How Uber fools or intimidates just about everyone

 In March 2017 The New York Times lead the way in confirming our earlier projection about this with an article titled “How Uber deceives the authorities worldwide” ( Isaac, 3/3/2017) – referring to new reports of Uber’s obviously unethical and largely illegal implementation of its so-called Greyball strategy to target both enemies and possible supporters with deceptions(including politicians in Australia). This article dovetailed with a series of exposures about how the sexist, predatory and ruthlessly ‘toxic’ (so-called ‘ass-hole’) work culture, management practices, and speculative investment strategies of Silicon Valley had continued to also dominate Uber (Lacey & Illing, 28/2/2017). As well as the well-known case involving CEO Kalanick in exposing the sexual harassment cover-ups within Uber (Lawlor 25/3/2017), Kalanick was also the focus of the global reporting of a video-tape where he abused an Uber driver over falling fares (Newcomer, 28/2/2017). [Original version of this written and first shared in hard copy format in September 2016]

The Uber company usually makes the ‘legal’ claim in relation to its UberX and Uberpop services that it is just an organizer of independent drivers (e.g. Battersby, 23/4/2016; Kaine & Josserand, 17/5/2016). However, in practice it generally acts in various ways as a self-regulating multi-national corporation with arbitrary, often aggressive, and even apparently predatory tendencies. This is also in relation to its own employees as well in dealings with national governments and local industries.

When it uses these arguments and stunts to bypass local regulatory regimes or establish illegal ridesharing taxi services, naturally local industries will rightfully complain about such tactics. What does not get so much such attention are mounting items of widespread evidence that many of the drivers they have attracted to work for them (many of them ex or current taxi drivers)  are increasingly finding out that initial promises are not kept and related income projections not accurate or sustainable (e.g. Knowles, 5/11/2015), that contractual conditions of agreement are prone to change with negative implications, and that if any dispute arises they effectively have no right to due process within Uber – who freely admits that their driver contracts “reserve the right to deactivate or restrict a driver from accessing the Uber app ‘at any time’, and at its ‘sole discretion’” (Wilkins, 18/5/2016). There are even local reports adding weight to a growing global perception that Uber effectively oversees a ‘pyramid scheme’: “frustrated Uber drivers who claim they are earning below minimum wage are preparing to fight back against the ride-sharing service for luring them into a ‘pyramid scheme’” (Courier Mail, 6/12/2015).

Fooling governments into allowing Uber’s off-shore profiteering and corporate tax evasion

A critical flaw in Uber’s emerging plans for world domination of various local taxi ‘markets’ is their non-sustainable view that an aggressively invasive approach is a sufficient strategy for corporate success (Davies, 6/5/2016) – especially when combined with opportunism and ostensibly unlimited as well as largely speculative financial backing. The related tactic of justifying this using the concept of innovative disruption (which appeals to ambitious politicians and enthusiastic generation Y-ers with perhaps equal measure) is disingenuous on various levels and in a range of ways (Cramer & Krueger, 2016). It is certainly disruptive but not innovative – or at least not sustainably so. It is a public marketing strategy which also often involves being prepared to support illegal practices whilst ostensibly convincing regulators to relax or ignore required standards of driver accreditation, passenger safety, and general insurance cove. As O’Keefe & Jones (22/10/2015) have pointed out, “Uber … is viewed by many as the model for the 21st century corporation. You should see how state-of-the-art it is when it comes to minimizing its tax bill”. They outline how Uber has designed it so they should only ever pay 1% of revenue after subtracting the costs of operation – then sending the rest of the profits to their shell company in Holland as royalties which are not taxable under Dutch law (i.e. shades of the Panama Papers).

Likewise, the monopolizing impulse driving Uber is reinforced or confirmed by CEO Kalanick’s candid admission: “This is about a product, you can’t win 51 to 49. You have to win 98 to 2” (Anthony, 21/12/2014). Moreover, the claim that Uber is basically a service for ridesharing taxi drivers using their own cars to bring down costs is not just being increasingly exposed as a cynical ploy to seduce ex-taxidrivers and get prospective future drivers to think that Uber offers them a business as well as work opportunity. Kalanick has also quite clearly acknowledged that Uber’s real future target is actually to do with away with all drivers and eventually just run its own driverless cars: “When there’s no other dude in the car, the cost of taking an Uber anywhere becomes cheaper (Cava 20/5/2016).

From the start the basic motivation for Uber was more than just a dissatisfaction with  poor taxis service linked to the cartel behavior of taxi  companies and/or owners in cities around the world. It has been consistently projected as a speculative investment focus for developing a new ‘app-based’ monopoly model of business in the 21st Century (in other words, a kind of ponzi scheme). From the initial Silicon Valley funding through to recent global investors, there has been little concern for regular large operating losses as literally billions of investment funds have multiplied. In 2011 Google Ventures put into Uber a reported US$258 on the basis of a projected future US$3.5 billion valuation (Wilhem, 22/8/2013). In a period from 2014 through to 2015 the Chinese search engine Baidu (i.e. the Chinese Google) put up most of the more than US$1 billion to assist Uber to beat its similarly modelled competitor in China Didi Chuxing – resulting in a $2 billion loss for China Uber in 2016 alone as Uber eventually conceded defeat (e.g. Chung, 1/12/2016). However, when it took over China Uber for around US$1 billion, Didi Chuxing became the new key spec investor in the global Uber with a convergent strategy for global domination. Then, despite all these regular and cumulative losses and various ongoing legal actions against around the world, the grandest speculation came from the Saudi Arabian Public Investment Fund which put in US$3.5 million into Uber in mid-2016.

The intimidation of critics and even acquiescent governments

The aggressive tactics of both intimidation and seduction (e.g. (Richardson, 6/5/2016) have apparently extended to Uber senior executives considering a ‘digging up dirt’ strategy to neutralize critics (e.g. Empson, 24/1/2016; Smith, 14/11/2014) and also trying to ban their own increasingly disgruntled drivers from collective or union representation (Kaine & Josserand, 17/5/2016).  Even after recently convincing the South Australian governments to let it operate as a de facto and unregulated taxi industry within an industry, that state had a direct experience of the confrontational ‘bullying’ tactics of Uber to gain greater concessions (AAP, 5/5/2016a). Then there is the example of how, after successfully bypassing all other normal costs and regulations Uber has even attacked (and is in the process of taking legal action against) the Australian Tax Office for ruling that a GST will apply to its services (Keany, 18/11/2015).  This is a putting aside for the moment how Uber also claims that it should not pay any tax directly on its 25% current earnings from every Australian fare because the transaction is virtually processed off-shore in the Netherlands. When Uber started it only took 5% of fares and has continued to ‘seduce’ with short-term incentives). In some American states now Uber reportedly takes 30%. Australian Uber drivers have bitterly complained when Uber recently raised the rate from 20 to 25% (Cooper, 14/4/2016). Like the monopoly it is and with no operating costs (as, unlike with taxis, this is borne by drivers), Uber will likely further increase this. Also, all along drivers have had to also bear the brunt of the regular discount promotions Uber uses to entice new customers.

Australia one of the few countries not to have ‘woken up’ to (and resisted) the Uber game

Whilst such predatory tactics may have worked well at times in the North American context, the Uber strategists have generally underestimated and also misread and miscalculated the situation in most other countries (with Australia a notable exception currently). In the European context the importance of the public service function of taxis is recognized and defended – the background to how, for instance, Uber got ‘walloped’ in Germany (Scott, 4/1/2016). Conversely, in various Asian and other countries Uber has underestimated the capacity for innovation in support of (not against) local taxi industries (e.g. Auyong, 21/4/2014).  As indicated, Uber lost several billion dollars in China before conceding defeat in its battle with the local app service Didi Kuaidi (Clover & Hook, 18/2/2016). A similar story is happening in many other places around the world including, for instance, Russia (Khreenikov, 14/8/2015). In other words, after some initial successes Uber’s general ‘smash and grab’ tactics have increasingly stopped working. They have also suffered a major setback with global implications when in late 2016 the UK government ruled that they are actually an employer confirming a range of legal responsibilities to their drivers which they have regularly tried to evade from the outset of their operations.

This case has exemplified Dauss’s (2016) projection that where Uber really made a mistake is in over-confidently entering expensive and multiple legal actions around the world – many of which are impending or continuing, and many of which they are now being projected to lose. As Dauss further clarifies, this will not stop ridesharing per se and there are many other similar companies operating in the USA and other places (Lyft, etc.) (Cf. also Dauss, 2013; Daus & Klein, 2016). However, those that are likely to be sustainable are complementing and supporting local taxi industries rather than trying to unfairly undermine them whilst ‘bullying’ their regulators into compliance.

Uber’s myth of being a 2Ist Century corporate model of innovation (more like a 19th Century Robber Baron?)

Even the one area where Uber genuinely helped to bring innovation into the taxi industry (technological innovation with app-based taxi bookings) is no longer an item of competitive advantage. Initially this was so successful because it was attractive to a public tired of the old taxi image. As Jericho (18/4/2016) put it, Uber passengers were not just attracted to low-cost rides but the ability to use smartphone apps to “estimate fares and car arrival times, view the approach of a driver, monitor actual versus advised routes, streamline payments, and review each trip’s route, time, driver, and fare”.  This was especially so with a digitally literate generation who attracted to cheaper option but also often were and are attracted to the idea that Uber could be a ticket to get into ‘service work’ – but also as a potentially affordable business opportunity.   However, not only have most of the key functions of the Uber app (GPS tracking, virtual records, and direct communications) been adapted by other taxi service apps, but they are often improved upon. As indicated, those apps which also support taxis as well as some kind of carpooling service (Grab Taxis, GoCatch, and so on) are now arguably superior and also in more sustainable ways.

Uber tried to further muddy the waters for those who hold to the illusion that UberX is merely a ‘peer to peer platform’ (e.g. as accepted at apparently face value in the Grattan Institute by Minifie, 2016). Not so long ago it released a related car-pooling app in the US (UberPOOL) which, more than anything else, just reinforces how UberX remains an illegal taxi service trying to confuse people with its use of the ridesharing concept. The one last ‘card’ up Uber’s sleeve (i.e. becoming ‘global’ enough to be used in different countries) is now being definitively quashed with the emergence of the IRU’s (2016) UpTop model of collaborative global networking of apps across all countries.  The UpTop model also provides a framework for encouraging all local taxi industries around the world to have some basic regulatory as well as technological ‘interoperability’. This is actually the kind of sustainable innovation Uber could have lead the way with if it really was interested in being an organized and legitimate commercial service and not just a pirate.

How Uber even fools its own drivers that it is an innovative ridesharing ‘service’

It is also becoming clear that Uber has either underestimated how or does not care whether initial good will and luck and/or opportunism can quickly turn to cynicism, resistance and loss of confidence. This is particularly so when involving claims to be providing innovation and a new ‘service’ which will benefit all stakeholders when ultimately this is not true. With passengers, there is growing awareness that Uber’s price surging model can not only be an unpleasant uncertainty with Uber cars typically more interested in ‘cherry-picking’ normal taxi customers and fares (e.g. those with disabilities or the ‘small job’ fares of pensioners and local shoppers) – but also is open to manipulation (e.g. Schetzer, 16/12/2016).

However, as indicated above, it is the Uber drivers (many of them ex or even current taxi drivers) who are finding out that the promises of greater income, personal autonomy and a private enterprise opportunity have not only been greatly exaggerated in the long term but often misrepresented (e.g. Knowles, 15/11/2015; Wilkins, 13/5/2016).  Many were attracted by the idea (and related inflated claims) that they could make more money with Uber than with conventional taxis, that any legal issues with failures to meet regulatory legalist would soon get sorted out, and that the UberX model would allow them to effectively to use their own cars to operate a small business.  As time has gone by, many of the Uber drivers have found that because Uber is more interested in numbers than in quality and sustainability, there is (a) often and increasingly less work and income than expected, (b) that after the range of expenses involved such as using their own cars (even when not meeting legal requirements for insurance, safety, and accreditation) that regular income tends to be dramatically lower than advertised, and  (c) that Ubers’ so-called ‘self-regulation’ is often unfair and even more arbitrary than the regulated system when it comes to their rights and responsibilities.

How Uber fooled Alan Fels and his taxi industry inquiry

It is not just many of the Uber drivers who were fooled. As a noted national advocate of competitive business practices, Alan Fels made significant contributions about the wisdom of sometimes ‘de-regulating’ industries (e.g. Schetzer, 16/11/2016). However, since he has also acted as head of the taxi industry inquiry in Victoria (http://taxi.vi.gov.au/taxi-reform/taxi-industry-inquiry) he should have understood better how the taxi industry is not quite the same as the LPG industry or petrol prices. More recently Alan Fels not only came out with an article (The Age, Dec 22, 2015) championing the deregulation of the Victorian taxi industry to allow the same unfettered access to Uber – he also actually accepted a position on Uber’s Global Advisory Board (The Age, May 22, 2016). His article justifies the de-regulation of the state industry to legalise Uber that this would correct how the industry had become closed, prone to ‘bad practices’ and also how “regulation in all its dimensions has been captured by the industry with deleterious effects on safety, driver quality and service”.  As indicated in our full report , we would not disagree with his conclusion that the industry has become over-regulated in a somewhat anti-competitive manner. However, this either/or mentality of going from one extreme of regulation to another of deregulation fails to get the right balance or understand the long-term damage which might be caused with knee-jerk or flip-flop policy (Richards & Farroknia, 2016).

APPENDIX : Cutting through the confusion about ‘ride-sharing’

Like many other media outlets around the world as well as Australia, Queensland newspapers such as the Brisbane Times also inadvertently tend to use such terms as ridesharing (and related ridesharing apps and ridesharing service), Uber, and even the larger term sharing economy in loose, sometimes inaccurate, and generally misleading ways. This all serves to reinforce a perception that these new terms represent an option of future innovation, are an economic opportunity for all concerned (besides taxis), are indeed opposed to ‘taxis’, and, further, represent a legitimate basis for trying to fully circumvent all and any regulatory standards (safety inspections, insurance, etc.) and many of the related costs (transport registration fees, plate licenses, etc.) which have been foisted on the taxi industry.

For instance, the Courier Mail typically refers to Uber as ‘a ride-sharing app’, and also regularly suggests that Uber ride-sharing is an alternative to taxis as distinct from the more accurate ‘illegal taxi service’ (e.g.  Courier-Mail, 5/5/2016a). Conversely, when reporting on the OPT Green Paper, the Brisbane Times translated this to mean exclusively legalizing Uber when the proposal was to ostensibly legalise ridesharing – also inaccurately suggesting that if ‘Uber was banned’ that this would automatically result in ‘higher taxi fees’ (AAP, 21/5.2016). In an article about GoCatch for the Brisbane Times, Durkehim & Drummond (22/2/2016) inaccurately refers to GoCatch as a taxi industry enemy like Uber – when Gocatch actually supports taxis, and its new GoCar ridesharing service is designed to complement not conflict with its app supporting the taxi industry. As GoCatch itself points out, references to Uber as a ‘service’ ignore or conceal how it functions as a corporate monopoly (Atfield 29/4/2016).

At the heart of the confusion is that, somewhat depending on one’s perspective, Uber has been either very naïve or very mischievous in selectively using the ride-sharing and also alternative variation such as ride-sourcing, ride-booking, e-hailing, and so on, to encourage wider confusion about what this means. Indeed, all these related terms are inadequate, partial, and inaccurate. The main reason why Uber probably prefers ridesharing over the term often used by some transport industry commentators (ride-sourcing) was its association with both (a) the apparently related concept of car-pooling and also (b) the illusion or myth that somehow Uber was promoting a ‘sharing economy’ or ‘peer-to-peer’ service along the lines of Airbnb home accommodation ‘rental’ – that is, customers ‘share’ an informal ride with a driver. The term ride-sourcing emphases Uber’s alternate claim or justification it is just a technological platform informally (vs. illegally) linking up drivers to take customers – who can ‘source’ taxi fares or trips through Uber’s app-enabled service (e.g. Free, 30/6/2015). And related variations e-hailing and ride-booking (especially variations of ad hoc/real-time/dynamic/on demand ridesharing or even car-pooling) all have tried to suggest a functional difference between ridesharing and the unique ‘hail and rank’ taxi roles. As Logie-Smith Lanyon Lawyers (2/11/2015) point out, these variations of informal e-hailing remain a variation of taxi hail work for purposes of industry regulation and legal definition.

It should not be forgotten that Uber originally referred to itself as a default taxi company (Ubercab) and this only changed in around 2011 when they faced legal action from taxi companies in California at the time. They then embraced the links to ridesharing as a form of car-pooling in terms of how it provided a defense or cover from many more legal actions by ‘employees’ held rather to be ‘contractors’ (e.g. Smith, 3/11/2015).  In other words, Uber is happy to take all monies paid for fares (even including tips which have often not been passed on) as a company, but then deny that it has any responsibilities either for taxation, working conditions or industrial benefits – or to allow its employees/contractors any rights of due process before arbitrarily ‘dismissing’ them with no right of appeal under work agreements.

Uber’s model of using GPS devices, smartphone bookings and digital extension of human social networks is replicated by many other ‘apps’ (i.e. mobile device applications) with perhaps two key distinctions which allow us to more foundationally distinguish between an Uber model and a non-Uber model of ridesharing. One is Uber’s centralized digital network processing of all payments from the customers of its drivers – part of its wider ‘automated management’ model (e.g. Mannix, 10/5/2016). A second is Uber’s elaborate controlling of ‘booking and dispatch’ work allocation through an ‘optimisation algorithm’ (e.g. Vedantum, 17/5/2016) – which clearly extends beyond its initial claims of only organizing on-demand, ad hoc or dynamic sharing and sourcing of Uber cars and drivers.  Uber likes to promote itself as the sharing alternative to how traditional taxi booking companies often functioned as cartels – but its model is a more extreme and global form of monopolizing.

The word-play linkages with not just new technologies but also notions of participating in a sharing as well as service economy have clearly been appealing to a digitally literate yet often work-challenged younger generation who often find taxis expensive but not sufficiently service-oriented (Law & Ma, 24/3/2015) – and who are also often attracted to the promise of working for themselves in a way which is presently feasible with existing taxis. For some, the flagrant circumventing of rules may have the suggestion of a legitimate form of ‘black economy’ not too far removed from drugs or prostitution. Uber’s reference to itself as a ridesharing application and service would appear to be designed to harness growing collective enthusiasm but also confusion for the notion of a ‘sharing economy’ – where individuals can circumvent the formal economy to freely share, barter exchange, or even informally rent out services (e.g. Schneiderman, 24/4/2015). A perhaps somewhat more accurate but still limited term is that Uber is a ‘transport networking company’ (Goldmark, 8/8/2013; Daus, 2016). Uber has not just exploited the confusion about the grey area between taxis and car-pooling, but also confusions between conventional vs. digital, manual vs. automised, exclusive vs. taxi+ridesharing ‘taxi booking and dispatch’ services.

In the Oxford Dictionary taxis are defined as ‘a motor vehicle licensed to transport passengers in return for payment of a fare’, whilst ride-sharing is generally defined as ‘participation in an arrangement in which a passenger travels in a private vehicle driven by its owner’. So, when all is said and done Uber is basically operating an (illegal) taxi service (not a ride-sharing service in terms of the car-pooling meaning indicated in the Oxford Dictionary). Whilst it may set itself up in direct opposition to conventional taxis it is getting an unfair advantage by circumventing the costs of operating in a regulatory framework. This, at least, is the very reasonable and consistent conclusion of the Australian Tax Office for the purposes of GST payment.  Uber’s appeal against this ATO ruling is not likely to be successful (Keany, 18/11/2015). To the extent that we are obviously going to have to accept a notion of paid ride-sharing (or the ATO’s selective use of the alternative term ride-sourcing) quite distinct from car-pooling, then we propose that it be defined in terms of a truly independent and semi-regulated service by non-taxi-drivers and non taxi vehicles – and one which is complementary to and at least partially included within a re-calibrated local taxi industry.

In other words, a more accurate as well as fairer definition of ‘ridesharing’ for the purposes of taxi industry integration is needed. It might (depending on how this is refined) recognise GoCatch’s GoCar option as a ridesharing service of personalised transport (or non-exclusive e-hailing) but not the UberX model. South-East Asia’s GrabTaxis also represents a more constructive version of this model which, in Singapore for instance, encourages registered non-taxi car owner-drivers to be able to take two such ‘jobs’ on a working day during peak hour traffic. This clearly can complement a taxi industry typically stretched out at peak hour times, and help reduce traffic problems at the same time. As we outline in detail in Part 2 of our related report (from which this excerpt has been taken) in terms of an overall proposed solution to the industry crisis, this might involve recognising, regulating, and authorising only individually registered ‘ride-sharers’ and digital booking companies which support both normal taxis and some complementary ridesharing alternative. With this understanding between an Uber model and a non-Uber model of this term, our related report uses the most common attribution for an alternative taxi service ridesharing.

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