Montreal is at war with Uber. Which side will surrender?

Between a raid by Revenue Quebec, 40 impounded cars, and quasi-vigilante action by taxi drivers, pressure on Uber is growing

Uber sign on front of an office building

Uber’s headquarters in San Francisco. (Eric Risberg/AP)

Alex Wu opened up his UberX app and received an order for a customer pickup near Montreal’s Rosemont neighbourhood. He accepted the request and proceeded to the destination. It was a trap.

The address was actually the headquarters of Montreal’s taxi bureau, and the person behind the ambush was Hassan Kattoua, a local cab driver and one of many who are angry at Uber’s presence in the city. A group of cabbies, led by Kattoua, commandeered Wu’s grey minivan and prevented him from leaving the scene until city officials arrived, issued him a fine (reports put the amount at about $350) and towed his vehicle. (Uber has said it will pay the $1,000 fee if a contractor’s car is impounded.) A Radio-Canada news crew was on hand to capture the stunt.

Kattoua has been distributing wanted posters featuring the face of Uber’s general manager for Montreal, Jean-Nicolas Guillemette; he keeps the poster displayed on the door of his cab. Guillemette told reporters he was shocked that he was being portrayed as a criminal. “I would be lying if I said it didn’t affect me,” he said. “They’re threats. It’s intimidation. The goal, to scare us, will not work.”

Guillemette’s response signifies a shift in tone for Uber. The San Francisco–based ride-sharing firm, currently valued at $41 billion, is widely perceived to be cavalier toward local authorities. Uber’s strategy, like many major players in Silicon Valley’s white-hot sharing economy (Airbnb among them), has been to work quickly to establish itself in as many markets as possible and deal with legal pitfalls and red tape later.

MORE: What it takes to build a business in a legal grey zone

So far, the game plan has worked. Despite objections from industry rivals and local governments—who allege that Uber’s reliance on non-professional cab drivers to shuttle passengers is both unfair and illegal—public demand for Uber’s services is strong and continues to grow.

But Guillemette’s comments suggest the stress of cracking the Montreal market may be getting to him. It’s not just the city’s licensed cab drivers who have declared war on UberX. Last October, just hours after UberX launched in the City of Saints, Mayor Denis Coderre declared the service illegal. In May, Uber’s offices in Montreal were subjected to raids by Revenue Quebec, which said it has reason to believe the company has broken the province’s tax laws. Meanwhile, 40 cars used by Uber contractors have been impounded since the beginning of the year for operating without a licence.

While it’s true that Uber has done a pitiful job of engaging the governments in charge of regulating local taxi regimes—by and large, that’s been a key part of the company’s strategy—it’s time Uber learned to play nice with the cities it hopes to conquer. There are ways Uber can make itself more palatable to local governments.

“Any time you’re a disrupter like Uber, you can’t really avoid some level of controversy,” says Peter Landry, principal at Enterprise Canada, a public affairs firm that specializes in government and public relations. When entering a new region, he says, it’s important to prime the political market and regulators. “You have to meet an objective that they also hold. When I observe Uber from a distance, it’s almost like someone who’s on a date but only talking about themselves. Usually, when you’re doing this, political leaders are thinking, What problem are you solving for me?” In other words, we know what’s in it for Uber. But what’s in it for the city of Montreal?

In making its case to cities, Uber can start by better explaining the benefits it can bring to municipalities, says Jui Ramaprasad, a professor of information systems at McGill University’s Desautels faculty of management. She theorizes that Uber could broker a data-sharing partnership with the Montreal, as a condition for allowing it to operate. In addition to billing and contact information, Uber collects vast quantities of geo-location data, logging each and every trip a customer takes. Ramaprasad thinks it’s data that could help guide decisions around improvements to Montreal’s rapidly aging infrastructure. “By trying to stifle this type of innovation, it may be taking away benefits of this technology,” she says.

That said, the real muscle behind the pushback stems from disenfranchised cab operators, who must comply with a complex web of regulations and shell out for insurance, vehicle maintenance and exorbitant licence fees: In Montreal, cab drivers pay around $200,000 for a taxi medallion. They argue that Uber should be classified as a taxi service (it isn’t currently) and forced to comply with the same regulations. Cab drivers believe, not without reason, that Uber undercuts their ability to make a living.

That may be of little concern to Montrealers when the UberX app offers a more convenient way of hailing and paying for a ride (payments are handled through the app). On the public front, Uber has been a marketing success, with recent publicity stunts including the rollout of deluxe delivery services for gourmet lunches, ice cream and even puppies.

Recently, Uber has shown it is ready to start making some concessions and has applied for taxi licenses in both Montreal and Toronto (for its taxi service but not for UberX, which allows any car owner to moonlight as an Uber driver). It can do more. According to a study published in the University of Chicago Law Review, companies like Uber could be more proactive and offer solutions to concerns like whether cars are roadworthy, drivers are rigorously vetted or customer data kept secure. The study suggests the formation of brand new self-regulatory organizations to oversee third-party apps, which would at least quiet some of the complaints of regulators.

Meanwhile, UberX contractors such as Wu continue to take their chances despite the regulatory grey zone and pick up fares, often to supplement another income. At the end of Radio-Canada’s video clip, Kattoua is seen extending his hand to Alain Rochon, the head of the taxi bureau, but the gesture is rebuffed.

It seems the city of Montreal, too, knows which way the winds are blowing in this fight.