If that law is correct then it seems they have a perfectly valid complaint, using an app on your phone instead of a dedicated device is just circumventing the spirit of the law.
Whether the law should still exist, and whether this method of protest is appropriate, are other questions of course.
Transport For London (the governing body) have set it is not illegal as the law only covers meters that are mechanically attached to the car not an app that uses information about location/time/distance.
So they're complaining that they'd like the law to be different so that Uber could be temporarily banned until they code a workaround. Pointless.
You can measure the distance on a paper map as well. The smartphone app is only slightly more convenient. I do not think they are breaking the spirit of the law.
Well, if you do so with the intent of charging a passenger for distance traveled, yeah. The taxi industry is heavily regulated, and circumventing those regulations is extremely questionable. Certainly it does not seem to be a fair market.
Whether the law should still exist, and whether this method of protest is appropriate, are other questions of course.