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Tuesday, 8 May 2018

Parliament looks to smother ride-hailing in the baby crib by approving an even worse version of the Ride-Hailing Apps Act

LEGISLATION WATCH- Parliament looks to smother ride-hailing in the baby crib by approving its Ride-Hailing Apps Act: The House of Representatives approved in its plenary session yesterday the Ride-Hailing Apps Act. Parliament not only passed the law without amending its most controversial clauses on user data, but appears to have drafted a worse version of the law. The move comes many MPs heavily criticizing on Sunday articles 9 and 10 of the legislation — which mandate that ride-hailing companies store user data on servers for a period of 180 days and make information accessible to government agencies when requested. The Egyptian Council of State (Maglis El Dawla) had said that these clauses were unconstitutional, and reports suggested that a House subcommittee charged with reviewing the act had agreed to scrap them. The passed version of the act requires the companies to store the user data on their servers abroad for the 180-day period, in contrast to an earlier draft that required data to be stored locally.

The law also retained several other stipulations that had earned the ire of ride-hailing companies Uber and Careem, a copy of the legislation published on Youm7 shows. Drivers operating through the companies must display a “symbol” — the nature of which will be determined by the prime minister at a later time — to indicate their affiliation with the company. Ride-hailing companies will have a three-month window after receiving their operating licenses to prepare a policy strategy to incorporate white taxis in their fleets and train white taxi drivers to meet the companies’ quality standards. A decree from the prime minister will be issued to set these standards. The law also sets a six-month window for companies to comply with all its requirements.

In its final form, the legislation also imposes higher licensing fees than a previous draft had indicated. Companies will be required to pay up to EGP 30 mn (up from the EGP 10 mn cap previously suggested) to receive a five-year operating license. Companies will pay a 25% down payment on these licenses and will pay the remaining fees in instalments over the five-year licensing period. Meanwhile, ride-sharing drivers must pay up to EGP 2,000 (up from EGP 1,000) for an annual license to work through the companies, and will pay taxes 25% higher than those imposed on cab drivers. Companies will also be required to pay a one-off fee to legalize their status. The law stipulates that this fee must be lower than the cost of the operating license.

Companies and drivers will both face fines for violations: Companies that operate without receiving the necessary licenses will face penalties ranging between EGP 200k and 5 mn, while drivers will be fined EGP 5-20k for the same offense. A fine of no less than EGP 500k and no more than EGP 5 mn will be imposed on companies that fail to share their databases as required by the state or incorporate white taxis in their fleets. These violations could also lead to companies’ licenses being revoked.

The law does not apply to tuk-tuks, House Transport Committee undersecretary Ahmed Hussein confirmed yesterday, according to Ahram Gate. Tuk-tuks are regulated through their respective municipalities, Hussein said.

Just in the nick of time: The law’s passing comes just days before the Supreme Administrative Court will hear an appeal by Uber and Careem against a lower court decision that ordered the two companies to suspend operations.

Uber seems to be taking the law in stride: The law is “a major step forward for the ridesharing industry as Egypt becomes one of the first countries in the Middle East to pass progressive regulations,” spokeswoman Shaden Abdellatif said, the Associated Press reports. Careem declined a request to comment. “We will continue working with the prime minister and the cabinet in the coming months as the law is finalised, and look forward to continuing to serve the millions of Egyptian riders and drivers that rely on Uber,” the company said, according to Reuters.

Meanwhile, Investment and International Cooperation Minister Sahar Nasr hailed the legislation as “encouraging” for the ride-sharing industry, according to a ministry statement. Nasr also said the law will protect competition in the transport sector while leveling the playing field.

Privacy concerns top coverage of the law in the foreign press: We can naturally expect that the international press is having a field day with the act in its current form. The Wall Street Journal is noting criticisms by Human Rights Watch and other organizations.

Our take — Uber and Careem will be fine. Startups will suffer: It seems from the wording of the law that MPs have only heard of Uber and Careem, two major multinationals in the ride-hailing space that can bear the hefty licensing and penalty costs in the law. What they don’t seem to understand is that local startups, such as Swvl — which set a record for a Series A funding round in Egypt with USD 8 mn last month — will find it harder to comply with the stringent financial demands of the law. The law has the potential to stifle a nascent and exciting new industry. And as for cab drivers, we have as much sympathy for them as the horse and buggy drivers when cars came about.

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