Despite Intense Scrutiny, Uber Lays Another Egg
Mar 10, 2017 12:25 PM PT
Already under the microscope for claims of sexual harassment and questionable labor practices, Uber this week said it would ban the use of a controversial technology to block regulatory authorities from monitoring its operations.
The company's "greyballing" technology is designed to hide the standard city app view in specific cases -- for example, from former riders blocked for being abusive, or to prevent fraud. However, some drivers have used it to circumvent local regulators, a practice that Uber no longer will allow, according to Chief Security Officer Joe Sullivan.
Uber has started a review of the different ways the technology has been used up to now, he said, noting that it will take some time before the prohibition can be enforced fully.
A number of organizations have reached out for additional information, Sullivan said, although he did not specify whether they were government regulators or other organizations.
Uber will respond to their inquiries after the review is completed, he added.
"I am baffled that it took Uber public scrutiny and a week's time to come to this conclusion," said European Parliament member Marietje Schaake.
"I expect at least full disclosure of every city in which Uber used greyballing for this purpose, so that the relevant authorities can get to the bottom of this and take appropriate actions," she told the E-Commerce Times.
Uber has used its greyballing technology to thwart regulators in various U.S. cities, including Boston and Las Vegas, as well as in a number of overseas markets, including Paris, where it has been under scrutiny, The New York Times reported earlier this month.
Uber has faced a heavy backlash in cities where it has faced off against entrenched taxi and private car services that transport tourists, business travelers and local passengers to and from local airports, rail stations and hotels under a completely different set of operating costs and regulatory requirements.
Hundreds of taxi drivers in South Africa blocked traffic to the O.R. Tambo International Airport in Johannesburg to protest Uber operations there.
Following publication of the NYT story, Schaake last week appealed to the European Commission for an investigation of the greyballing tool in connection with local competition rules.
"The rule of law should apply to everybody, online and offline. I want to know what the European Commission proposes to do after what we learned about Uber. It should be a no-brainer that if you actively create measures and tools to circumvent local laws, you should be held accountable," she said.
"Some cities have very rigid rules against the ride-hailing market," Schaake noted. "We need rules to ensure principles are preserved and we have a level playing field. As a liberal, I am not in favor of companies that aim to monopolize transport services under the guise of being 'collaborative' companies."
Sexual Harassment Claims
The greyballling controversy marks the latest disruption for Uber, which has prided itself as the ultimate Silicon Valley disruptor, following a major backlash against the company's coziness with the Trump administration.
Uber drew protesters' ire in particular when it attempted to circumvent a work stoppage by local taxi drivers at JFK International Airport in January, which was intended to protest the president's controversial ban on the admission of refugees and visitors to the U.S. from certain Muslim-dominant countries.
A big scandal erupted just last month, when a former engineer at Uber alleged widespread sexual harassment that the company allegedly tried to bury before forcing her out.
Uber hired former Obama administration AG Eric Holder to investigate the sexual harassment claims, and since has fired Amit Singhal, senior vice president of engineering.
Uber has committed a rash of unforced errors in recent months, according to Michael Harley, executive analyst at Kelley Blue Book. However, it's way too early to bet against Uber weathering the storm.
'While there will be countless riders who will abandon the app-based company and jump over to rival Lyft, don't discount Uber just yet," he told the E-Commerce Times.
Uber just landed a permit to test autonomous vehicle driving in California, which is another potentially lucrative market for the emerging business of ride sharing with driverless cars, Harley noted.
"Pushing the technology envelope, while carefully managing its public image and next steps, should help extinguish much of the negativity," he said.
Uber has "certainly been under pressure" in recent months, acknowledged Steven Polzin, director of mobility policy research at the University of South Florida's Center for Urban Transportation Research.
Still, it's prudent to take a longer view of the ride-sharing industry's potential, he said, cautioning against drawing conclusions about Uber and Lyft based on current events.
"The technology is important and will be around," Polzin told the E-Commerce Times. "The pricing and delivery structure, regulatory environment, and capacity remain to be validated and are likely to keep changing."