Uberization and its ethical challenges: the case of Russian taxi market

Размещено на http://www.allbest.ru/

FEDERAL STATE EDUCATIONAL INSTITUTION

OF HIGHER EDUCATION

NATIONAL RESEARCH UNIVERSITY

HIGHER SCHOOL OF ECONOMICS

Saint Petersburg School of Economics and Management

Department of Management

Bachelor's thesis

Uberization and its Ethical Challenges: The Case of Russian Taxi Market

In the field 38.03.02 `Management'

Educational programme `Management'

Kozhevnikov Anton Alekseevich

Saint Petersburg 2020



Abstract

Market and technologies are constantly changing, and new economies rapidly appear, one of them have a term “uberization”. Despite the fact they are pretending to have an effective nature and improving traditional businesses, governments and people are not always ready for this new type of businesses. Problems in ethics also appear. The author analyzes this situation on Russian taxi market. This is qualitative research with case-study approach, the author conducted in-depth interviews with taxi drivers and managers of the platform. Secondary data analysis conducted to support evidences and compare phenomenon of “uberization” with international cases. Anticipated results will be useful in understanding insights from the market, behavior and motivation of its main players, level and future trends of “uberization” that might be important for organizations with similar business models, governments with regulations and people that are working with these platforms.

Keywords: uberization; uberisation; taxi market, self-employment; People-to-People Economy; P2PE; digital labor; gig economy; crowdsourcing economy; aggregators; ride-hailing;



Introduction

Recent theoretical developments have revealed that there is relatively new economy growing, called “sharing economy”, its companies displaced organizations in traditional economies. In this condition, some platforms got enormous scale, spreading worldwide. One of them is a mobile application that allowed users to order a taxi directly through their phone called “Uber” without intermediaries, such as dispatchers in this case, when a self-employment driver decides whether to take a ride or not, providing a trip on its own car.

Only in five years after the launch of Uber in 2010 by Garrett Camp and Travis Kalanick, Uber has spread to more than 50 countries around the world. Approximately at this time, they had a problem of launching in France. They faced a challenge of launching a low-cost taxi service called UberPop, that was banned by the French government after taxis go on strike (Toor A., 2014). Drivers from traditional taxi services even blocked major highways around Paris, stocked at the airport, had big demonstrations on city streets and even attacked people, who they thought were working for Uber, and that is all because of “unfair competition” (Rubin and Scott, 2015). The government had to develop new regulations in intense, soon Uber had fines for almost a million of euros. As Alissa J. Rubin and Mark Scott (2015) in their article state from one of the businessman's speeches.

In the end of 2014, during unrest, Maurice Lйvy, CEO of Publicis Groupe on one of the conferences said that “France faces “uberization” (Thomson, 2014), first time introducing this neo-euphemism term to a public, that then started to be used across the board and categorized this specific type of uberized software and platforms, and outcomes they may result, like events in Paris.

Apart from Uber, there are also Airbnb -- an app that allows users to be a host and lease an apartment or a half of house without agencies, Indiegogo -- crowdfunding platform for direct donation on projects from people to people, BlaBlaCar -- ride-sharing application and other thousands of platforms that are all might be characterized with next elements: digitalized platform with peer-to-peer transactions, minimized distance between user and service provider (drivers in case of taxies), ratings and other features to provide transparency in the system.

Ticona and Mateescu (2018) observe digitalized platforms in carework market and argue that those products are “cultural entrepreneurs”, creating cultural distinctions among workers, and institutionalize it into platform feature. This is an example of problems that may happen on the way of Russian taxi market, even though spheres are different.

In this manner, considering the speed of spreading among those type of technological platforms, that sometimes may have undesired outcomes like in events in France after Ubers entry, phenomenon of uberization should be deeply studied. General awareness of the situation around the world cumulatively with knowledge of specific market will allow governments and business to stay away from misfortunes and relapses.

Therefore, the author of this research paper decided to analyze Russian market of aggregators (uberized digital platforms) in the sphere of taxi services. Russia has been chosen as a native country of the author that will eventually make easier to obtain qualitative data and the sphere of taxi services as one of the most controversial in the world, according to the literature reviews, and rapidly expanding, increasing a market share and taking it out from the traditional businesses.

The objectives of this explorative paper are following:

O1: Understand behavior, motivation and attitude about digital platforms among drivers and firms;

O2: Build knowledge about level and the trend of uberization in Russia, compare it to other countries;

O3: Get insides about common problems and its solutions from drivers, firms and the government of Russia;

O4: Provide recommendations for the firms that are operating on this market and governments that are trying to regulate it;

The rest of this research is designed in the following manure. Literature review presented first, where everything is primarily built on the international scientific articles about uberization, but journal articles, researches and cases are also included. Methodology follows next, where the methods of data collection are described, and then empirical results with analysis and explanations are given. Conclusion of the author as a result in the end.



Chapter 1. Regulation of Platform Economy: Theory and Current Research

1.1 Regulation of Ethical Behavior in the Markets

Since regulation is intended to prevent unethical behavior, it must first be defined. Unethical behavior is the behavior of an individual or company that impairs the welfare of others.

There are several mechanisms for forcing companies to refrain from unethical behavior. Each mechanism creates certain incentives that make the company's welfare higher than that of the violation of the rule.

Reputation mechanism -- the company itself is interested in ethical behavior, because otherwise its stakeholders refuse to cooperate with it. The company wants to maintain this relationship, so it refrains from unethical behavior.

Governmental regulation -- The State establishes mandatory ethical behavior (laws) and punishes violators. The Company does not want to be punished and complies with the norms.

Self-regulation -- an association of market or industry participants sets general standards of conduct and punishes violators. Association members do not want to be punished and comply with these standards.

What is the best model for regulating unethical behavior?

Reputation Mechanism

The reputation mechanism is an ideal mechanism in terms of costs and benefits, as it is automatically launched in a market economy without any additional effort or cost to society. It is further enhanced when producers start to operate themselves under widely advertised brands that make them well known to all members of societies and send them a message of integrity. Because all members of society are aware of the brand, loss of reputation due to unethical behavior is very sensitive and companies try to avoid it. There are about six billion consumers in today's world, but they all know producers like Apple, Unilever or Toyota. They are behaving in good faith not because they are afraid of prosecution or revenge, but because they are afraid of losing the trust and loyalty of consumers. It is obvious that brands are perfectly created and maintained by companies individually without government involvement. However, this brand failure mechanism can cause a failure (brand failure). There are two problems that cause this failure: lack of information and lack of incentives.

Problem 1. Lack of information

The brand mechanism may fail if the company's unethical actions remain unknown to consumers. This can happen in two cases: 1) an individual consumer observes unethical behavior, but this information remains inaccessible to a wide range of consumers, 2) no consumer observes unethical behavior because he does not have sufficient professional knowledge or observes the company's actions. These cases are resolved through the following mechanisms.

Company feedback collection system. Any information system that allows to collect opinions and feedback from clients of various companies and pass this information to their potential consumers. Such a platform can be created specifically, or it can be a by-product of a large online retailer or marketplaces (e.g. Ozon, Yandex Market, AliExpress, Beru, etc.)

System of certification and licensing. Setting requirements for ethical behavior and monitoring compliance with these requirements by a specific organization. Successfully audited companies receive a product certificate or a license to conduct any activity. If the requirements are violated, the certificate or license will be revoked at any time with appropriate sanctions.

A variation of the second system can be a rating system, where an organization is not only tested for compliance or ability to meet ethical requirements, but also calculates a quantitative index of compliance with best practices, which allows to build a rating of companies on this indicator.

Feedback collection, licensing and rating systems may be established by the government, voluntary associations or self-regulatory organizations. Who is the best operator of these systems? Each party has its own unique advantages.

Industry associations have a better understanding of the industry product and are interested in increasing consumer confidence in the industry as a whole, but may 1) misunderstand ethical principles themselves, 2) be interested in embellishing the situation and concealing the most painful manifestations of unethical behavior, 3) experience a conflict of interest when they need to punish or expel members who pay dues.

The regulator does not have such a conflict of interest, but it is less aware of the specifics of each industry and may not be an effective operator of such systems. Two mistakes may be the main drawback of government regulation: 1) false positive error (preventing ethical conduct due to too strict norm), 2) false negative error (omission of unethical conduct due to limited wording of the norm).

In this regard, the coregulation model may be more optimal: the state regulator establishes 1) general principles for reputation platforms and 2) general principles for corporate governance of industry's self-regulating organizations to eliminate conflicts of interest, and then industry's self-regulating organizations create reputation platforms and corporate governance in accordance with these principles. As a result, the customer receives the most complete and reliable information about the ethics and professionalism of each market participant.

Problem 2. Lack of incentives

An individual consumer, employee, supplier or investor is aware of the company's unethical behavior but decides to continue cooperating with the company because the benefits of such cooperation are greater than those of stopping. There are several factors that lead to this and may reinforce each other.

Market power of the company. If a company has high market power over its stakeholders (consumers, employees, suppliers, local community), everyone may know about the company's unethical behavior, but they cannot do anything because they have to cooperate with it. For example, if there is only one railway company in a country, it may not care about the quality of its services because consumers will still be forced to use them.

The stowaway problem. Each stakeholder representative would benefit from the company being forced to behave ethically but prefers to evade their individual contribution to the pressure. If all consumers of a railway company boycott it, it will be forced to start improving its services, but the individual rational consumer has an incentive not to join the boycott ("let others do it"), so all rational consumers will refuse the boycott and it will be impossible.

Low level of solidarity. If a company behaves unethically towards an individual stakeholder who cannot refuse company's services due to high market power, the company may be boycotted by other stakeholders who show solidarity with the members of the company and punish the unethical company by refusing to cooperate with it. This mechanism may not work if the stakeholders have a low level of ethical consciousness, do not consider ethical behavior important at all and are not willing to sacrifice their welfare to protect the welfare of others.

1.2 Governmental control

The governmental control mechanism also has its advantages and disadvantages. The main advantage is that state regulation has the greatest power of enforcement. This power derives from two circumstances: 1) norms in the form of laws become mandatory for all market participants and no one can say that they do not consider it necessary to comply with them, 2) violators may be subject to inevitable and severe sanctions ranging from financial punishment to imprisonment for individuals or a ban on activities for organizations. The main drawback of governmental control is limited ability to develop and apply effective norms that will not hinder ethical behavior (false positive error) and will effectively detect and eliminate unethical behavior (false negative error). Here the fundamental weakness of the bureaucratic mechanism in solving any task is manifested - insufficient information and insufficient incentives for officials.

The way to solve this limitation is to maximize the involvement of private initiative and market mechanism. On the one hand, it is to develop effective contracts with officials, which will make their payment dependent on the successful resolution of the regulatory problem. On the other hand, it is the maximum involvement of private initiative of people for the work of this mechanism. For example, it could be the involvement of market players to monitor compliance: people and companies that believe they have suffered unethical behavior report the alleged violator to government authorities, and then an association commission or court determines the violation and punishes the violator.

Self-regulation

Self-regulation is an analogue of governmental regulation but is carried out at the micro level - by market participants themselves. Self-regulation has its own potential and advantages, which can lead to more effective results where government regulation is lagging behind or cannot solve the problem in a qualitative way.

An effective regulatory mechanism requires three elements: 1) code of conduct, 2) monitoring compliance with the code of conduct, 3) punishment for violation. In this case, each element must meet certain quality criteria.

A code of conduct must meet the following criteria:

Understandability and validity (a code should be written logically explaining all norms of behavior)

Concreteness (The code should define as clear criteria as possible to separate ethical conduct from unethical conduct.)

Fullness (the code should include all possible areas and manifestations of unethical behavior)

The monitoring of a code of conduct should ensure a high probability of detecting a violation of the code. Main methods of control:

Signaling of service recipients (it is necessary to maximally facilitate technical conditions for filing a complaint against the company, as well as to promote the active position of users who believe that they have been unethically treated).

Signaling of competitors (it is necessary to convince the company to actively report to SRO about unethical behavior of other members of SRO)

Mystery shopper checks (it is suggested that this function should be left to the Regulator, that can more effectively support united mystery shopper service that can scan all markets systematically).

Ethical audit (in case of revealing violations of ethical principles, it is proposed that an SRO or the Regulator check the company for compliance with the Code of Ethics and availability of all necessary compliance programs)

Punishment for violations should prevent unethical behavior. The main elements of the qualitative mechanism of punishment:

Proportionality (the penalty should be severe enough to provide an incentive for abstaining from unethical behavior)

Inevitability (punishment must be unavoidable to increase the incentive to abstain from unethical behavior)

Fairness (the decision on violation and punishment should be made by an expert authority that is credible to market participants and excludes errors or abuses)

If all three elements are of high quality, the self-regulation mechanism can work. However, its effectiveness will also be affected by several external or structural factors that do not depend on the mechanism itself. Let us list these factors:

The complexity of ethical dilemmas (the more complex ethical dilemmas have to be regulated, the harder it is to set clear criteria in a code of conduct, the harder it is to identify violations and the harder it is to make decisions about punishment). For example, the failure of MFIs to regulate themselves in 2013-2017 was in part because it was difficult to formulate ethical rules for interest and penalties for late fees. The success of NAPKA (union of major Russian collectors' companies) self-regulation was due to simple ethical dilemmas (not to be rude, not to call at night, etc.).

The tendency to unethical behavior (the less developed is the consciousness of employees and managers of companies participating in the industry, the more difficult it is to make the mechanism of self-regulation work). The failure of banking self-regulation in 2008 and its failure today is a low level of ethical consciousness of banks.

The active position of leaders of the branch (self-regulation should be advantageous to the largest and most authoritative companies in the branch and associations which can involve other companies in the given project by the reputation and active actions; success of NAPKA caused by the reason it was created by leaders of the market).

Benefit for a single honest firm in case of participation of all firms (e.g. all honest firms benefit from refusing bribes in procurement; unfortunately, in many cases this benefit does not exist for financial services markets: for example, if all banks refuse to misseling insurance products, they will all lose part of their income).

Observability and measurability of firms' behavior in the industry (in the case of poorly observed or measurable behavior, it will be difficult to identify and establish breaches of the code; this problem can easily be remedied at present by audio and video recording all communication between financial firms and their clients, which the regulator can study if necessary).

SRO's sensitivity to membership fees (if the SRO is too dependent on the membership fees of its members, it may avoid applying strict measures to violators; this problem is partially eliminated by maintaining a large SRO size (at least 25 per cent of market participants) and compulsory membership in the SRO).

The most important condition for the success of self-regulation projects is internal compliance programs that each company must implement. Qualitative implementation of these programs depends on having a well-trained compliance officer in each financial institution. Good training requires quality training (additional professional education programs on compliance and ethics), systematic maintenance of qualifications through participation in the professional community and certification of existing professional skills.

Another key condition for the success of self-regulatory projects is the availability of training programs and trainings for employees and managers of companies that will help:

Better understanding of the self-regulation mechanism.

To influence the ethical consciousness and create incentives for ethical behavior (internal motivation to comply with the code), which can be extremely important if external control over compliance with the code is difficult.

Explain the intricacies and peculiarities of different situations of unethical behavior to prevent errors.

A certain condition for effective self-regulation is support from the governmental regulator. Strictly speaking, self-regulation and state regulation should be complementary mechanisms, so we can talk about coregulation. In particular, the governmental regulator should take the following actions:

Provide ideological support in their documents and public speeches to self-regulatory projects.

Require market participants to participate in self-regulation projects.

Providing participants in self-regulation projects with more preferential regimes of state regulation:

Reduce the regulatory burden.

Reduce the number of inspections by the regulator.

Reduce penalties for violators of regulations and laws.

Regulation of Platform Economy

The general trend was - Uber and other aggregators made a lot of efforts to avoid state regulation.

In the United States, regulation of taxi aggregators differs from state to state. Uber's headquarters set in San Francisco, California had significant court proceedings since 2011 for operating an unlicensed taxi service and demanded to terminate their activity (Siegler, 2011). In 2012 California Public Utilities Commission (from here on out, CPUC) send a cease-and-desist letter to some of operating services at that time like Uber and Lyft with a fine of $20 thousand (Evangelista, 2012). Cease-and-desist letter continued to come but were cleared after interim agreements that allowed services to operate (Geron, 2013). In September 2013 CPUC decided to create a new category of services where these companies might be covered, being the first jurisdiction that recognized these services under the category “transportation network company” (Geron, 2013). Therefore, companies like Uber, Lyft and Sidecar have to get a license from the CPUC, check each driver for crimes, have a driver training program and have a “zero-tolerance” policy on alcohol and drugs, all incidents must be insured (Geron, 2013). Local regulations are being made from state to state up to this day.

In 2017 The European Court of Justice has rejected an argument that Uber merely connects passengers with drivers via mobile application and the Court decided that this is a taxi service and can be regulated like any other transportation firms on the territory of 28 member states of the EU, but decision to the way of regulation and condition of further work of similar companies are up to states (Chapman, 2017).

Process of implementation Uber on the streets of China had several governmental strikes and after several attempts made it fled China, selling business to Chinese taxi service Didi. In the beginning, Chinese Government quickly reacted to the way Uber's business model worked not allowing to provide such services for drivers by private cars, Uber's office was several times raided by police (The Guardian, 2015). Some experts say that Uber failed because of mixed reasons: internal governmental politics that are making hard to international businesses entry the market, economic unpreparedness to international business and the way they are doing this business,

Platform Economy: Efficiency and its Ethical Issues.

Economics of platforms is an actively researched topic in economics and strategic management, they have they have their own typology and are common in almost all industries (Smirnov, 2015), one of them is a multilateral markets or platforms, including two-sided platforms that are about several firms that interact with each other through an intermediary in a two-sided or multi-sided markets. Smirnov in his research also states that there are two main characteristics that define this type of platforms: 1) they have to organize direct communications (to have a control to the key factors, such as price setting, key values setting, marketing, delivery of the services, and so on)between two or more stakeholders, 2) each party is associated with the platform (on the both sides of a platforms users are aware that they are making a conscious input -- fixed payment, any type of resources invested, including registration in the app and so on).

Pricing is determined by the subtype of the platform, we will distinguish two of them, that are describing uberization somehow: The first one determines a platform with freely regulative prices and heterogeneous quality (an example of such a platform is Airbnb, users set and control prices themselves, the goods (room, hotel or hostel room, etc.) also vary; the second one has a regulated price and a single quality (an example of such a platform is Uber or other aggregators, when the price is regulated directly by Uber, the type of suitable cars is also set and controlled by Uber). We are interested in the last one - with regulated prices and single quality, as we are analyzing the taxi market, and this is how aggregators work.

How does the platform solve integrity issues?

There are different problems may appear:

Price increase

Poor quality

Deception and failure to comply with the contract

These problems can arise in relations with two parties: buyers, suppliers. In addition, there is a society with which the platform does not have a contract, but which can receive positive or negative external effects.

Let us consider relations with consumers, suppliers and society one by one. Relationships with Customers

1. Price increase under market power. If the platform has great market power, the price can be high (abuse of market power. This problem, as in any other market, is solved by competition between platforms. Here the regulator needs to ensure that there are at least 3-4 large taxi platforms in the market, although in theory one can expect an explicit or implicit collusion, which will be difficult to detect. However, there is another disciplining factor - other transport opportunities: metro and land transport. Developing these capabilities will help to significantly reduce the effect of potential explicit or implicit collusion of platforms.

There is another purely economic factor as well. If the demand curve for taxi services, which is shown in Figure 1, then the threat of collusion and its negative consequences is very relevant. If there is a demand curve, which is shown in Figure 2. (long elastic section), in this case the aggregator, even without regulation, will be interested in maximum price reduction, because it allows to increase the number of clients very much. In this case, cost reduction acquires fundamental importance, and partly it causes problems in relations with employees (we will consider them below).

Fig. 1

Fig. 2

In Russia dumping among ride-hailing services started in 2013, when Uber entered the market and aggressively lowered the prices, Yandex.Taxi and Gett were forced to enter into this price war, otherwise they will lose a market share, and in response, it made the drivers work longer to make money (The Firm's Secret, 2017), dumping also happened later in 2015, where minimum prices for Uber and Yandex.Taxi were 49-50 rubles instead of 99-199 rubles before and drivers were complaining about it (The Village, 2015). The situation about dumping might be somehow the same in other countries when new services appear, but not everywhere. For example, in China it was just illegal to take over the market like Uber did in other countries -- dumping prices (Lopez, 2016).

2. Decrease in quality. The problem of quality service (clean car, polite driver, delivery accuracy, etc.) is also successfully solved through competition between platforms as well as competition with other transport opportunities. In the conditions of active competition, consumers quickly get used to quality service and manufacturers have to put all their efforts into ensuring the highest quality.

Therefore, a strong correlation between the level of competition and service quality can be expected here. It can be expected that at the first stage of market development, when aggregators are just emerging, the quality may rather suffer. However, over time, as competition intensifies and business scale increases, aggregators should make serious efforts to ensure the right quality. Learning on mistakes and getting more feedback have contributed to the improvement of services, competition played a key role here, which triggered an outflow of clients from company to company, who provided better services, forcing aggregators to follow quality standards and evolve (The Village, 2014).

Since all consumers have different preferences in terms of quality, aggregators have invented a system of price discrimination that will meet any quality requirements and price expectations. In each of these market segments, the same competition laws apply as described above.

In quality management in any market of service sphere there is a problem of non-observability of quality of service at the moment of its rendering (hairdressers, waiters, etc.). Therefore, the company should come up with something for quality control and one of the most economical and effective solutions is a system of customer feedback. Let's consider the tariff system on the example of the biggest player - Yandex.Taxi. Ten tariffs are already available in St. Petersburg for 2020, including freight and courier tariffs. If a passenger orders a taxi, the cheapest option is "Economy" with a minimum cost of travel of 79 rubles, there are also "Comfort", "Comfort Plus", "Business", "Premier" and "Elite", these tariffs differ among themselves in price, class and year of the car, and the level of service. In the premium rates, the driver meets a person at the car, and inside there is always a bottle of water (Yandex.Taxi, 2020). Similar classes have other aggregators, changing from city to city. Such a variety of tariffs allows services to cover the whole range of customer requirements.

However, some researchers note that this system of rating of drivers may fail. The fact is that people can simply not assess the driver, worrying about his future fate. In San Francisco, only one percent of drivers got one or two stars. AirBnb analysts said that they said those people who didn't score were sometimes worse experienced than those who did, so until a mandatory score is introduced, the fairness of the score may be in question. (Stemler, 2017)

The company promises a certain quality of service, but in reality, this promise is not fulfilled. For example, the travel time forecast indicates 20 minutes, but in reality, the travel takes 40 minutes. Or the company promises one car and sends another. Since such events are also immediately obvious to customers and are a sensitive factor, companies try to eliminate this problem as much as possible. For example, Yandex.Taxi gives immediate bonuses in case of an unforeseen decrease in quality (long wait, long trip, etc.).

3. Product safety. All of the above mechanisms work well for “observable quality”, but there is still an “unobservable quality”: 1) the probability of an accident, 2) the distribution of responsibility between the passenger and the service provider for damages in the event of an accident. These characteristics are very important, but as reality shows, consumers are almost never interested in them because they feel that there is nothing wrong with them (the probability of an accident is almost zero and the damage problem will not affect them). And this fact can lead to a failure of the mechanism in the field of quality - the platform can 1) reduce the safety of transportation by reducing costs, 2) shift the responsibility for costs to the consumer or taxi driver. Since these cases are rare, it is easier for the platform to survive scandals with individual victims and leave things as is.

Can the market solve this problem? Only with the high solidarity of the society, which will learn about scandals and irresponsible behavior of the aggregator and refuse to use its services. In 2016-2017, there was a precedent when a human rights activist managed to sue 300 thousand rubles from Yandex.Taxi for compensation after an accident in a taxi (RBK, 2017), she believes that the responsibility for such cases should be borne by Yandex.Taxi, the company assures that they simply connect the passenger and the driver (Yablonskiy, 2019) However, after this incident, Yandex.Taxi began to insure all their trips, as well as other aggregators. If the market does not work because of limited solidarity, government intervention is required.

An effective solution for the aggregator is life and property liability insurance for passengers. If there is effective competition in the market, fair insurance rates will be determined, and the platform will have an incentive to reduce them through increased transport safety. Apart from buying insurance on the market, large aggregators may be able to organize such liability insurance themselves, as they have very large statistics and sufficient financial resources.

Liability insurance may also have certain market failures due to "insurance gap". The problem is that all working hours of the taxi driver are divided into period 1 (waiting for the order), period 2 (the way to the client after receiving the order) and period 3 (the way together with the client). As Edelman and Geradin write (2015, p. 312), the platforms try to direct drivers to get insurance from the state insurer if the accident occurs during the period 1, which is not quite fair to the whole society, as it increases insurance premiums for other drivers. The solution to this "gap" may be to require the platform to have full liability insurance for the driver. This has gradually happened in the USA and other countries (aggregators were denied non-commercial insurance for period 1 and were required to use commercial insurance for all periods).

As we saw in our review of the taxi market, peculiarities of its regulation, there are dozens of ways to manage ride-hailing services and different countries do it in their own way, even within one country there are their own ways of regulation. Relationship among citizens, passengers and drivers also varies. But to get full potential of developing such services and decreasing risk of collision and protest in the future, there should be a wider and broader consistency in legal sphere, said an expert to The Mercury News about the case of evolving services in the United States and its contradiction between laws, especially in case of different states (Kendall, 2017).

Uber was detected as a company that experienced misleading behavior towards driver. In order to translate the risk of problems on the drivers themselves, the term "sharewashing" was even chosen for this purpose (Kalamar, 2013), meaning the risk is translated under the pretense of “sharing”. For example, they are hiding the fact that Uber drivers' insurance covers only private rides, not commercial; or an information about illegal commercial activity on the car, that could be written in drivers' crime history (Kraan & van Hoek, 2014; Sharma, 2015)

In the summer of 2016 Chinese government accepted ride-hailing services and have created a list of requirements, all drivers had to pass crime check, have a car younger than eight years and have no more than 600 thousand kilometers passed. Further restrictions might be listed by local authorities, this includes controlling fares and setting its minimum and maximum, allowing only certain cars to work and more (Spring, 2016).

1.3 Relationships with Employees

1. Decrease in payment under conditions of market power. In relations with employees, the problem of price manifests itself in the opposite way: the platform can reduce the price of suppliers and redistribute industry-wide profits in its favor. In a highly competitive environment, the problem is also regulated through platform competition for suppliers and does not require government intervention. In two-way competition, payment to suppliers must be set at an economically fair level - covering production costs and a small profit.

This mechanism may not work in a situation of high market power of one platform, so the regulator's task here is to ensure a sufficient level of competition.

However, in the case of the taxi market, this mechanism might not solve the problem of low payment for suppliers, because the labor market of taxi drivers is overwhelmed (low barrier to entry and a large number of unemployed, including migrants). Competition between platforms does not lead to higher wages for taxi drivers because there are simply too many of them. However, the Analytical Center for the Government of the Russian Federation in the report (2019) about the taxi market in Russia analyzed legal segment of drivers and their earnings with division for population in their city which is shown in Figure 3. Overall situation is getting better in all of the cities with more than 500 thousand people, but when it is less, the situation might get worse. Thus, the opinion on information will still be checked in an in-depth interview with drivers.

Figure 3. Monthly income of taxi drivers in Russia 2017-2019 depending on the population (in thousand rubles)



2. Conditions of work. The platform can save on creating quality and safe working conditions for employees. This problem should also be solved by competition between platforms that offer more comfortable and safe working conditions to attract workers.

However, in reality this mechanism may work badly for the reasons already mentioned above - oversupply of workers on the labor market who agree to any conditions for the sake of obtaining a job. The problem may be exacerbated by the fact that safer conditions require limiting the length of work time of taxi drivers, and in case of piece wage, this will mean limiting the level of earnings. Consequently, under low pay conditions, taxi drivers may seek to work too long, which will lead to a reduction in safety.

If self-employed people find employment through platforms, they may be deprived of traditional social protection. As a consequence, wages and exploitation may be low (Nurvala 2015). This should be taken care of by the regulator.

According to the report of Analytical Center for the Government of the Russian Federation (2019), the number of taxi-drivers is growing, for 2019 there was about 584 thousand drivers, the share of aggregators among all trips reaches 53-60%. Thus, about 300 thousand and more work for a taxi, for some of them it is the only job and they might not get benefits (minimum wage, weekends, etc.) from an official job.

The historical case for the United States and services like Uber and Lyft occurred at the end 2018, New York became the first U.S. city that introduced a minimum pay an app-based drivers providing $17.22 per hour after expenses, a TLC study says that majority of drivers were earned about $12 before; Jason Post, Uber's director of public affairs, said that this new rules will lead to unnecessarily increase in a fair for passengers and didn't take into account bonuses “forcing companies to raise rates even higher” (Holley, 2018). In California, 2019, after an assembly of a bill that would require to qualify drivers to be employees instead of contractors and provide extended range of rights and compensations, Uber offers drivers in this state to have a paid time off, sick leave, $21 minimum wage per hour, but with an exception: this wage will only apply while drivers on a ride, but this is still in the process of discussion (Rapier, 2019)

In 2016 in the United Kingdom, British tribunal has stated that Uber drivers are not self-employed and should be treated as an employee with a minimum wage (Ј7.20 an hour at that time) and offer holiday entitlement, working hours should begin when the driver logged into the application (Pitas, 2016). This case might be not only a test of Uber's business model and others ride-hailing services, but also gig economy as a whole. Uber states that there are more than 30 thousand drivers just in London, it means that drivers choose it, because it allows them to have flexible work hours, no minimum hours and restrictions to work with other services. (Espiner and Thomas, 2016)

Drivers in Russia also go on strike, the key feature here is that these drivers are already connected to one of the aggregators and have experience working with them, as it happened in 2016, when a few thousand drivers decided to turn off the application for 2-3 days, this is all because of services' decrease in fares for passengers; a representative of the drivers' union said that the regulation of aggregators should be enacted at the legislative level, in particular, the Government have to establish a minimum price per ride for all of the services and index it, depending on the region. But as Elina Stayiskaya, head of Yandex.Taxi PR-projects, said to Meduza “There is no mass dissatisfaction” and that service operates as usual (Meduza, 2016). Another strike was in early 2018 in Moscow, demanding not to take orders and try to convey drivers' point of view to the aggregator once again. They were dissatisfied with the fact that the service was setting the price of the trip itself and was increasing the percentage for each trip and they have to over work to get enough money. Drivers who refused to go on strike were promised to send fake orders to inconvenient and remote areas (Raspopova, 2018). The latest protest was organized in December of 2019 and had to be extended to the entire country with thousands of followers on social media. Attendees have urged people to boycott and not to come to work for a couple of days, in their opinion, it would increase prices and the aggregators would make concessions, but that did not happened, ordinary people have not even noticed what's going on (Petunin, 2019). One of the drivers said to Komsomolskaya Pravda on the days of protest “We wouldn't be working here if it was that bad. Outraged are the people who do not want to work. And if we go out on a normal schedule, that's enough.” At Yandex.Taxi at these days did not notice a shortage of drivers, some of the drivers even used this opportunity to get more free orders (Viktorov, 2019 and RIA, 2019).

Wentrup, Nakamura and Strцm (2019) in their article relationships of Uber with workers in France. What is the trust-building mechanisms and its consequences through the perspective of its workers -- drivers of Uber in Paris: mistrust, false feel of freedom, systems of punishments and so on. The authors are also described inefficiency of incumbent international business theory and making an assumption that trust is one of the main factors of successful market entry in modern world. This article represents negative outcomes that may be resulted in other countries and it should be examined to avoid in the future.

Relationships with Competitors

When a large platform enters the market, it can severely restrict the business of existing suppliers, or force them out of the market. Market ethics allows more efficient suppliers to displace less efficient ones - this is the basis of the market mechanism. However, there are ethical rules of this competition: 1) the less effective supplier, who will have to leave the market, it is necessary to give the opportunity to save their resources as much as possible, 2) it is impossible to carry out predatory competition (predatory pricing), that is, to sharply lower prices at the time of entry into the market in order to ruin existing competitors, and then be able to capture the whole or almost the whole market and raise prices to a higher level.

In the case of taxi aggregators in general, experts agree that their appearance is an example of normal development of competition (Boshuijzen-van Burken, 2017, p.5) and there is no ethical dilemma.

When aggregators entered the taxi market in the regions of Russia, at some point traditional taxi parks could not resist the competition and joining to the aggregator as a partner. One of the representatives of the traditional taxi park in Vyborg said, "Taxi parks need to maintain a base, regularly repair cars, feed the dispatcher service, pay taxes and salaries, but a cabbie with a smartphone does not […] Where should we go?" (Kalinin, 2019)

However, how ethically the competition between Uber and traditional carriers has developed?

Communities of drivers in some countries protest against services and it fares, one of hugest unrests because of Uber happened in Paris, France and lasted for two years, drivers of traditional taxi blocked key highways and roads to airports (BBC, 2014) and even attacked Uber drivers with passengers, burned cars (Dillet, 2014 and Dillet, 2015). As a result, French Government reacts rapidly and adopts bills in different steps restricting such services in different ways to protect the traditional taxi market, eventually banning UberPOP -- right after another nationwide protest of cab drivers (BBC, 2015), two Uber executives were arrested and fined, they were found guilty of misleading commercial practices and operating an illegal transportation service (Pickles, 2015). BBC also states in this article, the reason French cab drivers are mad for Uber is because they have to pay thousands of euros just to get a license and are being strictly monitored, but it takes just a registration in the app to let any non-professional driver occur rides in Uber, they are also stating that this is a reason why cab drivers are criticized for not being adaptative to new technologies. Rachid Boudjema, the president of the taxi drivers' union called Uber management “American cowboys” who “want to destroy our system, the system we are all attached to” (Allen, 2016). Uber company also had a luxury segment in France, it continued to operate.

1.4 Current Research on Regulation of Platforms

Although uberization is a recent phenomenon, there is no lack of articles devoted to this field. Many articles appeared with a peak in 2016 by French writers and it has still positive growth. Unfortunately, beside the fact there is articles about product and regulations on the U.S., French, Chinese and other markets, there is a gap on articles specifically about Russian market. One of the first paper by Edelman and Geradin (2015) explored contradictions in regulations of software that makes a service which typically requires certification and licensing and existing systems of the law that might be outdated. The authors suggested how it may be improved in order to protect its customers and avoid any harm for noncustomers.

Interesting that aggregators initially tried not to get under governmental regulation. For example, Uber tried to argue that it should not be subject to government regulation because it has its own safety standards. (Boshuijzen-van Burken, 2017, p.7). In many cities, Uber did not have licenses to transport passengers, but even here they claimed that licenses were no longer needed. Researchers note that platforms were initially successful at failing to comply with regulations, and this was not fair (Baker, 27 May 2014).

Uber has also been accused of violating privacy (Isaac, 2015; Suster, 22 November 2014; Weisse & Guynn, 2014).

At the same time, researchers note that in various countries, regulation is in the interests of existing traditional service providers, which strictly speaking is not in line with the interests of the whole society. For example, the number of vehicles in traditional carriers is often limited to maintain prices, which is not exactly ethical in terms of market competition and even more unethical at times of peak demand.

For example, a very strange regulation in France, which was apparently aimed at protecting traditional carriers. For instance, in France, Uber's growth brought demonstrations and violence, and in an October 2014 response, the French Parliament passed the so-called Loi Thйvenoud. This law imposed a series of regulations that do not seem to be justified by genuine consumer protection concerns. For one, Loi Thйvenoud prohibits so-called “transport vehicles with drivers” (a category intended to cover transportation platforms including Uber) from being geo-localized by users before reservation, for instance through the use of a smartphone. The law also requires each covered driver to return to his base between rides if he does not have a reservation booked when dropping off a passenger--preventing drivers from traveling to areas where

they anticipate customer demand. Finally, the law requires informing a passenger of the price of a ride when the passenger makes a reservation, which is incompatible with typical transportation platform pricing and with the flexibility software platforms anticipate. These requirements seem to do little to protect users from market failures. For example, passengers are helped, not harmed, when drivers move towards areas of high demand. But these rules deprive users of some key efficiencies provided by transportation platforms.

One of the dilemmas of regulation is what level of quality and safety consumers need. For example, the regulator may set the maximum mileage or age of the car, but if this leads to an increase in the price of the service, many passengers would probably be against it and would prefer a cheaper service instead of better quality (Edelman, 2015, p. 315). However, while in the area of observed quality (type of car, soft ride, smell, etc.) consumers can be trusted to self-regulate quality, in the area of safety consumers cannot be trusted, as they may misunderstand the situation, risks, etc. It is likely that in these cases the regulator should think for them and set minimum requirements for carriers (Edelman, 2015, p. 317-318). Covid-19 and its Challenges for the Industry in Russia

...