Here's A Tip: If You're Desiging Special Apps To Hide From Regulators, You're Going To Get In Trouble

from the bad-idea dept

Crisis management must be a full-time job at Uber. I've argued in the past that some of the attacks on the company are greatly exaggerated, but it keeps running into crisis after crisis -- many of them avoidable. The latest is a big scoop in the NY Times about how Uber has a special program called Greyball (a play on "blackball," get it?) that helped it determine if regulators were trying to get rides and then avoid sending a car. Here are the basics from the article by Mike Isaac:

One technique involved drawing a digital perimeter, or “geofence,” around the government offices on a digital map of a city that Uber was monitoring. The company watched which people were frequently opening and closing the app — a process known internally as eyeballing — near such locations as evidence that the users might be associated with city agencies.

Other techniques included looking at a user’s credit card information and determining whether the card was tied directly to an institution like a police credit union.

Enforcement officials involved in large-scale sting operations meant to catch Uber drivers would sometimes buy dozens of cellphones to create different accounts. To circumvent that tactic, Uber employees would go local electronics stores to look up device numbers of the cheapest mobile phones for sale, which were often the ones bought by city officials working with budgets that were not sizable.

In response, Uber has claimed that the program was designed to greylist "terms of service violators", but if that's the case it can just kick them off the service and tell them they violated the ToS. From the report, it seems clear that even if the program was used for ToS violators, it was also used against regulators.

I've certainly been vocal about the fact that I think city and state regulations limiting Uber/Lyft and the like are generally bad ideas. What may have started out as a good idea to prevent cabbies taking advantage of riders has turned into quite a corrupt system used to limit competition and artificially inflate prices. I think that the idea behind Uber and Lyft and similar services is super powerful. But, that doesn't mean the company should get a pass for this kind of stuff.

Directly building an app to avoid regulators just looks really, really shady, and it's going to come back to haunt you (just ask Zenefits or Volkswagen). And while the article claims that the tool might be a CFAA violation, I don't see how that's possible, unless it involved even more nefarious activities under the hood (none of what's revealed in the article would seem to qualify as a CFAA violation, even under the really stretched interpretations of the CFAA that we've seen).

But there still are some other questions. At least in the EU, some are already asking if the use of the tool violates the E-Commerce Directive or Data Protection rules.

The bigger question, honestly, is why do this kind of stuff? I'll never understand why companies feel the need to take the shadiest route possible, when they could have just gone with the upfront path of explaining why what they're doing is so useful and powerful, and fighting for it, rather than trying to play silly games. Yes, you can make arguments about how they're trying to grow rapidly, and yes, (as we've discussed) these local regulators are often a nuisance for bad reasons. But this kind of stuff is clearly going to bounce back and create problems later on. Just fight these fights head on, without playing shady games that undermine basically everything else about your business.

Filed Under: car hailing, greyball, regulations, ridesharing
Companies: uber

Judge Denies Uber's Motion To Dismiss, Sets Up Jury Trial For 'Employees Or Independent Contractors?' Question

from the innovation-through-jurisprudence? dept

In a decision that's sure to be applauded by Uber's opponents, Judge Edward Chen has denied the ride-sharing company's request to declare its drivers independent contractors. If Uber is forced to suddenly take thousands of employees on board, along with the added expenses and liabilities such a move would entail, it's going to have a much harder time maintaining -- much less expanding -- a service that many people find preferable to the taxicab strangleholds present in many cities.

In denying the company's motion for summary judgment, Chen calls Uber out for the "narrow framing" of its "we're an app, not a company" assertions, but notes that Uber does grant its drivers enough leeway that the question cannot be completely resolved via a motion in his court. Chen also raises the spectre of further regulation -- something that's similarly unlikely to work out in Uber's favor.

The application of the traditional test of employment – a test which evolved under an economic model very different from the new “sharing economy” – to Uber’s business model creates significant challenges. Arguably, many of the factors in that test appear outmoded in this context. Other factors, which might arguably be reflective of the current economic realities (such as the proportion of revenues generated and shared by the respective parties, their relative bargaining power, and the range of alternatives available to each), are not expressly encompassed by the Borello test. It may be that the legislature or appellate courts may eventually refine or revise that test in the context of the new economy. It is conceivable that the legislature would enact rules particular to the new so-called “sharing economy.”

And then sends the case on its way to a jury trial, something he notes earlier is the only way to resolve an issue this complex. No precedent is set or will be set, at least not in Chen's court.

Until then, this Court is tasked with applying the traditional multifactor test of Borello and its progeny to the facts at hand. For the reasons stated above, apart from the preliminary finding that Uber drivers are presumptive employees, the Borello test does not yield an unambiguous result. The matter cannot on this record be decided as a matter of law. Uber’s motion for summary judgment is therefore denied.

This order disposes of Docket No. 211.

So, a case that has been running since August of 2013 may still be months away from a resolution. Uber's inability to get the suit tossed doesn't necessarily mean it's destined to become Yet Another Cab Company. It still has options, but it also has an uphill battle against plenty of incumbents… and the politicians who prefer what they know to unfamiliar market entrants.

Filed Under: contractors, employees, gig economy, labor, ridesharing
Companies: lyft, uber

Ride Sharing Services Lead Taxi Medallion Values To Plummet (And That's A Good Thing)

from the competition-is-good dept

Three years ago, Planet Money did an episode on the ridiculous economics of taxi cab medallions, the protectionist, anti-competition way in which cities keep competition scarce for taxis, and (thus) drive up taxi fares. Yes, sure, the taxi folks will tell you, these medallions are supposed to "regulate" the market to keep it safe, but as pretty much everyone knows, the reality is that they're just to limit competition and keep prices high. So, given all the new pressures on that market from ridesharing* efforts like Uber** and Lyft, it shouldn't come as much of a surprise that taxi medallion prices are plummeting rapidly. They're still high -- for now -- but they're dropping fast and that's likely to continue:

The average price of an individual New York City taxi medallion fell to $872,000 in October, down 17 percent from a peak reached in the spring of 2013, according to an analysis of sales data. Previous figures published by the city’s Taxi and Limousine Commission — showing flat prices — appear to have been incorrect, and the commission removed them from its website after an inquiry from The New York Times.

In other big cities, medallion prices are also falling, often in conjunction with a sharp decline in sales volume. In Chicago, prices are down 17 percent. In Boston, they’re down at least 20 percent, though it’s hard to establish an exact market price because there have been only five trades since July. In Philadelphia, the taxi authority recently failed to sell any medallions at its asking price of $475,000; it will try again, at $350,000.

In cities like San Francisco, there's been a 65% decline in cab use as people shift to these more convenient (and often more affordable) alternatives. And the trend appears likely to continue: The end result appears to be pretty good for users -- who get more convenient, less expensive options for getting around. And, for all the stated fears from the old taxi guys that a glut of new entrants would drive away business, we can just watch what happens and see how the market sorts things out.

* Yes, I know some people hate the term "ridesharing" for these kinds of services. But that's what they're commonly called, and it's perfectly reasonable to call them that.

** Yes, Uber has been getting a ton of bad press lately for a vareity of statements and actions that, at the very least, suggest a rather cavalier attitude towards privacy, and a very aggressive view towards everything else. Thankfully, if you don't like the way Uber conducts its business, there are alternatives.

Filed Under: competition, economics, ridesharing, taxi medallions
Companies: lyft, uber