A bad year -- already -- for Uber continues to spiral out of control. First there was its response to the Trump immigration executive order, which appeared to be crossing a one-hour taxi strike for JFK Airport in New York. Then came the sexual harassment charges. Just the other day, CEO Travis Kalanick said that he needed "leadership help" after getting caught on video berating an Uber driver who had legitimate concerns about the company.
Now it's a story in the New York Times about how Uber dodged authorities worldwide where law enforcement and other officials were running sting operations when Uber wasn't authorized to operate. Using data from the app and other unnamed sources, the company would identify who was working for the government, cancel any rides they ordered, and put up a faked screen of where vehicles were at the time.
This potentially crosses the ethical boundaries the company has allegedly pushed throughout its history and moves into a questionable legal sphere, as it could be seen as obstructing authorities. It also raises the prickly question of how much entrepreneurs can expect to get away with before they get themselves and their companies into significant trouble.
According to the story, Uber's legal team approved the use. Uber hasn't yet responded to a request for a comment, but a statement run by the Times said: "This program denies ride requests to users who are violating our terms of service -- whether that's people aiming to physically harm drivers, competitors looking to disrupt our operations, or opponents who collude with officials on secret 'stings' meant to entrap drivers."
If authorities are using an app in the line of duty, it's unclear whether claiming a violation of terms of service would be enough of a defense anywhere.
More fundamentally from a business view, you have to ask how much leeway should executives get in pursuit of profit and expansion. Over the years, Uber has been allegedly embroiled in a huge number of issues, including the following:
- Ignoring municipal regulations and running the service even when prohibited.
- Treating drivers as contractors when there are questions about whether their status is more that of an employee.
- Attempting to sabotage the business operations of competitor Lyft.
- Instituting predatory pricing practices.
- Violating lobbying rules in Chicago.
- Enabling a freewheeling culture in which sexual harassment has run rampant.
- Getting sued by Waymo, the former Google self-driving car division and now a sibling property of parent Alphabet, for allegedly stealing its technology.
Startups can sometimes run afoul of rules out of ignorance. They may have issues combining an entrepreneurial nature with a necessary respect for regulations and laws. They might take short-cuts that later seem ill-advised. But, criminy, this is a heck of a list for a company that has raised $8.8 billion in investment money since 2009.
I've said before that Kalanick needs far more than leadership help. You can't slap on some courses in ethical behavior, basic business law, labor issues, and other such elementary issues onto a runaway train -- or hired car, whether it drives itself or not. The company has potentially big financial problems if the analysis at Naked Capitalism is even close to right and there's no clear way it can ever get enough efficiency to make money. Scale doesn't work when the costs are born by individual drivers and they can't combine their expenses. Either prices go up, making alternatives more competitive, or Uber has to keep raising money to subsidize its costs.
The investments are too big. The stakes are too high. The problems, far too frequent, severe, and fundamental. How long can investors ignore the battering in the press? How long before they wonder whether they are captives of a bad deal and only hoping that they might see some payoff, or recovery of some of the money they've put in? How long before they say that the current management team, including Kalanick, isn't up to the challenge and they boot them out? Maybe the current executives have some time and goodwill left, but it surely has to be running shorter than the stream of money.