Multiple Legal Battles, Ethics Issues Put Uber's Future at Risk

NEWS ANALYSIS: A Justice Department investigation caps an already bad year for car-sharing giant Uber as legal and public image problems just keeps piling up.

uber driver

Somehow the news reports on Friday were not a surprise even as they made things look worse for Uber than they already did. According to new reports from the Reuters news service, a federal grand jury in California has subpoenaed records and other information from Uber in connection with the Greyball software controversy that has shaken the company since early March.

Greyball was software that Uber used to ferret out regulators who might be trying to carry out stings on Uber drivers in locations where Uber was either illegal or hadn’t been authorized to operate. The software tracked the locations of requests, even bank accounts and social media postings as a way to see who might be a regulator or a member of law enforcement and then load a fake app that kept them from getting rides.

Perhaps the best known example of Greyball has been in Portland, Oregon, when Uber was waiting for approval. Letters from Uber’s lawyers to the city have been made public and they have admitted using the software, although very sparingly.

Uber has caught a lot of flack over the use of Greyball, even though the company stopped using it shortly after it was revealed by a New York Times investigation. But Greyball is hardly the only legal issue that Uber is dealing with right now. 

For example, Uber is also being sued by Waymo, a subsidiary of Google parent Alphabet, which alleges that Uber is using stolen trade secrets brought to the company by a former Google executive. That executive, Anthony Levandowski, is accused of stealing self-driving car technology, which he then used to start Otto, the self-driving truck company. Uber has since acquired Otto and its self-driving technology.

Waymo is attempting to convince a federal judge to place an injunction against Uber that would require all work by Uber on self-driving cars to cease.

Another legal issue involves charges by a female engineer of sexual harassment at Uber, charges that prompted other former and current Uber employees to complain about other incidents of harassment.

Then there’s the viral video of Uber CEO Travis Kalanick verbally abusing an Uber driver who complained that Kalanick’s policies were hurting driver income. Uber drivers have also accused the ride-sharing company of punishing them for driving with competitor Lyft.

Kalanick has already admitted that he has serious problems in terms of his leadership skills. He’s vowed to fix those problems. In addition, Uber has hired former US Attorney General Eric Holder to investigate Uber’s internal operations and recommend changes.

Fortunately for Uber’s employees and drivers, Holder is a take-no-prisoners kind of guy, and there’s nothing that Kalanick can do that can intimidate Holder. But that doesn’t mean that Kalanick can’t simply ignore the recommendations and continue business as usual.

If there’s a lesson to be learned from Uber’s rapid rise and current legal troubles is that there’s a price for conducting business at any cost. Uber’s aggressive approach to building its ride-sharing business has won it few friends in government and regulatory circles not to mention the taxi industry. While regulators shouldn’t play favorites, the reality is that if you enrage enough of them the cost of doing business could rise precipitously.

Uber has made enemies in spades and at this point every example of questionable business practices or ethics is going to get close scrutiny by regulators and the news media.

Whether the federal investigation is in fact related to Greyball or some other Uber practices isn’t known. In fact, it’s not completely clear that Uber is the subject of the investigation or simply has information that the grand jury is seeking in some other investigation. It’s also worth noting that relatively few such investigations actually turn into criminal actions involving the party being investigated.

So what do we really know about the Uber federal investigation? Remarkably little. The reason it’s making news is because of the trouble the company has caused for itself this year. After all, a lot of companies are involved in investigations and Fortune 10 companies have some sort of investigation going on most of the time. But Uber’s case is special if only because the company has been seen as the bad boy of internet commerce industry.

Being a bad boy isn’t necessarily a crime and it’s not at all clear that Greyball actually breaks the law in the U.S., although it certainly annoys a lot of regulators. Whether those regulators can make a case for state-level indictments against Uber remains to be seen.

But even if the investigation of Uber does not result in any charges, just the existence of the investigation has damaged the company's reputation. That reputation will continue to suffer every time Uber makes another bone-headed move. This means that Uber can’t afford any more bad publicity.

At this point, the best thing that can happen to Uber is to hire the chief operating officer the company is looking to provide the leadership that Kalanick lacks sooner rather than later.

This COO should also be able to restore Uber’s brand reputation and its credibility in the eyes of customers, drivers and regulators.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...