Ministry on May 10, suggesting an approach similar to those in Estonia and Lithuania. The Baltic states have introduced proposed bills that would regulate ride-sharing as a new legal category, distinct from traditional passenger transportation.

However, even if every Uber driver had a proper licence and paid tax, there is still one point of disagreement that seems to be persistent between the company and Hungary, and which might undermine any chance of compromise. The government, together with the Hungarian Statistics Office KSH and the National Transport Authority claim that Uber unlawfully operates dispatcher services, which independently of any other agreement would provide reason for blocking its website.

Uber, on the other hand, claims that it only provides “an online marketplace”. “Dispatcher service is a category connected exclusively to taxi service providers. We are not taxi service providers,” Fekete said, adding that “there would be a need for a new system rather than trying to fit new models into old schemes”.

However, the powerful global "business disruptor" may be too tardy in realising just how serious a fight it faces from the combative Fidesz, which has proved in recent years it's more than capable of taking on some of the world's biggest companies.  

The political pressures the ruling party is under only suggest that fight will go one way, according to the political consultant. “Uber is now suggesting it's ready to change its approach, but it’s too late," he asserts. "That ship has sailed."