The Ticking Time Bomb of Uber

Taxi drivers in Toronto, Canada protest agaist Uber and the city lack of regulation that creates an unfair competition on December 9, 2015. The protest blocked a main intersection in downtown for hours. (Photo via Shutterstock)Taxi drivers in Toronto, Canada, protest against Uber and the city’s lack of regulation that creates an unfair competition. (Photo: rmnoa357 / Shutterstock.com)

As the “sharing economy” rapidly transforms into the “share-the-crumbs economy,” multi-billion dollar companies like Uber and Airbnb are profiting from tax and legal loopholes while full-time, living-wage jobs disappear at an alarming rate. Learn the ugly details in Steven Hill’s Raw Deal – order your copy today by making a donation to Truthout!

The following is an excerpt from the book RAW DEAL: How the “Uber Economy” and Runaway Capitalism are Screwing American Workers:

Uber has become a global as well as a grassroots phenomenon, its impressive growth in a few short years to some 250 cities and 46 countries striking fear into the hearts of taxi companies everywhere. Occasionally a CEO comes along – Steve Jobs, Bill Gates, Larry Ellison – whose personality so imprints his (or rarely, her) company that the two become inseparable in the public’s mind, as well as within the culture of the company. Uber founder and now-billionaire Travis Kalanick is such a CEO – for better and worse. He is the reigning bad boy of “wild west” capitalism, breaking livery laws, dodging taxes, raiding competitors and spouting controversy wherever he goes. As one entrepreneur who has worked with him says, “Travis is ego personified.” Others have described him more pointedly: “He’s an asshole.”

But he has driven his company to the top of something remarkable – though no one is quite sure yet what that something is. Kalanick sees himself as a kind of Ayn Randian revolutionary, and has said he thinks that Uber isn’t just competing against taxis and other ridesharing companies, but against private car ownership itself. He aims to make Uber’s network of drivers – and eventually, he hopes, driverless cars – a logistics platform monopoly on which businesses can send packages, food and other products. It’s about making “car ownership a thing of the past,” says Kalanick.

But that’s still down the road a ways, and in the meantime, Uber – like Airbnb – already is reaching legendary icon status, becoming a household name and a new verb and noun in our vocabulary. The company is being hailed by many free marketeers as the new “disruptive” kid on the block, overturning conventional business models, in this case the corrupt monopoly of Big Taxi, and bringing innovation to the important transportation sector. It has grown at an astonishing pace since its launch in San Francisco in 2009, and with big backers like Goldman Sachs, Blackrock, Amazon’s Jeff Bezos and Google Ventures, it has succeeded in attracting one of the largest direct investments in a startup company in US history. In the murky world of Silicon Valley, where hype and “vaporware” often substitute for substance, Uber has been assessed a jaw-dropping market valuation of $51 billion – to put that in perspective, that’s higher than Facebook’s valuation at a similar point in its growth, it’s greater than Delta ($39 billion) or United Airlines ($26 billion), and has nearly overtaken the king itself, General Motors, the largest US automaker ($52.6 billion value). Not bad for a company that doesn’t actually make anything or own any cars or directly employ any drivers (since the drivers are all treated as independent contractors).

But as we will see, like the villain Harvey “Two-Face” Dent in the Batman comics, there is a dark, scabbish side to Uber’s pretty face. Driven by Kalanick’s pedal-to-the-metal tactics, Uber has lurched from scandal to scandal, which not only has undermined its popularity but also has served to obscure the merits of the ridesharing industry. So far, the ridesharing business has not been nearly as disruptive to society as Airbnb, which has become a giant loophole that has allowed professional real estate operatives to evict tenants, convert entire apartment buildings into tourist hotels and ravage entire urban neighborhoods. Therein lies Uber’s advantage: few people are going to shed tears over a torpedoing of the taxi industry, which has long been known for cartelism, political payola and lousy service.

In fact, as the US plunges headlong toward a freelance society, and average Americans start casting around for any kind of reliable way to “monetize” their lives and bring in some income, peer-to-peer ridesharing holds potential – but only if it’s properly regulated. As Kalanick fully knows, the supply of drivers and cars on the road is the bottleneck in this industry, and those drivers’ needs are in direct conflict with Kalanick’s ambitions. Uber’s business model seems to depend on driver exploitation and legal loopholes. Even as Uber pugnaciously fights any type of common-sense regulation, this ridesharing service is crying out for well-targeted oversight that minimizes exploitation of drivers, ensures the safety of the public, reduces price gouging and cracks down on abuse of the new ridesharing technology and its surveillance capabilities.

Yet all the warning signs indicate that Travis Kalanick is not interested in building such a company. His Uber is not about empowering either its drivers or the 1099 perma-lancers of the freelance society, and he is dismissive of concerns about privacy or public safety. Instead, this “sharing” economy company is about maximizing market share in its greed-grab to wipe out all competitors and achieve global domination of the transportation industry. Like Airbnb, Kalanick is polishing his company’s gloss in preparation for a high-flying IPO, and he doesn’t seem to care how many laws are broken in the process or how the public perceives him. He is a laissez-faire capitalist who once chose the cover of Ayn Rand’s The Fountainhead as his Twitter profile picture, and his “Travis Shrugged” persona projects a jet-setting, frat-house boyishness that switches easily from talking about the self-styled transportation revolution he believes he is fomenting, to Twitter photos of him partying with rapper Snoop Dogg, or bragging about his newfound billionaire’s ability to bag nubile hotties as easily as he can summon an Uber car: “Yeah, we call that Boob-er,” he told GQ.

Welcome to Travis’s World.

The Tasmanian Devil of Taxis

(Image: St. Martin's Press)(Image: St. Martin’s Press)Travis Kalanick doesn’t like it when journalists call Uber just another taxi company. The taxi industry is heavily regulated, and the prickly Kalanick has no use for regulations or paying taxes. “I’m in the technology industry,” he told the Boston Globe, and the tech industry has always seen itself as a meritocracy where innovation and “getting there first” win, and government bureaucracy and rust are evil.

It’s true that Uber is not in the taxi business, at least not in the conventional sense. Uber and other ridesharing companies like Lyft and Sidecar maintain that they only play the role of matchmaker, connecting a driver and car with a customer looking for a ride, and then taking a cut of the fare for providing the service (an amount which has been steadily escalating from the original 5 percent of every fare to now more like 25-30 percent). Its value comes from being a bit less expensive than a conventional taxi, and also more convenient – tap your app, and the closest Uber driver to your location shows up anywhere from five to 15 minutes later.

Which is a relief to anyone like this author, who has waited up to 45 minutes for a taxi in San Francisco. Kalanick is driven – some might say obsessed – by a mission to have enough roaming drivers who are within minutes of any potential passenger. His stated mission is to flood the streets with his cars and drivers to increase coverage and decrease passenger wait times, and also as a means to grab market share over the competition of Big Taxi and other ridesharing companies like Lyft and Sidecar. But flooding already crowded urban streets with more cars has led to predictable results, from San Francisco to New York City to Seattle to Los Angeles – traffic-choked congestion. Now passengers can hail a ride quickly, yet it takes 25 minutes longer to go anywhere. But that’s not Travis Kalanick’s problem, at least, not yet. Not until the inevitable backlash (as the history of livery shows will come at some point).

Uber’s value also comes from its alleged screening of its drivers and cars, to ensure both safety and comfort. On Uber’s website, the company trumpets that “every ridesharing and livery driver is thoroughly screened through a rigorous process” which includes “a three-step criminal background screening.” In fact, Uber charges every customer an extra $1.00 “Safe Rides” fee to pay for those checks. It sounds impressive.

But not to the district attorneys of Los Angeles and San Francisco. In December 2014 they jointly filed a consumer protection lawsuit against Uber, alleging that it misleads customers about the service’s safety.

The lawsuit also claimed that Uber overcharges customers and often thumbs its nose at the law. At a news conference, San Francisco district attorney George Gascon accused Uber of making false statements about how it protects consumers. Gascon says that because Uber (as well as its leading ridesharing competitor Lyft) does not fingerprint its drivers, the company’s criminal checks are “completely worthless.” Uber doesn’t do what is known as a Live Scan (which includes fingerprinting), the highest standard of background check that most taxi companies in California are required by law to do. Indeed, the FBI says Uber’s method, called a “name-based criminal background check,” has a 43 percent error rate. “The company repeats this misleading statement,” said Gascon, “giving consumers a false sense of security when deciding whether to get into a stranger’s car.”

Kalanick and his other Uber operatives reacted with howls of victimization over “big government” overreach. But they could hardly have been surprised. This issue had been building steam for some time. Only a week before, Uber had gained international notoriety when in New Delhi, India, an Uber driver was arrested for allegedly raping a passenger. The female passenger fell asleep during the ride, and when she awoke she found that the driver had taken her to a secluded area. He then stopped the car and assaulted her, according to the woman’s testimony. Police said that Uber did not conduct an adequate background check on the driver, who it turns out had been arrested at least twice before for alleged sex crimes. The Delhi state government immediately banned Uber from operating there. Other Indian states quickly followed suit.

In the United States, Uber drivers also have faced a slew of charges. In Boston, three women reported (in separate incidents) being sexually assaulted by Uber drivers. In Los Angeles, an Uber driver was arrested for allegedly kidnapping a drunk female passenger; she awoke in a motel room, after having been carried there unconscious by the driver, according to motel surveillance cameras. In Washington, D.C., another Uber driver was accused of rape. In Brooklyn, an Uber driver was arrested for stealing $5000 worth of jewelry from two passengers. In one assault case the driver had a prior felony conviction yet had passed Uber’s background test; in another case a passenger was allegedly bludgeoned by an Uber driver with a hammer, resulting in a fractured skull. Numerous episodes have popped up of drivers who apparently obtained female passenger phone numbers from the Uber database, and continued to contact them, seeking dates and other forms of attention.

A month earlier than the New Delhi incident, in November 2014, an Uber driver in Chicago was arrested for sexual assault. The charges were later dropped, but it turns out the driver was not even authorized to pick up passengers for the ridesharing company – he was using an account registered in his wife’s name. In Los Angeles, an Uber driver told about how easy it was to game Uber’s background checks by handing off an approved driver’s account to another driver. Some drivers actually share accounts. The company knows and looks the other way, claimed the driver, because “it’s harder to find drivers than you’d imagine. The company just wants someone in that car.”

Practically admitting the failure of their background check system, an Uber spokeswoman could not explain how the discrepancy in Chicago could have been missed. But she then went on the offensive and blamed riders, a consistent Uber tactic used for deflecting criticism.

“There is a responsibility for the rider to make sure that when they get into an Uber that they’re checking the license plate and they’re checking the driver’s face and making sure all that matches up,” she said. That was a first – a new safety procedure of checking the drivers face, as well as the license plate, amidst the company’s blandly reassuring words about the safety of its service.

As many of Uber’s defenders have pointed out, assaults and other bad things happen from taxi drivers as well. But when things go wrong, heavily regulated taxi companies have to take responsibility. Uber on the other hand feels self-righteously justified in disclaiming any responsibility for its drivers’ bad behaviors because of its insistence that it is not a taxi company but merely a Web- and app-based matchmaker between a driver and a passenger. According to Uber, the driver is a private contractor who is in fact not an employee – the driver is “the CEO of his own driving business,” Uber likes to say – so the company has no liability. It’s kind of an outrageous claim for a company valued at $51 billion to make, with all the clout that its high-priced lawyers bring to this discussion.

Yet that’s exactly what Uber did when, on New Year’s Eve 2013 at 8 p.m., one of its drivers in San Francisco hit and killed six-year-old Sofia Liu.

Sofia, her mother and brother were leisurely crossing the street in a crosswalk when Syed Muzaffar, an Uber driver in a Honda sport utility vehicle, turned into all three of them. Sofia was killed instantly, her mother and brother badly injured. Muzaffar was arrested and charged with vehicular manslaughter. But Uber immediately denied fault, claiming that Muzaffer was an independent contractor, not a direct employee, and besides he was not carrying a passenger or driving to pick up a passenger, and so technically he was not “on the clock.” Uber “did not cause this tragic accident,” said its attorney, and therefore had no legal liability.

The girl’s family sued both Muzaffar and Uber for wrongful death, alleging that Muzaffar was logged on to the UberX app when he fatally struck Sofia, waiting to receive his next ride request. The driver’s attorney also stipulated that his client was awaiting his next fare assignment. It also turned out that Muzaffer already had a reckless-driving record in Florida, including being arrested for driving 100 mph into oncoming traffic while trying to pass another car – something Uber’s screening process did not uncover.

Uber’s refusal to accept responsibility not only is tragic, it defies industry standards. Chris Dolan, attorney at Dolan Law Firm representing Sofia Liu’s family, called Uber a “pirate” operation. “Pizza delivery drivers? They have insurance on the pizza car. From the minute it gets turned on until the minute it gets turned off. Everybody else who’s driving vehicles on the road, whether they are full or empty, carries commercial insurance 24-7.” Taxi drivers, for example, are covered by the company’s commercial insurance for as long as they are in the car. He calls the ridesharing business “a tragedy waiting to happen. They [Uber] want to be exempt – because they’re special. They’re ‘technology,’ so they shouldn’t have to follow the rules.”
This pattern of evading responsibility by any means necessary has become a frequent

Uber tactic. The hard charging company seems to care little about who is being trampled by its extremely narrow legal interpretations. Uber has a habit of nickel-and-diming the public, its drivers (which it calls its “partners”) and cities where it operates, despite its being a multi- billion-dollar-valued company.

Copyright (2015) of Steven Hill. Not to be reposted without permission of the publisher, St. Martin’s Press.