Uber, rival apps join forces in Brazil to stem tide of regulation

BRASILIA (Reuters) - Uber Technologies Inc [UBER.UL] has formed an unprecedented alliance in Brazil with other ride-hailing services, including its main local rival 99, to win public support to block regulation threatening the way they do business in a booming market.

Despite dominating the sector in Brazil, Uber has joined forces with three smaller apps for a public campaign that helped convince senators last week to scrap parts of a bill that would have effectively turned the companies into regular taxi services.

With Uber facing a possible ban in London and several U.S. federal investigations, the company’s new Chief Executive, Dara Khosrowshahi, needed a win in Brazil. The South American country is its second-largest market after the United States and Sao Paulo, Brazil’s economic capital, has more Uber rides than New York.

Together with Spain’s Cabify and Brazilian apps 99 and Lady Driver - which focuses on women drivers and customers - Uber recruited digital influencers and flooded social media with messages asking their users to call their lawmakers.

Under the slogan “Together for Mobility,” the apps got thousands of their drivers onto the streets of Brazil’s cities in protest, while the country managers of Uber, 99 and Cabify made a video together warning Brazilians that ride-hailing was in danger of being suffocated by red tape.

The collaboration with competitors may be an early sign of Khosrowshahi’s strategy of fighting unwanted regulation with a less confrontational approach than his outspoken predecessor Travis Kalanick.

“We called on drivers and users to mobilize by gathering signatures in support of alternative regulation for the apps,” said Fabio Sabba, chief spokesman for Uber in Brazil, adding that 816,000 people signed the petition presented to Congress.

In their amended bill, senators dropped requirements that drivers own their cars and use the same red license plates used by public taxis, though they left a ban on rides outside the city where the car is registered.

While drivers will still have to register with municipal authorities, they will not be classed as public transport if the amendments stand, and no city would be able ban car-hailing services or limit their numbers.

“Together we boosted public awareness of the issue and the Senate accepted the amendments,” said Daniel Bedoya, Brazil manager at Cabify, which operates in 11 countries and had never teamed up with Uber before.

The ride-booking firms said they are confident public pressure will sway Brazil’s lower house to accept the Senate’s amendments, a milestone in efforts to roll back a regulatory crackdown that could jeopardize their rapid global expansion.

But the battle is far from over. There is no date scheduled for the final vote and the leftist Workers Party, backed by taxi unions, has vowed to undo the changes.

ATTRACTING INVESTMENT

Tough regulation would slam the brakes on foreign investment into the fast-growing Brazilian market, where car-hailing apps have taken off explosively due to disastrous public transport and the belief that online booking is safer in crime-ridden cities.

In January, China’s largest ride-hailing company, Didi Chuxing, announced plans to invest $100 million in 99, an on-demand taxi and ride-sharing service. Japan’s SoftBank Group Corp (9984.T) followed suit in May with its own $100 million investment in the Brazilian app.

Stricter regulation would be a blow for Uber, which has 80 percent of the Brazilian market, as Japan’s SoftBank and other investors are negotiating the terms of a $10 billion investment in the company.

The debate in Brazil comes shortly after authorities in London decided not to renew Uber’s operating license and highlights the legal threats against its foreign operations as the company prepares for an initial public offering IPO as soon as 2019.

With the stakes high, Khosrowshahi flew at short notice to Brasilia last week to join lobbying efforts on the day the bill went to a Senate vote in the country’s capital.

Striking a more conciliatory style than the combative Kalanick, Khosrowshahi kept his cool after senators refused to meet with him but publicly warned that Uber’s future in Latin America’s largest economy depended on the decision.

The company was careful to emphasize the impact on ordinary Brazilians, saying the bill would leave its 500,000 drivers out of work by making it too expensive to operate.

Uber’s allies played their part. Lady Driver founder Gabriela Corrêa said she lobbied the 13 women senators in the corridors of Congress, telling them many of her drivers were mothers who depended on the app for their families’ livelihood.

Lady Driver began in February in Sao Paulo and is expanding fast in an activity long-dominated by men. The app has 9,500 drivers and will launch in November in Rio de Janeiro, Brazil’s second-largest city.

“Congressmen won’t undo the amendments because they have realized that ride-hailing is needed today,” she said. “If we go back to the past, women will lose ground.”