(Bloomberg) -- Uber could face a major legislative clampdown in Brazil, potentially rendering its current business model unworkable in its second-largest market after the U.S.
Brazil’s Senate plenary is scheduled to begin discussing on Tuesday a bill that would regulate Uber and other on-demand transport apps such as Cabify, 99 and Lady Driver as taxi services rather than technology companies. The rule changes would "increase app drivers’ bureaucracy so much that the system would become inviable," the companies said in a joint press release. The lower house approved the bill six months ago.
The Brazilian regulations add to the challenges facing new Uber CEO Dara Khosrowshahi, including a ban in London, a boardroom battle with co-founder Travis Kalanick, a lawsuit over driverless-car technology, allegations of a sexist company culture, and several ongoing government investigations. As in London, the massively popular car service has flourished in Brazil, but also not without controversy. While the company has provided plenty of freelance work amid double-digit unemployment in the South American country, it has also faced lawsuits over its employment practices.
Uber’s argument that it fills a void left by Brazil’s combination of inadequate public transport and neighborhoods neglected by traditional taxi services is disputed by professional drivers who say the company is unfairly undercutting their business.
"In effect Uber is a form of public transport and it has already resulted in a loss of income for mass transit," said Humberto Costa, a PT Senator and the upper house minority leader. "There must be some rules, it’s in the interests of the consumer and public transport."
In April a vote by the Chamber of Deputies approved the bill defining Uber and others as public services and granting municipal authorities the right to regulate them. Drivers would require the same red license plates as taxis which they would only be able to acquire via a city permit.
Ahead of Tuesday’s vote both taxi drivers and Uber lobbyists thronged the corridors of Brazil’s upper house, competing to pressure Senators.
"We’re not afraid of innovation, we’re not afraid of competition, but it must be fair," said Antonio Pascoal, a 59-year old taxi driver from Rio de Janeiro.
Uber, meanwhile, issued a press release stating that it has paid 495 million reais ($152 million) in taxes so far this year.
"Every day more and more Brazilians take refuge from the economic crisis that we are experiencing by generating income in a dignified and uncomplicated way," said Guilherme Telles, the director-general of Uber in Brazil, in the company statement.
If the Senate passes the bill as is, President Michel Temer can sign it into law. If Senate alters the bill, it goes back to the lower house for a second vote.