Uber Became Big By Ignoring Laws (and it Plans to Keep Doing That)

Uber’s ascent to the largest rideshare company in the world was fueled by a recurring cycle in which it blatantly ignored state and local laws, became entrenched and widely used in a community, and then tried to use its largesse to change the laws it was breaking. Failing that, the company simply paid slap-on-the-wrist fines and continued as normal or petulantly left cities rather than comply with laws designed to regulate it.

That Uber regularly broke laws to cement its frontrunner status is not a controversial statement, it’s a fact. The state of Pennsylvania, for example, fined Uber $11.4 million in 2016 for operating in the state without permission. Emails obtained by Motherboard showed that Uber then deputized the mayor of Pittsburgh, where it was seeking to start a driverless car program, to lobby the state to reduce its fine (an Uber lobbyist said it was willing to pay $250,000).

In a 2016 paper called “Disrupting Democracy: How Uber Deploys Corporate Power to Overwhelm and Undermine Local Government” researcher Rick Claypool documents how Uber overran or ignored regulations in nine cities around the country and then later changed the laws with its high-powered lobbyists:

“There is a pattern to Uber’s conflicts with cities. The company often launches in cities in conflict with local officials’ interpretations of local regulations, while at the same time insisting on the legality of its business. When local law enforcement and other officials respond, the company mobilizes a campaign to ‘save Uber,’” Claypool wrote. “Uber usually wins these battles against rules and regulations the company opposes, but when it loses, it keeps fighting. When cities pass laws that Uber opposes, the company commonly seeks to have them preempted with Uber-approved state law or repealed through voter referenda.”

Mike Isaac’s new book, Super Pumped, serves as the definitive account of Uber’s “guerilla tactics” meant to facilitate grow at all costs. Often, those costs meant enthusiastically breaking the law, engaging in rampant corruption overseas, and resulted in sexual assaults, injuries, deaths, and suicides.

The general thinking has been that the ousting of Uber founder Travis Kalanick ended the company’s wild west days. But the company’s response to AB5, a new law passed in California that would require the company to classify its drivers as “employees,” thus conferring them the benefits and protections that come with it, shows that Uber’s strategy to ignore or fight regulations remains the same as it’s always been.

In a statement responding to AB5’s passage today, Uber said “we continue to believe drivers are properly classified as independent, and because we’ll continue to be responsive to what the vast majority of drivers tell us they want most—flexibility—drivers will not be automatically reclassified as employees, even after January of next year.”

The company said it will try to change the law and, together with Lyft and DoorDash, has pledged $90 million to try to reverse AB5. Uber said in a statement that it will continue to fight drivers who try to become classed as employees in court.

When Uber says it’s a technology platform, not a cab company, it is reiterating an old legal argument that Uber has deployed to argue it is a platform, not a transportation service, therefore drivers can’t possibly be employees because they are customers. There are a few problems here.

First, there is the fact that this argument has already been shot down by the European Union’s highest court, which ruled that Uber is a transportation service, specifically a cab company. This, after all, is why London was able to revoke Uber’s license to operate after the company's long stretch of reckless and illegal behavior in the city. A ruling in Europe does not apply to the United States, but it shows that Uber is fighting this same fight all over the world.

Second, returning to this “technology platform” position could be dangerous for Uber as it exposes them to a legal argument accusing them of price-fixing, as laid out by Jalopnik’s Aaron Gordon.

Independent contractors, who do not have the right to collectively bargain, are allowed to classify themselves as incorporated entities such as limited liability corporations—in other words, corporations. If ride-hail drivers collectively bargained as independent contractors either to determine a minimum wage or benefits, antitrust law would see them acting as different corporations colluding to set the cost of their services: price-fixing.

In Seattle, this argument came to a head when the Chamber of Commerce sued to prevent one union from representing all of Seattle's ride-hail drivers. Their argument was that "by allowing drivers to bargain over their pay, which is based on fares received from passengers, the city would permit them to essentially fix prices in violation of federal antitrust law."

So, let's indulge Uber's arguments for a moment. If Uber is a technology platform where drivers are matched to passengers, then Uber's normal course of business is not the fare you pay for a ride but the commission and fees it collects from every ride. But if a driver is an independent contractor (corporation) using the service and you are a customer using the service, then Uber is setting the cost of services: price-fixing.