Platform based work, unfair practices and
business engagements by digital taxi companies.
To:
The Competition Authority of Kenya
Kenya Railways Staff Retirement Benefit Scheme Block
‘D’ 1st Floor
info@cak.go.ke
December 5, 2021
Background
The Communication infrastructure in Kenya and more so
the reliable connectivity in the major cities has come with opportunities for
the economy. Investments in various sectors is aided by efficient and
affordable internet connectivity. Use of internet data is on a growth
trajectory as cited in annual reports from the Telco’s, the Government and even
in global reports. Innovations that have come to play is internet platform-based
business delivering or seeking services via an online engagement with players for
a fee.
It is now commonplace for a student to be engaged in a
data analysis project for someone in another part of the Globe, Consumers
ordering for items online from their favourite vendors. Markets for all goods
and services. This is encouraging since it is supporting and creating new jobs
with varied amounts of investments required.
Platform based business engagements are equally
supported by the Country’s efforts over the years to formalize data and
encourage investors to come into the economy and innovate on how best to engage
with the available data, infrastructure and the citizens in all levels of the
economy for businesses. This is praiseworthy.
It is now commonplace to premise any business or
stakeholder engagement on a digital strategy and we must thus accept that
platform anchoring is a mode of delivery of information, data collection and a
business model.
What I seek to engage the commission on is in the
transport sector, The business case therein, the developments, engagements,
practices, concerns and seek direction on a few observations.
Digital taxi work was introduced in Kenya in June
2015. Whereas the KNBS census in 2019 (Citation link 1) indicated that there
were 12,000 persons earning a living in commercial driving, platforms like uber
on separate instances have reported to having 5,000 Vehicles active on their
platform.
Other operators joined the business as years followed,
we assume that drivers are engaged on the platforms as they would desire since
the requirements to enroll are similar. The platforms mode of operation is
similar in many as it shall be demonstrated in this memo.
Platforms connect service providers to customers and
charge a fee for the service. Others are engaged in direct marketing where a
business offers its merchandise or services directly through a platform. Others
are agency based and each must be looked at with the understanding of the
market it is working in.
The business case and developments
Prior to the introduction of platform-based transport
work, the traditional taxi was largely a market that was not exploited. It was
a market charging a premium fee and available to the upper middle class of the
economy. The industry was small and heavily regulated with not much a
contribution to the economy.
The entry of platform-based taxi changed the tide and
the numbers increased, the convenience that came with it and the competition in
pricing has led to the growth of what we have today. These developments,
however, has not been without controversy.
An investment in the industry is at two levels.
Whereas the trading engagement is at the platform level, there is debate on
where to group the platform providers. Innovation that leads to growth is
encouraged in any economy and should not be overly regulated as such may
inhibit its growth.
Two major players in the industry are foreign based
companies while the third one is local. The business environment as I
understand it is that for compliance it is prudent to trade within the law
since other statutory requirements will be required. There is also an aspect of
contracting parties involved and hence any investor (irrespective of origin)
should operate within the law as a rule and to also be able to enjoy equal
protection of the law should there be need to invoke rights.
Whereas there is a debate globally as to where to
classify the platforms, as I have demonstrated above, they are a mode of
convenient delivery of a service and have a legal entity behind them. Every
software application has a developer behind it. The platforms whether they are
applications or websites have entities that develop them. They should thus be
seen as a good sold in the market which has a manufacturer behind it.
In our case, the digital transport apps are backed by
entities with a legal standing behind them, they have a code, form, rules,
brand and market positioning. Just as a company brands their product and
distributes it, the platforms are marketed by firms which have proprietary
rights. The issue here is to distinguish that the aspect we are handling is the
business engagement between the platform providers (proprietors) could be
different from a developer, the developer would be the application or website
engineering lead who works for the proprietor’s interest. The developer makes
or can make the platform but not own it.
In our case, the “brands” behind the platforms are
known, and since they run operations like any other company does, we will assume
that they comply with the laws of the land. They have registered a proprietary
interest in the business as their key objective, they engage employees, they
solicit for business within the economic opportunities in the country and in
their convenient mode of reaching out to their clients they have deployed a
platform, “an application” “app” accessible to their customers upon meeting
their standards.
To that extent the providers behind the taxi
applications “Uber”, “Bolt”, “Little” the three main platforms in Kenya have
companies behind them. They run offices in town with employees, they contract
drivers and service providers, they obtain licenses from the local authorities
and hopefully comply with statutory requirements as is required of all persons.
They are thus Taxi/Transport Companies engaged in app-based transport work and
other businesses like food and parcel delivery.
The digital disruption that came with the app must
thus be seen as a business delivery model that has contributed to the economy
by creating jobs and is driving businesses and service delivery.
What the platform offers is a digital service and
their providers are business concerns subject to the rule of fair play as
should be applicable in all aspect of business conduct.
In this context the case is the business practices
obtaining since 2016 onwards on the conduct and pricing. There is abuse of
buyer power by the taxi companies at two levels, between themselves and down to
one of their customer’s, the drivers.
Platforms have sold their app service to the public.
Individual Kenyans have taken up the opportunity to enterprise and have
acquired vehicles which are enrolled into the platforms. The vehicles offer the
service to the requesting members of the public via the apps which link the
two.
To the App Taxi companies, I will refer to them as
“platforms” their customer is the partner driver who uses the driver app. The
platforms charge a commission from the fares charged which forms their income. Notably
the platforms do at times innovate to make other products like transit
advertising, food delivery, among others.
The platforms make a customer service charter and do
allow customers to give feedback and ratings of the service received. The
partner drivers must meet the customer service standard set and expected by the
platforms. That is not objectionable since it enhances enjoyment of a service.
The Business concerns and abusive
processes.
As stated, the Platforms / Taxi companies make their revenues
from commissions charged as a part of the fares paid by the riders using the
platform. The commissions collected from drivers. They also make commissions
from advertising and a sales charge from restaurants through which their apps
have arrangements with for food orders and deliveries. It’s a value chain.
In the Kenyan market, we analyze the industry known
practices of the three main players. Uber, Little and Bolt (Formerly Taxify).
The three have offices in Nairobi as detailed below.
Uber, The Riverfront, Chiromo Lane, Nairobi
https://twitter.com/uber_kenya
https://www.facebook.com/UberKenya
Phone: +254 733700500 +254 722205496
Bolt, Azure Towers, Lantana Road, Westlands, Nairobi
https://www.facebook.com/bolt
https://www.bolt.eu nairobi@bolt.eu
https://twitter.com/boltapp_ke
Phone: +254 7326 771 71
Little, Craft Silicon Campus Musa Gitau Road, Kangemi,
Nairobi
https://twitter.com/littlerideke
https://web.facebook.com/LittleRideKE
support@little.bz
Phone: +254 709 302 302
Uber and Bolt command the biggest market share. Uber
parent company is America based while Bolt is from Estonia, Little is local.
The commissions charged on the trip fare are 25% for
Uber, 20% for Bolt and 15% for Little. The fare price is based on the distance
covered charged per kilometer, time taken and a base price subject to a minimum
price. The various categories are detailed below.
|
Item
|
Vehicles below 1300CC
3 Passengers
|
Vehicles between 1301 - 1500CC
4 Passengers
|
Vehicles above 1500CC
7 Passengers
|
|
Uber ChapChap
|
Bolt Lite
|
Little Economy
|
Uber X
|
Bolt Base
|
Little Basic
|
Uber XL
|
Bolt XL
|
Little Comfort Plus
|
|
Base fare - KShs.
|
80.00
|
55.00
|
100.00
|
85.00
|
80.00
|
100.00
|
N/A
|
100.00
|
100.00
|
|
Minimum
Fare – KShs.
|
150.00
|
150.00
|
200.00
|
200.00
|
200.00
|
200.00
|
N/A
|
250.00
|
270.00
|
|
Per
Minute – KShs.
|
4.00
|
4.00
|
4.00
|
5.00
|
5.00
|
4.00
|
N/A
|
4.00
|
4.00
|
|
Per
Kilometer – KShs.
|
25.00
|
26.90
|
27.00
|
38.00
|
37.00
|
33.00
|
N/A
|
52.50
|
50.00
|
|
|
|
|
|
|
|
|
|
|
|
|
I make the case in two approaches, the Inter
competition between the platforms leading to fixing prices. And vertical
pricing that hurts the driver and goes against the stated terms. I will also
comment on an unfavourable discounting policy adopted by one of the players and
finally share findings on the operational environment.
Buyer power abuse and basic contract
considerations
The Authority’s mandate as I understand it is to
ensure there is fairness in every aspect of business between parties at a
macroeconomic level.
The business structure is such that the platforms /
Taxi app companies need the drivers to enroll as service providers in their
database. The partner drivers are thus the “consumers” of the taxi app
company “merchandise” the platform.
As stated earlier, the platforms set the service
standards, work times, work zones and general housekeeping rules.
The Authority should investigate the practices on
pricing of buyer power and market dominance abuse by Uber. As a leader in the market,
they set the trend in the market, this is achieved by pricing. “Horizontal
influence” should be appreciated by a careful look at how they have arrived
at stirring up unfair competition is the use of market dominance to set prices.
They will normally run a campaign with reduced fare pricing and at the end of
it, the reduced prices become the dominant pricing. During the period, the
competitors will not attract business and will be forced to follow. So stiff is
the competition that there is innovation from the competing platform to
manipulate prices to match the leader, an aspect Bolt uses of locking prices,
“an upfront pricing” irrespective of what the trip will be. Time taken and
route may change, the price is locked. This practice of upfront pricing is
nothing else but “vertical abuse” I have attached a sample of
screenshots with pricing, and they will demonstrate the fixed pricing.
Another price fixing evidence that hurts drivers is a
recent introduction of dynamic pricing by Bolt. This was in response to drivers
concerns on pricing. They informed the drivers to set their minimum price per Kilometer
but that does not apply, they do state that Prices are in their control. An
aspect a driver must consent to for continued use. (See attached screenshots) They
demonstrate price manipulation.
I present this as a challenge to the Authority to research
on pricing the last three years, the marketing campaigns run and the eventual
results. Drivers baited with reduced commissions, normally what follows the
campaign and new low prices is a go slow by drivers but pressured by the day-to-day
economic realities they give in to the changes since they are daily wage
earners and must meet their upkeep and obligations. They do not enjoy the
services of a trade union or guaranteed pay.
Business stirs the markets by offering customers
discounts a practice that is meant to build the brand and cultivate royalty.
The taxi app business is threefold as demonstrated. The customer to the
platform is the driver and the passenger is a customer to the driver.
The discounts are offered by the platforms, but the cost of that discount is
met by the driver. The App decides on a discounted price and without consulting
and agreeing with the drivers they apply it to the fares charged. Whereas the
Platform was aware of the campaign and had made necessary adjustments to their
operations in advance, the drivers will be caught unawares. The commissions
payable still apply. Who bears the cost in this case? Reduced earnings by the
driver. Open engagements would do in this case.
The economic discussion obtaining
2015 the introductory price was KShs. 60 per
kilometer, Competition has expanded the market and the price has gone down on
the account of the same to KShs. 25 today. Running costs are a factor that
concerns all businesses. The trends seem not to match the economic cycles.
Worth noting is that the driver partner has no say whatsoever on the price, it
is left to the platform to set based on the “Prevailing market situation” see
the prices below from official sources, EPRA and the Platforms official
communications.
|
Reference
Month
|
Jun-17
|
Jun-18
|
Jun-19
|
Nov-20
|
Nov-21
|
|
Price per Km - Uber
|
30.00
|
16.00
|
30.00
|
28.00
|
25.00
|
|
Price per Km - Bolt/Taxify
|
36.00
|
18.00
|
33.00
|
30.00
|
26.90
|
|
Price per Km - Little
|
34.00
|
35.00
|
35.00
|
30.00
|
27.00
|
|
Petrol Price Per Liter
|
97.10
|
108.90
|
114.50
|
109.50
|
129.72
|
Our vehicles are “New” after a 7-year use, Maintenance
kicks in with continued use, other running costs besides fuel and maintenance
is internet bundles and airtime to communicate with riders, lunch, licensing
fees, insurance, tyres, car wash and regular service. Notably not all drivers
own the vehicles, some lease them for a daily fee from the owners. With the situation as it is, it is commonplace
for a trip at the comfort of a clean vehicle the driver earning less than the
cost of a Liter of fuel. Example a trip covering 3 Kilometers on Bolt lite or
uber Chap Chap taking 10 minutes, less commission earns less than a liter of
super petrol. This cannot be said to be fair remuneration.
It is not all gloom, “Little” has a forum to address
drivers concerns and have remained competitive (as demonstrated in the pricing
earlier) to the drivers, the only disadvantage is its market share. Years ago,
Uber had a referral program for their good drivers to be funded to acquire
their own vehicles and some benefited from it. Though these are private
contracts and may not be credited to the app wholly since the driver is the
principal borrower at market rates.
From an economic perspective, the passenger has the
advantage of affording an alternative form of transportation and the jobs that
have come with it.
It may be argued that there is free entry and exit in
the business, whereas that is right in theory the issue of fairness is what
this petition is all about. Demonstrated above and in the attached screenshots
is that the driver has no say to the monetary aspect of the business. With
obligations to meet the workers in the sector are cowed and, in a fix, to work
out their next move. Unemployment is a challenge in Kenya and the ease to
switch jobs is not common. The maxim of fair wage for an honest job is not met.
Platform based work is fast growing and any economy
mindful of its people as a resource needs to evaluate the developments as they
happen. Reason is, an unchecked practice becomes an impediment to fairness when
the myriad of issues arise. In this matter the case of a level playing field is
not at play. 6 years into the business in the Kenyan market, there is need to
look at the concerns raised. It is no longer a new phenomenon.
Global scene
Platform based work is a global development as
observed. There is no convergence on the regulatory framework of such business
models. it is rightly observed by scholars that regulations can impede innovation.
The basic rules of engagement on fairness however cannot be varied in business
engagements.
There will be no global convergence on how to handle
markets developments by different economies. After all every Country has its
standards. Bothered by issue of pricing and earnings owing to the earning
expectation created by Uber, The UK Supreme Court decision in the case of
(Aslam v Uber BV) See citation link 2. The Court held that “drivers are
employees deserving a minimum wage.” This is not the petition here, but it
should support the issue of fair pricing.
Another controversy on price fixing that went into
litigation, arbitration and litigation is (Meyer v Uber Tech.) 2014 at
arbitration as (Meyer v Kalanic) 2015 and at Appeal (Meyer v Kalanik and Uber
Tech) 2016-2017 The US Appeals Court for the second circuit 2017 (Citation link
3) where it was held that “consenting to terms and conditions is not a
waiver to fair compensation in the prevailing market”. The platforms thus
have no unilateral right to arbitrarily set prices.
I equally make a mention of the EU Court of Justice in
Brussels ruling on November 26, 2021 which held that “the platform was a
transport company and not a digital service, that regulations of fair play as
applicable to other players in the business are applicable to Uber”,
Notably the contention in this matter was on standardization towards licensing
requirements for drivers under Uber compared to traditional players. This cited
as ground for regulation. (See Reference link 4)
You will also find in my sources of Uber being banned
in Colombia for violating their competition law.
Uber is a pioneer and a giant corporation that has
footprints in many nations and hence the reason it is extensively cited. These
are cases decided in commonwealth jurisdictions and we can borrow from them.
The introduction of Digital Service Tax in Kenya would
place the platform-based work in the purview of taxation, when it finally gets
clarified on its applicability, this is a cost to be met by the drivers, a
cost. The platforms will be mandated to collect it, how that plays out amidst
the infirmities in pricing will cause friction.
Further observations
In an article titled Uber and Taxify in Africa: Good
work or a race to the bottom? Dated November 18, 2018 for the Center for Global
Development Julie Zollmann and Amolo Ng’weno (Nairobi Based Economic
Researchers) explores the platform based work and the changing dynamics and
rightly observe the use of pricing as the competing factor is hurting the
business to a point of the new jobs not paying sufficiently for the input. (See
citation link 5) The Authors too detail a calendar of events in the industry.
Appreciating that Taxi service is not a basic need,
there should be a price to pay. To break even the driver partners need to have
revenues enough to cover their running costs, have a return on investment and a
take home. Inflation is a present-day reality among other changes in the
economy. To let the situation, continue as it is, on the guise of the platform
work being “a new development” is to fail to address the cry of citizen
investors. Truth is the current pricing is making the taxi app business
sweatshops on wheels.
The industry workers are not in any union, these are
independent contractors as described by the platforms. The aspect of a union to
voice concerns though important is beside the point. The Kenya transport
workers union is focused on freight workers in transit and air. The petition is
on the practices adopted by the platforms.
The Authority has spoken on several occasions on the
consumer rights in other issue related determinations. It has spoken too on
transparency in disclosure and practices adopted, considering that digitization
is the future, give guidance and direction in this petition. I cite media
reports on your determinations and voice to bread packaging and labeling
issues, the gas retailers matter and the recent information and notice to bank
on disclosing charges in mortgage accounts.
Below is a summary of the reliefs sought.
Reliefs sought
·
Equity enforcements, the Pricing must
match what is stated and upfront pricing stopped forthwith.
·
The Authority to commence an investigation
into the issues raised and advise on the way forward. A Party that has violated
the law to be surcharged.
·
The classification of the platforms as
Transport / Taxi companies since they are such and thus to realize they are
bound by the rules.
·
A notification to the platforms from the
authority of the concern and need to fully engage the players involved for
stability in the business.
Sources cited.
1.
2019
Kenya Population and Housing Census Volume IV: Distribution of Population by
Socio-Economic Characteristics - Kenya National Bureau of Statistics
(knbs.or.ke)
2.
Uber BV
and others (Appellants) v Aslam and others (Respondents) - Press Summary
(supremecourt.uk)
3.
Meyer v. Uber Techs.,
Inc., 868 F.3d 66 | Casetext Search + Citator
4.
Uber
Banned In Brussels—The Company’s Latest Legal Troubles Outside The U.S.
(forbes.com)
5.
Are new jobs good jobs?
| Julie Zollmann
Screen shots of pricing showing upfront pricing. The
below shows that price is manipulated or preset. The distances covered and the
expected charges do not match as per the tariff charge provided by Uber and
Bolt. Little observes business ethics. There is an aspect of legitimate
expectation created by the platform on pricing which they do not meet. Traffic
situation is beyond control but change of route happens at a riders will. These
changes are not paid for despite the comfort enjoyed by the rider.
Acknowledgement
I confirm that I did carry the research on the stated
facts and have obtained the consent of the researchers to cite them in the
petition. I’m a civic minded Kenyan, patriotic and wish every Kenyan earns an
honest wage in whatever they do.
Ken Muiruri
kahugukenm@gmail.com
