November 2017

Can Uber survive its compounding list of legal woes?

by Mike Beggs

“Peace in the kingdom” was the stated goal of a pivotal Uber Technologies board meeting on October 2.

It marked the height of a power struggle between the company’s new Chief Executive Officer, Dara Khosrowshahi, and his recently ousted predecessor Travis Kalanick.

While Kalanick must be credited for orchestrating Uber’s meteoritic ascent to a $70 billion global player, his oft-nefarious tactics have left a minefield of problems for his successor to pick his way through.

The meeting appeared to be Kalanick’s last stand, with the Board voting unanimously in favour of new rules to change the way the company operates – seemingly aiming to minimize his influence, and to retool Uber’s corporate image in advance of a vast investment by Japan’s Softbank Inc., and an initial public stock offering by September 2019.

The Board voted to expand from 11 to 17 members, ensure all members have an equal voting share, and to require a two-thirds majority to approve a new CEO, quashing Kalanick’s power, by and large. Just days before, he had pulled off a covert power play, appointing two directors to the Board without informing anyone – a move Khosrowshahi branded “disappointing, and highly unusual”.

“That was precisely why we’re working to put in place world-class governance, and to ensure that we are building a company every employee and shareholder can be proud of,” he stated in an open letter to all Uber employees.

But it remains to be seen if he can right Uber’s foundering ship.

“Who knows?” says Beck Taxi operations manager Kristine Hubbard. “There’s just so much chatter and so much information about what they can, and can’t do.”

Others like long-time owner/operator Gerry Manley allege that Uber has the financial wherewithal, “to buy its way out of anything”. He notes the company is represented by as many as 20 lawyers when it appears in court, and can afford to “appeal and appeal”.

But an exhaustive October story by Bloomberg indicates Uber’s legal woes run far deeper than thought – the company is the subject of FIVE federal investigations (not the two previously reported), relating to the use of illegal software, possible bribes, dubious pricing practices, and the theft of a competitor’s driverless software technology. The company is also facing numerous civil suits, and is fighting to remain in major markets like London and Brazil.

After interviewing more than a dozen anonymous sources within the Uber ranks, Bloomberg suggests the company operates from a position that, “the law is something to be tested.” But having tested laws throughout the world, Uber may now have to finally account for its legendary brazenness.

Bloomberg reports that Sallee Yoo, Uber’s former legal chief encouraged staff to stand behind Kalanick’s 2013 position that the firm would roll out ride-sharing on its existing platforms, “in any market where the regulators have tacitly approved doing so.”

The Bloomberg article reveals that Uber soon began employing a range of illicit software, to neutralize its opponents and stay a step ahead of the authorities. That included such known tools as “Greyball”, “Hell” and “Godview” and previously unreported software like “Surfcam”, developed in Sydney and used to spy on competitor’s ridesharing systems.

The story reports that Kalanick hired Joe Sullivan as Chief Security Officer to run a unit where Uber devised some of its most devious tools – and that Uber’s Board has now hired an outside law firm to look into this unit’s operations.

As its legal issues began to escalate, Yoo recommended “a stronger legal message of compliance” to Kalanick, as a pre-emptive strike for when court cases commence.

But, what’s top of mind for Khosrowshahi at the moment is the need to get Uber’s operating license renewed in London, where Transport for London recently shocked the ridesharing giant by deeming it, “unfit to operate”, due to its record on safety, bylaw compliance, and employee relations. Losing the London market would be a crushing blow, which could stifle Uber’s growth across Europe, and negatively affect the value of the upcoming public offering.

“Determined to make things right in this great city”, an apologetic Khosrowshahi flew to London for emergency talks with TfL chair Mike Brown, before Uber’s current license ran out on October 1. The meeting ended without a resolution, but the two sides deemed it “constructive”, and said the dialogue will continue.

On September 23, Greg Hands, the UK government’s minister for London tweeted furiously that, “with the flick of a pen London Mayor Sadiq Khan was threatening to put 40,000 drivers out of work, and leave 3.5 million Uber users stranded. Uber reported 59 percent growth across Britain in 2016.

But the October 1 deadline passed without its license being renewed, and Uber swiftly filed an appeal, allowing it to continue to operate on London streets in the interim. Uber has hired high-profile ex-Ofcom CEO Ed Richards (of the Flint Global consulting firm) to spearhead the appeal.

The major unions want the TfL to insist on basic employment rights, if a new five-year license is granted to Uber.

Spokesman James Farrar alleged to The Guardian that in these secret talks, Khosrowshahi and the TfL are “just going through the motions to give people the impression Uber is cleaning up its act.”

“The reality is, neither side seems to want to talk to the main stakeholders in the business – the drivers,” he stated.

Likewise, veteran Toronto taxi driver Gary Walsh suggests Uber’s recent efforts to portray itself as a good corporate citizen amount to “smoke and mirrors”, while behind the scenes its massive lobbying efforts continue.

“I think when you have that much money, you have the best politicians money can buy,” he alleges.

Owner Andy Reti agrees, suggesting the London talks amount to a high stakes poker game, in a pattern repeated by Uber in many cities.

“You don’t need to go to London,” he alleges. “(Last month), they were huffing and puffing they were going to leave Quebec. So, why aren’t you leaving?”

Uber subsequently complained that UK National Insurance contributions would cost it tens of millions of dollars.

The London standoff coincides with the departure of two more key Uber executives -- Uber UK boss Jo Bertram, and Euro policy chief Christopher Burghardt.

Telling Reuters, “We have learned the hard way”, Uber subsequently announced that it is pausing its UberPOP service in Norway, pending updated regulations which would allow it to operate with legal clarity.

“Norway deserves modernized laws that encourage innovation and competition without sacrificing what makes the Norwegians special,” the company stated in a letter. “This is already happening elsewhere. Finland already passed progressive reforms, and we chose to pause UberPOP in Helsinki, in order to relaunch when the new law comes into effect in 2018.”

The cut-rate UberPOP service has been banned in several European nations including Belgium, France, The Netherlands, Italy, Spain, and Germany, for operating outside of bylaws.

Over the summer, Oslo police cracked down on UberPOP drivers, prompting the company’s threats to pull this popular service off the roads.

By now pausing its service in Oslo, Uber said it is “acting responsibly” towards users and drivers, while continuing “constructive” talks with the regulator.

However, it’s not the first time the company has paused its service as an apparent bargaining chip, before the authorities follow up with more modern, Uber-friendly regulations.

In Quebec, Uber has ultimately decided to remain on the road, accepting the more stringent rules laid down by the Province. Uber drivers must now undergo police background checks, and 35 hours of training.

Quebec said the goal is to level the playing field and make Uber drivers and taxi drivers work under the same basic conditions.

Uber had threatened to pull out in September, but after a meeting with new Transportation Minister Andre Fortin, the company has decided to stay. The new rules won’t come into effect until January, and Uber Quebec GM Jean Nicholas Guillemette said they’re committed to working with the government to fine-tune these stipulations, over that period.

Montreal Mayor Denis Coderre welcomed the decision, as long as Uber abides by these “one size fits all” rules for taxis and Private Transportation Companies. In a high-profile September sound bite, Coderre had simply bid Uber, “Bye Bye” if they didn’t want to live by the existing regulations.

Of this latest news, Hubbard scoffs, “Two restrictions -- 35 hours of training, and criminal background checks -- and no, they can’t do that. The Province was only asking two things of them.”

Meanwhile, on October 24 the BBC reported that thousands of cabbies in the Colombian capital of Bogota blocked roads and clashed with police, to protest ridesharing services like Uber. They lined the streets claiming app-based companies are being granted “an unfair advantage”, such as not being obliged to have proper insurance.

According to Reuters, the strike cause major traffic disruption, and things got ugly when protesters began attacking those who wouldn’t join the strike. Police threw tear gas to clear the crowd.

Colombia authorities claim they are unable to prevent app start-ups like Uber from operating.

And from the New York State legislature in Albany comes the news that Uber spent more on lobbying in the first half of 2017 than any other group, as the ridesharing giant finally convinced lawmakers to allow it to expand aupstate.

By late October, Uber was facing yet another round of bad press.

First, one of its drivers in India was arrested and charged, after he was caught masturbating by a female passenger on the way to Hyderabad Airport. Then outside of Toronto, an Uber X driver was charged with inappropriately touching a female passenger, after transporting her home from a restaurant.

And then former Uber engineer Susan Fowler granted her first interviews, eight months after she first blew the lid off the sexual harassment and bullying which was commonplace at its Silicon Valley headquarters. The Uber scandal parallels similar allegations against movie mogul Harvey Weinstein, and Fox News’ analyst Bill O’Reilly, currently rocking Hollywood.

Variety reports that Good Universe and Fowler are at work on a movie, documenting the company’s (alleged) dysfunctional and toxic behavior, which inspired the recent purge of senior executives, and redefining of its corporate culture. It was on February 19 that the 26-year-old Fowler published the 2,000-word blog, “Reflecting On One Very, Very Strange Year At Uber”.

Mike Tranquada, president of Independent Toronto Taxi Inc., is among those who believes the much-trumpeted Uber service won’t be sustainable in the long run, as the company continues to hemorrhage vast amounts of money.

“They have a lot of money, but they’re burning through it. They’re losing $1 to $2 billion every quarter. That’s the reason they’re trying to take the company public,” he alleges. “This company may go the same way as Nortel. It’s not a winning business model.”

In an effort to offer even more convenience to its 10 million daily users, Uber has just introduced its own no fee credit card, in partnership with Barclay’s and Visa. However, this move prompted further privacy concerns from critics, who note the company will now have a record of its customers’ daily transactions.



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