This could be the week Uber Technologies Inc. finally grew up. The prospect of being shut out of one of the world's biggest markets can have that effect on an adolescent company.
Last week, Uber chief executive Travis Kalanick's brash approach to business was rewarded with another $1.2-billion (U.S.) from eager investors. Now, the app that gave the world a better way to hail a cab finds itself embroiled in a political crisis that dwarfs anything it has faced to date.
Last weekend, an Uber driver in New Delhi called Shiv Kumar Yadav allegedly raped a woman who had fallen asleep in the back of his car. The incident exploded into the biggest story in the country. There have been 25,000 reports of rape in India this year. Home Minister Rajnath Singh calls it a "national shame."
Uber now is associated with that shame. Mr. Yadav had been charged multiple times for various sex crimes dating back to 2003 and another woman complained to Uber about Mr. Yadav after she took a ride with him earlier this year. This is not a man who should have been given a stamp of approval by a company that promises the "safest rides on the road." Yet Uber gave Mr. Yadav a company-issued smartphone and added him to its roster of drivers.
Authorities said Mr. Yadav had a forged certificate from police that stated he had a clear record. Bloomberg News reported that these certificates are easily purchased for the equivalent of $130. While that is something to which the police must answer, few in India will give Uber the benefit of the doubt. Its citizens operate on the assumption the system is corrupt and that almost anything can be bought. A true guarantee of the "safest" ride on the road would have required more than a piece of paper.
Uber could have worked more closely with authorities on background checks. But Mr. Kalanick's approach has been to flout authority. He plunges into regulatory grey areas and defies elected officials who try to stop him. When India's central bank forced Uber to change its payment system to comply with Indian law, Mr. Kalanick responded as if his parents had ordered him to his room. "Uber is now compliant but less convenient," the company pouted in a blog post announcing the change.
In India, Uber has been spending heavily to establish itself as the dominant taxi service, offering discounts to customers and subsidies to drivers. The reason is clear: the country is on the verge of usurping China as the fastest growing major economy in the world. But Uber has company in India. A handful of local rivals offer essentially the same service, including ANI Technologies Pvt., which operates Ola Cabs and is backed by Japanese billionaire Masayoshi Son's SoftBank Corp. The competition is fierce, and consumers love it – at least, they were loving it.
The response of the government of the state of Delhi was to ban Uber, Ola and all their competitors. The national government urged other states to do the same and several have. Uber has also been banned in Thailand, Spain, the Netherlands, and a number of cities around the world. The bans are over-reactions, but that's how governments respond to public outrage. Because these ride-sharing services essentially exist thanks to regulatory loopholes, banning them was an easy way for politicians to demonstrate responsiveness.
There has been a notable change in Mr. Kalanick's attitude. A few days after the incident in New Delhi, he promised to do "everything, I repeat, everything" to help catch and punish the perpetrator and to support the victim. But he wasn't quite ready to accept full responsibility: "We will work with the government to establish clear background checks currently absent in their commercial transportation licensing programs."
By Thursday, Mr. Kalanick no longer was looking to share blame. Uber issued a new statement in which the company apologized for the incident and pledged to review the way it operates in India. Among the things the company said it is considering: background checks that go beyond what currently is required. "We are fully committed to partnering with and are in discussions with the government, other transportation organisations and safety experts in India to implement robust solutions to ensure a safe ride."
One wonders whether any of this would have happened if Mr. Kalanick had chosen a co-operate with authorities at the outset. His company is valued at approximately $40-billion because its technology truly could make the world a better place. Uber and its rivals are making taxi markets efficient, enriching drivers and comforting riders. They offer the prospect of fewer cars and less pollution. Mr. Kalanick would be partly responsible for such a future. His late-stage embrace of a more mature approach to business suggests he also would like to be part of it. That's not guaranteed. Today in New Delhi, Ola looks like the safer ride.
Kevin Carmichael is a senior fellow at the Centre for International Governance Innovation, based in Mumbai.