Andrew James F. Parungao
Introduction
On August 14, 2017, the Land Transportation Franchising Regulatory Board (LTFRB) suspended Uber for a month[1]after the company violated the agency’s July 26 order directing Transport Network Companies (TNCs) to stop accepting applications for accreditation of Transportation Network Vehicle Services (TNVS) and their eventual approval or activation. LTFRB found that driver applicants were not duly informed of the franchise requirements, and made to believe that once accredited by the Uber Systems, Inc., they can already legally ferry passengers and earn from their accreditation as TNVS peers. Following said order, LTFRB directed Uber stop operating their online booking application during the period of suspension.
In response to Uber’s suspension, the riding public and lawmakers called the action of LTFRB as cruel and absurd as it deprived thousands of commuters who rely on the ride-sharing services daily. Many believed that the suspension order is a violation of LTFRB responsibility to help in facilitating better solutions to issues concerning TNVS operations that will benefit the riding public.[2]Said suspension also doubted government’s ability to catch up with innovation brought about by TNVS like Uber and Grab only relying on and sanctioning traditional forms of public transportation, such as public utility jeepneys, public utility buses, utility vehicle (UV) express, and taxis.
The decision to suspend Uber brings us to the question whether or not LTFRB is correct in classifying Uber and Grab as Transportation Network Companies (TNC) pursuant to LTFRB Memorandum Circular No. 2015-015?
LTFRB
On June 19, 1987, the LTFRB was created by virtue of Executive Order No. 202(s.1987). It was mandated topromulgate, administer, enforce, and monitor compliance of public land transportation services in accordance to State policies and laws.[3]The Board is composed of a Chairman and five board members.[4][5]
One of the functions of the Board, among others, is to formulate, promulgate, administer, implement and enforce rules and regulations on land transportation public utilities.[6]It also provides standard of measurements and/or design, and rules and regulations requiring operators of any public land transportation service to equip, install and provide in their utilities and in their stations such devices, equipment facilities and operating procedures and techniques as may promote safety, protection, comfort and convenience to persons and property in their charges as well as the safety of persons and property within their areas of operations.[7]
Major Ride-Hailing Applications
Two major ride-hailing applications are servicing the commuting public in Metro Manila, namely Uber and Grab.
Uber
Originally called UberCab, Uber is arguably the most famous and a pioneer in the sharing economy industry.[8]It was founded in the United States in 2009 by two American start-up entrepreneurs, Travis Kalanick and Garrett Camp. The company, which originally started operations in San Francisco, has expanded to 632 cities[9]in the world providing its drivers with “flexible new way to earn money” and helping the cities it serves, “strengthen [its] local economies, improve access to transportation, and make [their] streets safer.”[10]
In February 2014, Uber arrived in the Philippines initially serving Manila.[11] It had operations in Cebu a year after.[12] Uber Philippines offers ride-sharing services like UberBlack,[13] UberX,[14] UberPool,[15] UberXL,[16]and UberHop.[17]
Fares on each trip are calculated by taking into account the following factors: (1) base fare or the price for the pick-up, (2) travel time, (3) travel distance, (4) surge pricing, and (5) highway tolls and other fees.[18]
Grab
Grab on the other hand is one of the leading ride-hailing mobile applications in Southeast Asia. Originally known as MyTeksi, the company was founded in Malaysia in 2012 by two Harvard Business School alumni, Messrs. Anthony Tan and Tan Hooi Ling.[19]Grab aims to revolutionise the transportation industry in Southeast Asia. Its core product is an on-demand dispatch service with GPS-enhancements, allowing passengers to hail the nearest available taxi, car or motorbike with extreme ease.[20] Currently, Grab operates in Malaysia, Indonesia, Singapore, Thailand, Vietnam, Myanmar, and the Philippines.[21]
Grab arrived in the Philippines in August 2013.Its services include transportation (i.e. GrabShare, GrabCar, GrabTaxi) and delivery (GrabExpress).[22]One of its notable innovations is the upfront pricing of fares which allows the riding public to view the fares for their respective trips. This allowed greater transparency and discouraged fare contracting reportedly rampant in the traditional taxi services in Metro Manila.
Other TNCs
In the wake of Uber’s suspension, a number of ride-sharing applications emerged to address the demand of the riding public. An application known as Arcade City was launched after Uber was suspended. LTFRB, through a press statement,warned Arcade City to stop all bookings made with the use of applications or platforms similar to Uber and Grab.[23]
Aside from the three applications, others have emerged to offer their platforms to the commuters: Micab, Wunder, U-Hop and Angkas.[24]
Government Recognition of Transportation Network Vehicle Services (TNVS) and Transportation Network Companies
The Department of Transportation and Communication (DOTC), through the issuance of Department Order No. 2015-011,[25] recognized that technological innovations are constantly challenging and often transforming established practices of industries. According to DOTC, one such “catalytic” technology in the transportation industry is the Online-Enabled Transportation Service (OETS) that connects drivers with potential customers who request a ride.[26] The internet-based digital technology application provides services by connecting available registered vehicles with registered customers who request rides. Once a request is accepted, the driver picks up the customers and brings them to their destination. Globally, the service provider which provides this type of application and facilitates this new type of transportation service is referred to by many jurisdictions as Transport Network Companies (TNC).[27]
To operate, the drivers and their corresponding vehicles must be accredited by the TNC and registered with LTFRB. The operators and drivers must also comply with the rules and regulations issued by government agencies. The DOTC directed the LTFRB to promulgate the relevant implementing Memorandum Circular on the accreditation of TNCs.[28]
LTFRB Memorandum Circular No. 2015-015
Pursuant to the provisions of DOTC Department Order No. 2015-11, the LTFRB published Memorandum Circular No. 2015-015 which provided the rules and regulations governing the accreditation of TNCs.[29] The MC defined a TNC as “an organization whether a corporation, partnership, or sole proprietor, that provides pre-arranged transportation services for compensation using an internet-based technology application or digital platform technology to connect passengers with drivers using their personal vehicles.”[30]
The MC stated that an application for the issuance of a Certificate Accreditation shall be made in writing on a form provided by the Board, signed and sworn to by the applicant. The Certificate of TNC Accreditation shall only be granted to TNCs providing internet-based technology application or digital platform technology to connect passengers with drivers using their personal vehicles. [31]
In addition, the LTFRB also published three other MCs that regulate the operations of TNCs. [32]
- MC 2015-016 – Terms and Conditions of Certificate of Transportation Network Company Accreditation;
- MC 2015-017 – Implementing Guidelines on the Acceptance of Applications for a Certificate of Public Convenience to Operate a Transportation Network Vehicle Service; and
- MC 2015-018 – Terms and Conditions of a Certificate of Public Convenience to Operate a Transportation Network Vehicle Service.
These provided the additional processes and legal documentary requirements for TNC accreditation and what TNVS operators needed in order to secure their franchises before they can start operating.
Liabilities of TNCs
To ensure the safety of the riding public and to enforce state laws and policies regulating public transport conveyances, the LTFRB directed the TNCS to comply with the rules and regulations set forth by the LTFRB. The TNCs should exercise due diligence and reasonable care when they accredit drivers that will provide transport service.
Reaction to the Government Recognition of TNCs
These related orders were celebrated by some sectors of the riding public for recognizing public sector’s demand for better transport services, the government’s ability to be flexible in light of the limitations of the current public transportation sector. In their press releases, Grab and Uber praised these measures: “this help revolutionize transport in the Philippines through the development of game-changing regulations that champion innovation and public safety for society,”[33]and government sending “a clear message that embracing innovation, supporting consumer choice and ensuring the safety of riders should be a top priority for governments in every market.”[34]
LTFRB MC No. 2016-008
In July 2016, the LTFRB issued Memorandum Circular No. 2016-008 ordering the suspension of the acceptance of all TNS applications which would operate within Metro Manila or entering Metro Manila.[35]The aim of such circular is to allow the LTFRB to review existing policies, and other pressing issues regarding the issuance of franchise to TNVS.[36]
Said issuance was based on certain allegations that some operators of TNVS are circumventing the regulations set by the government. On July 11, 2017, Uber and Grab were ordered by the LRFRB to pay a fine of five million pesos each when they allowed their drivers to operate on their platforms without permits. LTFRB, during the hearing of the case, found that both companies violated various terms and conditions stipulated in their agreement with the agency. Violations included TNCs allowing TNVS drivers to continue operating without a valid permit and violating in the MC 2015-016, including displaying the LTFRB accreditation case number in the phone application managed by TNCs and screening the drivers before recommending them to the LTFRB for accreditation.[37]
On August 14, 2017, the LTFRB ordered Uber to suspend operations for a month after the latter continued accrediting drivers into its system, in clear violation of the earlier issued memorandum circular. For its part, Uber clarified that they already “halted all activations” but “accepted but not processed” applications as they are optimistic that the discussions with the regulatory agency will move forward amicably.[38] Unconvinced with Uber’s explanation, LTFRB proceeded with the suspension.
On August 19, 2017, after paying a P190 million fine, Uber’s suspension was lifted and was again allowed to operate. LTFRB computed Uber’s fine based on the maximum daily earnings of the company, pegged at P10 million multiplied by the remaining number of days the company is suspended from operating. Additionally, Uber was also ordered to provide financial assistance to all Uber drivers amounting P299 million for the days they are unable to operate as a result of the suspension.[39]
Conclusion
The LTFRB is correct in classifying Uber and Grab as TNCs since both companies fall under the category of a TNC. It is evident that both companies provide pre-arranged transportation services using an internet-based technology application or digital platform technology to connect passengers to drivers who use their personal vehicles. Under the rules set forth by the government, the companies must adhere to the rules and regulations in order for them to be accredited. This is to ensure that laws are obeyed and the interests of the riding public are protected.
However, the suspension of Uber showed their failure to comply with the rules, especially on the registration of their drivers and issuance of the necessary permits to operate. The fines imposed may merit the infractions of the companies but the suspension order given to Uber, as shown in the events following the suspension proves that it did more harm than the supposed benefits.
[1] Philippines. Land Transportation Franchising and Regulatory Board. ADVISORY TO ALL UBER TNVS. August 03, 2017. Accessed September 03, 2017.https://www.facebook.com/ltfrb.citizen. enforcer/photos/a.1416260738615850.1073741827.1416241841951073/1931243310450921/?type=3&theater
[2] Hapal, Don Kevin. “Online outrage as LTFRB suspends Uber.” Online outrage as LTFRB suspends Uber. August 03, 2017. Accessed September 14, 2017. https://www.rappler.com/technology/social-media/178711-online-outrage-ltfrb-suspends-uber.
[3] “Mandate,” About Us, accessed September 23, 2017, http://ltfrb.gov.ph/main/aboutus#4.
[4] Philippines. Office of the President. Executive Order 202, s. 1987 CREATING THE LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD. June 19, 1987. Accessed September 03, 2017. http://www.officialgazette.gov.ph/1987/06/19/executive-order-no-202-s-1987/
[5] Two (2) members with the same rank, salary and privileges of an Assistant Secretary, all of whom shall be appointed by the President of the Philippines upon recommendation of the Secretary of Transportation and Communications. One (1) member of the Board shall be a member of the Bar and shall have engaged in the practice of law in the Philippines for at least five (5) years, another a holder of a degree in civil engineering, and the other a holder of a degree in economics, finance or management both with the same number of years of experience and practice. (See EO 202, s, 1987 Section 2)
[6] Ibid. See Section 5 paragraph (k)
[7] Ibid.
[8] A sharing economy is an economic model in which individuals are able to borrow or rent assets owned by someone else. The sharing economy model is most likely to be used when the price of a particular asset is high and the asset is not fully utilized all the time. (Source: Sharing Economy Definition | Investopedia http://www.investopedia.com/terms/s/sharing-economy.asp#ixzz4sqk05tWT)
[9] Uber. “Uber | Our Story.” Uber | Our Story. Accessed September 14, 2017. https://www.uber.com/en-PH/our-story/.
[10] Ibid.
[11] Uber. “Uber Manila Has Officially Launched!” Uber | Blogs. February 13, 2013. Accessed September 02, 2017. https://www.uber.com/en-PH/blog/manila/uber-manila-has-officially-launched/.
[12] Ibid.
[13] A high-end black cars driven by professional drivers. UberBlack offers an elevated ride experience great for business or date night. (Source: https://www.uber.com/en-PH/ride/uberblack/)
[14] A private ride, which can accommodate 1-4 passengers and utilizes sedans, UberX cars provide customers with comfortable and affordable rides. (Source: https://www.uber.com/en-PH/ride/uberx/)
[15] Launched in June 2016, UberPOOL matches you with riders heading in the same direction, so riders can share the ride and the cost. It’s the most affordable option among the services offered by Uber and can accommodate a maximum of two rides per pickup. (Source: https://www.uber.com/en-PH/blog/manila/manila-meet-uberpool/)
[16] UberXL car provide private rides for groups of 6 (or for riders with extra luggage) (Source: https://www.uber.com/en-PH/blog/manila/uberxl-more-room-for-what-matters/)
[17] uberHOP enables riders heading in the same direction to share a ride from 6-9am and 6-9pm for a flat fare. It starts from a fixed pick-up location and heads to a fixed drop-off location. (Source: https://www.uber.com/en-PH/blog/manila/uberhop-manila/)
[18] Uber. “How are fares calculated?” Uber | Help, accessed September 27, 2017, https://help.uber.com/h/33ed4293-383c-4d73-a610-d171d3aa5a78.
[19] Siddharth, Philip. “Harvard Inspires Man to Ditch Family Riches for Taxis.” Bloomberg | News. June 10, 2014. Accessed September 17, 2017. https://www.bloomberg.com/news/articles/2014-06-10/harvard-inspires-man-to-ditch-family-riches-for-taxis.
[20] MyTaxi.PH, Incorporated. “GrabCar First and Only Transport Network Company Legalized by the Philippine Government.” News release, July 07, 2015. GrabCar. Accessed September 14, 2017. https://www.grab.com/ph/blog/grabcar-first-and-only-transport-network-company-legalized-by-the-philippine-government/.
[21] Grab. Grab Corporate Profile. June 04, 2015. Singapore, Singapore.
[22] Ibid.
[23] Philippines. Land Transportation Franchising and Regulatory Board. ADVISORY: LTFRB ORDERS ARCADE CITY TO CEASE OPERATIONS. August 17, 2017. Accessed September 15, 2017. https://www.facebook.com/ltfrb.citizen.enforcer/photos/a.1416260738615850.1073741827.1416241841951073/1932143457027573/?type=3&theater
[24] Pauline Mendoza, “Attention, PH Commuters: Here are Five Ride-Hailing Apps to Fill the Void Left by Uber,” Inc. Southeast Asia | Technology, August 17, 2017, accessed September 27, 2017, http://inc-asean.com/editor-picks/attention-ph-commuters-five-ride-hailing-apps-fill-void-left-uber/.
[25] Philippines. Department of Transportation and Communications. May 11, 2015. Accessed September 02, 2017. http://dotr.gov.ph/images/issuances/DO/2015/DO2015-11.pdf.
[26] Ibid.
[27] Ibid.
[28] Ibid.
[29] Philippines. Land Transportation Franchising and Regulatory Board. May 11, 2015. Accessed September 02, 2017. http://ltfrb.gov.ph/media/downloadable/MC_NO._2015-015_.pdf
[30] Ibid.
[31] Ibid.
[32] Philippine News Agency. “LTFRB issues 4 circulars to regulate operations of TNCs.” BusinessMirror, May 29, 2015. Accessed September 14, 2017. http://businessmirror.com.ph/ltfrb-issues-4-circulars-to-regulate-operations-of-tncs/.
[33] Grab. “GrabCar First and Only Transport Network Company Legalized by the Philippine Government.” GrabCar. July 7, 2015. Accessed September 17, 2017. https://www.grab.com/ph/blog/grabcar-first-and-only-transport-network-company-legalized-by-the-philippine-government/.
[34] Uber. “Arriving Now: Progressive Ridesharing Regulations in the Philippines.” Uber | Blogs. May 11, 2015. Accessed September 27, 2017. https://www.uber.com/en-PH/blog/manila/arriving-now-progressive-ride-sharing-regulations-in-the-philippines/.
[35] Philippines. Land Transportation Franchising and Regulatory Board. July 21, 2016. Accessed September 02, 2017. http://ltfrb.gov.ph/media/downloadable/LTFRB_MC_NO._2016-008_.pdf
[36] Ibid.
[37] Talabong, Rambo. “LTFRB fines Grab, Uber P5M each for permit violations.” Rappler | Philippines. July 11, 2017. Accessed September 27, 2017. https://www.rappler.com/nation/175280-ltfrb-fine-grab-uber-permit-violations.
[38] Uber Philippines. Twitter Post. August 1, 2017, 5:28 AM. https://twitter.com/Uber_PH/status/ 892361338852212736.
[39] CNN Philippines Staff. “Uber pays P190M fine, proof of driver compensation needed for lifting of suspension.” CNN Philippines | Front Page/News. August 30 2017. Accessed September 27, 2017. http://cnnphilippines.com/news/2017/08/29/Uber-pays-fine-suspension-LTFRB.html
LEGAL WRITING: FIRST YEAR 2017-2018 5-7 