A Recent History of Uber: Lobbying, Lawsuits, and a 'Scuffle'
On its way to operating in more than 100 cities, the company has been focused on cutting political deals just as much as on disrupting the taxi industry.
Photo via Flickr user Joakim Formo
When Travis Kalanick and his co-founders launched Uber in 2009, it was just “about being baller in San Francisco.”
How things have changed.
Kalanick appeared on Bloomberg TV Thursday to discuss Uber's rollout in Hong Kong. He made just two references to the Mercedes S-Class cars that will pick up Uber Black users there before the host turned their conversation to less glamorous subjects, like Uber's conflicts with taxi drivers' trade groups and regulators.
“Now, there's choice words I've had at times for the taxi industry,” Kalanick said, later adding, “In many ways they don't provide choice for consumers, and they've often lobbied city governments to restrict choice and restrict supply and restrict convenience for people who live in those cities.”
That seems to be how the last two years have gone for Uber, beginning with fines from the California Public Utilities Commission in November 2012. What began as a story about tech-industry geekerati coming up with a more convenient way to tool around in luxury cars has turned into one about political insiders haggling over the particulars of chauffeurs' licenses and insurance policies. In a recent interview with Re/Code's Kara Swisher, Kalanick said the company was in a “political campaign” against “an asshole named 'Taxi.'”
The disruption Uber brought to the way cities work turns out to look a lot like politics as usual, as full of the crazy and terrible and banal as the rest of the world. While Kalanick might see himself in the middle of a battle with good guys and bad guys, the events of the past few years have made it more and more difficult to pick out heroes and villains.
There are other companies like Uber—Lyft and Sidecar, for example. But thanks to Uber's financial success and its three-tiered business plan, with various combinations of black cab, taxi and part-time individual drivers at work through the company's services depending on what each city will allow, it has attracted the lion’s share of attention. Kalanick has taken the opportunity to try to redirect any negative heat towards the taxi industry—and, given increasing demands that Uber drivers take on more expensive insurance policies, he may look to insurers next. But the company’s recent history looks less like that of an underdog on the ropes and more like an $18 billion business opening new markets every way it can, with regulators scrambling to keep pace. Uber is now active in more than 100 cities, and Lyft in 67.
Uber and Lyft both appear to follow a pattern in launch after launch. First, they set up operations in a city under a legal theory about how they are allowed to operate under that place's current rules. In the US, at least, regulators often disagree. As Uber and Lyft continue to operate, they build a user base. If regulators haven't cleared the company's drivers to work—and that has often been the case—then fines start to pile up for drivers and possibly even the companies themselves. At about the same time, the companies start sending representatives and lobbyists to meet with regulators. Eventually, lawmakers pass new rules that make room for companies like Uber and Lyft to operate legally.
As all of this goes on, strange and sad things happen that call into question the idea that Uber and Lyft don't need much regulation. It may be true that the taxi industry is also throwing “mud” at Uber, as Kalanick told Swisher in May. The company has been named in at least a dozen ongoing federal civil lawsuits around the country, many of which are brought by customers or taxi or livery cab drivers. It's also true that many of the counts in those lawsuits have been dismissed.
For example, one Uber user sued the company after he and his fiancé got in an altercation with an Uber-summoned driver in an Arby's parking lot in Oklahoma City. He says the driver asked his fiancée why she was “being a bitch,” so he told him to stop right away and let them out. After pulling into the Arby's lot, according to the civil suit, the driver walked around the car, punched him in the face, got back in the car, and sped off. The driver, an Air Force veteran, is quoted denying this version of events. He has said the passengers actually became belligerent and assaulted him, and criticized the company for its handling of the incident.
Either way, the Oklahoman reports no criminal charges were filed. A federal judge took Uber off the list of defendants in the civil suit. The driver no longer works with Uber. In general, Uber relies on a ratings system to track which drivers are good and which ones may need to be let go.
But these incidents seem to have little to do with jealousy from old-school cab drivers. Earlier this month, an Uber driver allegedly took passengers along on a high-speed chase in Washington, DC. In Los Angeles, a driver was arrested on suspicion of kidnapping for purposes of sexual assault. Another driver in Seattle has been cleared of a rape accusation in what remains an active sexual assault investigation. Then there's a suit seeking to hold Uber liable for the 2014 New Year's Eve death of a 6-year-old girl. She was struck by an UberX driver who was not carrying a passenger at the time.
Uber has said that UberX drivers are backed by commercial insurance while carrying passengers, but that 2014 New Year's Eve incident has motivated new California legislation that would raise insurance requirements for drivers even when between fares.
Then there are Uber's conflicts with competitors and drivers themselves.
One such claim is that a 20 percent "gratuity" Uber includes in the bill for its users is deceitful because a chunk of that money goes to the company and not to the driver. This argument appears in several pending federal cases brought by customers and drivers.
“Uber driver partners are licensees of the Uber platform and earn 80 percent of every fare,” Lane Kasselman, an Uber spokesman, said in an email. “Although it varies by market, Uber generally has a 20 percent commission for lead generation and marketing.”
I asked him if “fare” includes charges labeled as gratuities.
“There is no need to tip with Uber,” he replied.
Confused? Perhaps that's why the cases haven't been dismissed and are still pending in federal court.
Another claim is that Uber overburdens drivers with the cost of new cars in the name of keeping its fleet up to date. In Seattle, Uber drivers—whom the company treats as independent contractors, not employees—want to form a union to fight to improve working conditions. One of their complaints, according to the Stranger, an independent Seattle weekly newspaper, is that the list of vehicles approved for Uber Black, the black-car service, changes so frequently that it puts a strain on drivers' wallets.
A livery cab driver who works in New York City made that charge against Uber in a case now before the State Supreme Court. In the suit, he says he was bumped to UberX because his 2010 Chrysler was not on a new list of approved Uber Black vehicles. He traded it in for a newer model worth nearly $65,000. Just five months after buying that 2013 Chrysler 300, Uber notified him that this vehicle, too, had been bumped from the Uber Black list and he was once again being dropped back to UberX. As an UberX driver, he says, he can't make nearly as much money. At issue is whether Uber made any promise to keep the driver on Uber Black for any length of time, which of course the company denies. Uber has filed a motion to dismiss the suit and the case is still pending.
All of these issues—ranging from tragedies to alleged crimes, bizarre events and routine business disputes—are the same kinds that bedeviled the taxi industry long before Uber arrived. Perhaps the biggest actual departure from the norm on Uber's part is its "surge pricing," in which the company raises prices during peak usage times—like snowstorms—and is now testing out what happens if it reduces prices during low-usage summer months. Uber has promised drivers they will not lose money because lower prices will raise demand.
Innovative? Absolutely. Disruptive? Probably so. But revolutionary? One city official I spoke to said surge pricing was among the least problematic issues confronting regulators, because Uber customers know what the cost of a ride is going to be before getting in the car.
"As long as that agreement is made up front," says Adam Stevens, an assistant city attorney in Milwaukee, Wisconsin, "let the free market decide."
Milwaukee officials are working on a bill that would allow Uber, Lyft, and companies like them to operate within their city limits. In the meantime, both companies have been told that drivers might be fined for violating city law—and have stayed in business anyway. (Stevens said this week he was not aware of any drivers actually getting fined, and that the companies would probably reimburse them in any case.)
Milwaukee would join Seattle on a list of places where ride-sharing companies disrupted their way to the bargaining table and got laws passed that cleared the way for their drivers to work, although only after some tough talk—or more—from officials.
Seattle's mayor was on the verge of issuing a cease and desist letter to Uber and Lyft before officials brokered a deal earlier this month to revise previous legislation that set a cap on the number of drivers each company could have on the road. In California, the state Public Utilities Commission fined Lyft, SideCar, and Uber $20,000 each; last year, the state issued regulations allowing ride-sharing companies to operate. Uber was fined $26,000 and Lyft $9,000 in Virginia, according to a state DMV spokeswoman, Sunni Brown. Both companies appealed and have since applied for authority to operate, although Lyft withdrew its appeal and paid the fine. In Pennsylvania, regulators have filed complaints seeking more than $110,000 in fines from Lyft and about $95,000 from Uber. Both companies are seeking authority to operate there, now, too. (Lyft had already applied when investigators from the state Public Utilities Commission there slapped the company with those fines.)
“Many of those processes have moved forward and turned into a thoughtful, collaborative discussion where we can work with local leaders to create new rules for peer-to-peer transportation,” said a Lyft spokeswoman, Paige Thelen.
Ride-sharing companies are pulling out all the stops to steer that discussion.
On Monday, the Illinois state legislature sent a bill to Governor Pat Quinn that Uber and Lyft don't like. The legislation sets new rules for "ridesharing" services, like prohibiting drivers from working more than 10 hours a day, preventing them from charging more than the most expensive cab ride in the area, and requiring them to obtain a chauffeur's license. It mandates cars conform to some of the same insurance and safety requirements as taxis and livery cabs. And it requires that 5 percent of vehicles available through a "ridesharing arrangement" like Uber be able to accommodate wheelchairs. It would also keep services like UberX out of airports and cab stands.
Uber's response has been a petition calling on customers to urge Quinn to veto the bill and a public suggestion that it would add more jobs to an already planned expansion of its Chicago office—provided Quinn prevents those provisions from becoming law. In a blog post, Uber writes that the bill's rules "threaten consumers" and that insurance provisions are a maneuver to "protect the taxi monopoly."
“Uber works with leaders across the country to develop regulations that protect driver economic opportunity and rider access to safe, affordable and reliable transportation alternatives,” Kasselman, the Uber spokesman, told VICE.
This might not be a change in position for the company, but it's sure a change in tone. In 2013, the Wall Street Journal’s Andy Kessler quoted Kalanick this way:
"We don't have to beg for forgiveness because we are legal," he says. "But there's been so much corruption and so much cronyism in the taxi industry and so much regulatory capture that if you ask for permission upfront for something that's already legal, you'll never get it. There's no upside to them."
Maybe Uber's rough ride to success over the past two years has motivated the company—including Kalanick, who was more diplomatic in his Bloomberg TV appearance Thursday—to get better at this whole politics thing.
The company has hired lobbyists in Illinois to advocate on its behalf, according to public records, including Governor Quinn’s former chief of staff, Jack Lavin. In New York, it made a similar move by bringing on former NYC Taxi and Limousine Commission official Ashwini Chhabra earlier this year. And Kara Swisher at Re/code reports that Uber is looking for a senior communications hire to head up its growing government affairs staff.
All signs point to a rapid shift by Uber and companies like it from trying to ignore politics to actively shaping it. That shift must be informed by the fines, the penalties, the accidents and the allegations of the past two years—not just, as Uber CEO Travis Kalanick puts it, the “asshole named 'Taxi.'”
In Milwaukee, for example, officials are in discussions with Uber and Lyft about whether their background checks, vehicle inspections and insurance provisions are in line with what the city wants. Thelen, the Lyft spokeswoman, says the company's background checks are done by an industry-leading third party, and claims they meet or exceed local standards in most cities where the service operates. Uber makes similar claims about its own safety standards. But according to Stevens, the Milwaukee official, officials there want the police department to check drivers working within the city limits, the argument being that cops have access to databases that no civilian can see. The city wants to find suitable third parties to handle things like vehicle inspections, too, rather than taking companies at their word that cars are up to code.
Even with an algorithm matching passengers and drivers rather than someone at a radio console, many problems seem to crop up for Uber and its brethren—just as they do for regular cabs. Passengers get angry. Drivers get lost, or worse. Cars break down. Collisions happen and sometimes, sadly, six-year-old kids wind up dead. Hiding all of this behind a smartphone interface changes nothing. Uber cannot protect its drivers or its users from all of the terrible things that happen while people are humping to Point A from Point B in the modern city, and there are not enough lobbyists in the world to convince a state or a city that it isn't within their rights to force the company to try harder anyway.
"I think the companies are recognizing that there's going to be some regulation," says Stevens, the Milwaukee official. "They can't just operate outside of the law."
Nick Judd is a freelance writer whose work has also appeared at Yahoo News and techPresident. Follow him on Twitter.