Taxify’s London launch halted after transport regulator mounts investigation

So much for a smooth launch. Ride-hailing startup Taxify launched this week in London to a big PR-push and fanfare. Most of the coverage was about how this plucky startup was going to take on the Uber giant. But Taxify has now had to pause its operations in London after a transport union questioned if it had a license to operate, and official body Transport for London announced it would investigate Taxify’s operations. Meanwhile, the startup has been tweeting drivers that download and use its app not to say they are “employed by Taxify.”

So what is going on?

(UPDATE: Taxify has now issued a statement saying it has “done everything in its power to comply with the local regulations, but is faced by aggression from TfL.” It says that running Taxify as a technology platform directing bookings to City Drive Services registered drivers is “completely compliant within the existing UK law, and is a common practice.” TfL has revoked the license held by City Drive Services).

A few months ago, Taxify applied for a license to operate a taxi service in London. This is important, because there is a big misunderstanding going on here about what Taxify is: it’s actually fleet management software in the cloud. Cab firms sign up for it, and use it to replace their tired old booking software, while Taxify takes a low fee. In other words, Taxify doesn’t want to run cab or private car firms. It’s basically a tech front for licensed cab firms that could never build and manage such complex software themselves. But to launch in London, it needed a way in.

Well-placed sources say Taxify reached out to TfL in April about launch, but TfL was “walling” the firm, say the sources. Faced with a slow-moving bureaucracy, Taxify went ahead and literally bought a local cab firm, City Drive Services. This has a licence to operate with TfL, trading under two brand names, Avanti Car Service CityDrive and Sigma Car Service.

For Taxify is not just a plucky little startup taking on Uber — it’s now backed by Chinese ride-hailing tech giant Didi Chuxing in China.

Somehow, Taxify thought that just by buying a cab firm with a license, installing its cloud services and apps with the drivers, it could would then have carte blanche to launch its service in London.

Er, no. Taxi regulation doesn’t work like that.

The powerful GMB Union wrote to TfL saying: “The decision to acquire an operator and not advise Transport for London (TfL) of a fundamental change to licensing conditions seems incompatible with the law.” It questioned whether the firm is “fit and proper” to hold a licence with TfL, asking about driver safety, and saying there is “obfuscation” about how Taxify actually works and operates.

They may well have a point.

Taxify is clearly trying to shoe-horn its service into London, not by encouraging local players to sign up for its service, but by literally acquiring a local player and launching. It’s not clear yet whether it had actually outlined this to TfL.

But Founder and CEO Markus Villig says he has spoken to lawyers about the arrangement: “We have literally sent them (TfL) an email every 3 days, so they knew very well we were launching.”

A TfL spokesperson said: “Taxify is not a London licensed private hire operator. We are urgently investigating the nature and extent of its activities and will take action where appropriate.”

Taxify launched in Estonia in 2013 and now operates in 18 countries, mainly emerging markets like Eastern Europe and Africa. The startup claims to have more than 2.5 million customers, and recently announced a strategic partnership with Didi Chuxing in China.

It has an “all-in-one solution for taxi companies.” Basically, a booking system with a consumer-facing app. Traditional taxi companies use Taxify’s web-based dispatcher and fleet management systems to manage their back-end and unite under Taxify’s consumer-facing app to stay competitive against expanding networks like Hailo and Uber. That then lowers Taxify’s costs, allowing them to charge less. It then charges the cab firm a low monthly fee of about €12-15 per driver per month.

Taxify’s other focus is its rapidly growing Local Partner program, which allows entrepreneurs to set up their local Taxify business using a franchise model and become a city manager on a revenue share model.

UPDATE: Taxify has now issued the below statement:

Media Statement from Taxify in relation to the temporary suspension of operations

Taxify has done everything in its power to comply with the local regulations, but is faced by aggression from TfL. Taxify successfully launched its London ride-hailing service on Tuesday, with over 3,000 drivers signed up, 7,000 drivers due to be on-boarded and over 30,000 customers downloading the app in the first three days. This incredible response shows the huge demand for greater choice in the monopolised London ride-hailing market.

Over the last 48 hours, questions have been raised regarding the legality of its operations and Taxify would like to make clear that it has made every attempt possible to comply with TfL regulations. To launch its service to London customers, the business purchased a TfL licensed operator, running Taxify as a technology platform directing bookings to City Drive Services registered drivers. This arrangement is completely compliant within the existing UK law, and is a common practice within the industry. Taxify does not need a license, as any licensed operator can use any technology platform they choose to facilitate bookings between private hire drivers and riders. In this case, City Drive Services was the company authorised by TfL to dispatch bookings and therefore Taxify had no need to get a license for the software separately.

TfL has raised concerns about Taxify’s license directly to its drivers instead of to the platform. Despite multiple attempts at communication with to resolve the issue, TfL has not provided any guidance. In an effort to stay fully compliant, and to protect drivers from further harassment and scrutiny by TfL, Taxify voluntarily paused the use of its app by City Drive Services drivers so that it can seek clarification with the regulator.

TfL has issued a letter stating that they are revoking the license held by City Drive Services due to a change in the Company’s Director, who has no involvement with the operation or the business practice. Taxify strongly believe that the reasons for TfL revoking City Drive Services’ license are invalid, without merit, and outside of existing law. The action by TfL is denying London customers a valid choice within the market which has limited options. Taxify is appealing against TfL’s decision immediately.

Taxify are immensely frustrated that TfL have not been willing to co-operate nor meet to discuss its operating licence and entrance into the London market. Taxify is a fully compliant ride-hailing technology provider, already operating in 19 other countries and major European cities, where it is successfully delivering a new competitive ride-hailing platform to the benefit of both customers and drivers. Taxify remain committed to playing a key role in the London ride-hailing market.

As one of Europe’s leading start-ups, Taxify are a force for good in the worldwide ride-hailing market, providing important competition to the current market leader which uses its market position to mistreat drivers and take advantage of customers. London customers and drivers are crying out for competition against what has become an unchallenged monopoly. TfL’s action to revoke City Drive Services’ license does not benefit the customer and should be challenged by all those that favour a fair and safe ride-hailing market with improved conditions for both drivers and customers.

Taxify are keen to find a solution to this issue and strongly urge TfL to meet with the company at the earliest possible opportunity.