It’s been a tough few weeks for ride-sharing company Uber what with company CEO Travis Kalanik seen arguing over fares with one of his drivers, a former engineer accused of sexual harassment and now there's allegations in the New York Times that Uber is deceiving regulators.
The Times report suggested that Uber might be violating the law and in any case was probably up to no good when it developed software capable of figuring out who might be public transportation regulators and not sending them cars to ride in.
In statements to the media, Uber has said that its “Greyball” program was designed to prevent violations of its terms of service and to protect drivers. The series of events that appears to have led to the Times article involves a regulator in Portland, Oregon who found it difficult to get a ride from Uber because the company’s software ignored his requests for service. According to the Times, the regulator was trying to perform a sting on Uber and its drivers.
Uber provided a statement about the Times' allegations to eWEEK in an email. “This program denies ride requests to users who are violating our terms of service—whether that’s people aiming to physically harm drivers, competitors looking to disrupt our operations or opponents who collude with officials on secret ‘stings’ meant to entrap drivers,” the spokesperson said.
This may sound a little paranoid on the part of Uber, but in reality it’s somewhat of an understatement. The problem that Uber faces is that it’s bringing technology to a hidebound industry with what can best be described as an extremely close relationship with government officials in some areas.
In those areas, taxi companies, unable or more likely unwilling to compete with the new business paradigm that Uber is bringing to transportation, will do almost anything to protect their interests by thwarting this new online competition.
Helping those taxi companies are government officials and politicians who license the taxies, which generates revenue for their municipalities. The politicians want the taxi companies' support to turn out voters and to provide donations.
For an excellent example of just how incestuous this relationship can be, one only needs to look at the taxis Washington, DC. The taxi companies were able to successfully fight off innovations such as fare meters for decades, to the point where Washington was the only major city in the United States where meters weren’t allowed. Instead, the taxi companies used an obscure zone-based system that did two things, confuse tourists, and ensure that members of Congress got cheap rides.
Those cheap rides were the subtle bribes that the taxi industry used to keep Congress happy. The zone system was so arcane that visitors to the city frequently paid two or three times the proper fare because the visitors couldn’t figure it out.
The same thing happened in regards to Uber, except that the taxi drivers got caught fighting two battles—meters and ride sharing and ultimately lost both fights. Uber, Lyft and other ride sharing options are now legal in Washington. But those app-based services have had a rough time elsewhere as local officials did what they could to help keep the taxi companies happy and their own revenue streams unaffected. Those officials, unable to find a clear path to attacking Uber, would take it out on the drivers by arresting them, impounding their cars, levying huge fines and in many cases charging them with trumped up offenses to make sure the drivers were intimidated. As bad as it’s been in the United States, it’s worse overseas. In Europe ride-sharing drivers are routinely attacked by taxi drivers and local officials regularly helped. I’ve talked to drivers in Europe who describe the harrowing events when the taxis come after them. It’s worth noting that in the European Union, the official guidance is that the member nations avoid making rules that would discourage ride-sharing and other app-based services as a way to avoid discouraging innovation.
The official guidance is similar in many states in the U.S. I live in Virginia where ride-sharing is officially allowed under state law, as long as drivers and their companies adhere to some specific insurance requirements and perform driver background checks. Here, Uber and Lyft are legal, and the attitude of the government is that it stimulates innovation. Virginia isn’t alone in that position.
The problem that Uber has faced isn’t that its services are illegal, it’s that much of the time their services aren’t covered by the law at all. This means that in many cases, Uber found itself facing situations that were Orwellian in their application when local officials took the attitude that whatever wasn’t compulsory was forbidden. For Uber drivers it meant that arrest was always a risk because officials couldn’t find a law allowing their activity, meaning it must be illegal. Coupled with the fact that Uber drivers have been targeted by criminals, because Uber is much easier than a carjacking, by corrupt or clueless public officials and by companies that can’t stand competition, Uber’s response is understandable. As some would say, it’s the Wild West out there and you have to protect yourself. This is not to suggest that there aren’t situations in which Uber is its own worst enemy which is demonstrated by its recent management turmoil. But in the absence of laws or when the law isn’t enough, then the company has a valid reason to protect itself. It’s worth noting that Uber is working just fine in Portland these days, so perhaps the Uber sting wasn’t necessary after all.