For-profit

Uber

Website:

www.uber.com/

Location:

San Francisco, CA, United States

Formation:

2009

CEO:

Dara Khosrowshahi

Type:

Ridesharing and Internet Technology Firm

Uber Technologies is an American technology company best known for its ridesharing and restaurant delivery services. Founded in 2009, Uber became one of the most successful startups in history and a leading company in Silicon Valley. As of January 2021, Uber was valued at over $80 billion.[1]

Since its founding, Uber has attracted controversy with its aggressive expansion policies and clashes with regulators. Prior to achieving market dominance, Uber was known to ignore local regulations and operate in a legal grey area until it had achieved enough of a local presence to openly challenge laws. Taxi companies, which are usually dependent upon government-mandated monopolies, have opposed the rise of Uber and have accused the company of engaging in anti-competitive and illicit practices.[2]

Uber has also faced criticism for its labor policies, primarily for its designation of drivers as independent contractors. The designation permits drivers to have more flexible employment without the benefits that are mandated for standard employees by labor laws. Uber has faced legal challenges around the world for designating employees using contractor status, occasionally losing cases and being forced to reclassify drivers as employees. In 2020, the California Assembly targeted Uber and other ride-sharing companies with a bill to end independent contractor status for nearly all contract workers in the state. Later in the year, voters passed Proposition 22, which exempted ride-sharing companies from the bill. [3]

History

In 2009, Ubercab was founded by Garrett Camp and Travis Kalanick, a pair of technology entrepreneurs. Camp envisioned a company which could provide car transportation through a smartphone application, though the initial idea was for uber to function as a high-end timeshare car service. In 2010, one of Uber’s first employees, Ryan Graves, became CEO. He soon moved to COO while Kalanick took over as CEO.[4]

In 2011, Ubercab’s officially launched its service San Francisco. Months later, the company was renamed to Uber due to complaints from local taxicab companies. In December, Uber raised $37 million in its Series B round from investors including Menlo Ventures, Jeff Bezos, and Goldman Sachs.[5]

In 2015, Uber became the most valuable startup on earth after earning a $51 billion valuation. The following year, Uber raised an additional $3.5 billion from Saudi Arabia’s sovereign wealth fund.[6]

Uber continued to expand in the United States and across the world, despite failing to achieve profitability. In 2017, Kalanick was removed as CEO following allegations of widespread sexism in the company, and former Expedia CEO Dara Khosrowshahi replaced him. In 2019, Uber issued its initial public offering, and briefly ballooned in value to over $120 billion, before experiencing the greatest single-day share loss for an IPO, eventually settling at $69 billion. Uber is currently the largest ride-sharing company in the world by a large margin, with an $80 billion valuation as of January 2021.[7]

Failure in China

In 2013, Uber began an ambitious expansion plan to take over the ride-sharing market in China. Three years later, Uber sold its Chinese operations to its Chinese rival Didi in an equity-swap deal. Most pundits judged Uber to have suffered a disastrous setback against a foreign competitor after overextending into markets that the company’s leaders did not understand.[8][9]

Harvard University professor William Kirby has attributed Uber’s failure in China to interference from the Chinese government, likely instigated by protectionist motivations. From the start of its Chinese operations, Uber was forced to make partnerships with politically connected Chinese companies. For instance, rather than rely on credit cards, Uber was forced to partner with Alipay for its payments, and rather than using Google Maps, which is blocked by the Chinese government, Uber was forced to partner with Baidu for its map services.[10]

Uber initially found some success by operating in a legal grey area since ridesharing was unregulated in China. The company sustained enormous losses to gain market share both with its drivers and customers. Uber’s two largest competitors, Didi and Kuaidi, eventually merged to keep up with Uber.[11]

In 2016, as the ridesharing market grew, the Chinese government issued a new array of ridesharing regulations which put Uber at a disadvantage against Didi. The new rules required ridesharing companies to comply with complex national regulations, merge with local taxi companies, and share all data with the Chinese national government. Uber was unable to quickly comply with the regulations, leading it to leave the Chinese market despite its enormous prior investment. As of August 2021, Uber has no presence in China.[12]

Executive Order 13769

In February 2017, then-President Donald Trump signed Executive Order 13769 (commonly known as the “Muslim ban”), which levied a travel ban on citizens from several Muslim-majority countries. In response, the New York Taxi Workers Alliance (NYTWA) issued a boycott and began a protest at JFK airport in New York City. While Lyft supported the boycott and donated $1 million to support the left-of-center American Civil Liberties Union in challenging the executive order, Uber continued serving JFK airport and even lowered its prices. Then-CEO Travis Kalanick, who was a member of President Trump’s Economic Advisory Council, was accused of supporting President Trump and the executive order. Uber later claimed that its lower prices were an attempt to avoid profiting from the boycott.[13]

In response, left-of-center activists launched a boycott of Uber known as #DeleteUber; activists claimed they caused Uber to lose over 200,000 customers.[14] Uber issued a public statement denying its support for Executive Order 13769, and Kalanick eventually resigned from the Economic Advisory Council.[15]

Allegations of Sexism

In February 2017, Susan Fowler published a blog post alleging a pattern of sexism she faced while working at Uber for a year. Shortly after starting at the company, Fowler alleged that she was sexually propositioned by her supervisor. Fowler reported her supervisor to human resources, but she alleged that they told her that he would not be disciplined because he was valuable to the company and it was his first offense. Fowler claimed that she later found out that the supervisor had been accused of sexual harassment by several women at the company and alleged that she had made more complaints to the human resources department which went ignored. Fowler claimed that by the end of the year, her cohort of employees had fallen from 25% female to 3%.[16]

Uber CEO Travis Kalanick called an investigation into Fowler’s claims which was overseen by a panel which included former U.S. Attorney General Eric Holder and Ariana Huffington.[17] In June, the investigation concluded by firing 20 Uber employees.[18]

A few days later, a source leaked a memo written by Kalanick to the press which allegedly revealed a “frat-house culture” at Uber. The memo laid out rules for an Uber party celebrating its launch in its 50th city, which included rules which reminded staff members to ask for consent for sex with fellow employees, prohibited sex between employees in the same chain-of-command, imposed a “$200 puke charge,” and warned that Uber would not bail employees out of prison for illegal activities on the night of the celebration.[19] A few weeks later, Kalanick resigned as CEO of Uber due to pressure from the board.[20]

In August 2018, Uber agreed to pay $1.9 million to 56 workers who had filed sexual harassment and discrimination claims.[21]

Labor Issues

Independent Contractors

In most of the world, Uber’s drivers are legally considered independent contractors, thereby permitting them to avoid certain labor regulations that apply to workers classified as employees. For instance, Uber is not obligated to provide overtime pay, healthcare benefits, or unionization privileges to its drivers. Nonetheless, the independent contractor designation also permits ease of employment and a highly flexible work schedule for drivers. Uber has faced numerous lawsuits and legal challenges from employees and labor unions claiming that the independent contractor designation allows Uber to exploit its drivers.[22]

In 2016, a British drivers’ union sued Uber in Uber BV v. Aslam claiming that Uber drivers should be entitled to the applicable minimum wage. Uber lost the case and continued to appeal until finally losing in 2021 in the United Kingdom Supreme Court. Uber drivers in the U.K. are now entitled to a minimum wage, paid holiday leave, and protection from discrimination. various discrimination protections.[23]

In January 2019, New York City implemented a rule forcing Uber and other ride-sharing services to pay a minimum wage of $17.22 per hour. Uber has sued to overturn the rule; as of August 2021, the case remains before the courts. New York City also put a cap on the number of ride-sharing app drivers permitted in the city.[24] Also in 2019, the New Jersey Supreme Court ruled that Uber had illegally classified its employees as contractors and fined the company $650 million.[25]

In 2020, California passed Assembly Bill 5 (also known as the “gig worker bill”), which reclassified all independent contractors in California as ordinary employees with some very limited exceptions. The bill was targeted at Uber and Lyft, though it had a major impact on other industries reliant on contractors. Numerous media outlets announced that they would no longer hire freelance writers, and Uber and Lyft announced tentative plans to leave California.[26]

Later that year, Californians voted on Proposition 22 which proposed to exempt “app-based transportation” from Assembly Bill 5 and regulate the industry separately. Proposition 22 passed with 59% of the vote.[27] Uber, Lyft, DoorDash, and other companies dependent on independent contractors spent $200 million to support Proposition 22, making it one of the most expensive ballot campaigns in history.[28]

In May 2021, the Los Angeles Times accused Uber of manipulating its drivers to support Proposition 22. In 2020, Uber allegedly permitted unusual flexibility in driver conduct and higher commissions to rally support for the company. After Proposition 22 passed, Uber reversed these policies, and some drivers claimed to have been betrayed by the company.[29]

As of August 2021, the status of Proposition 22 is contested, with labor unions having filed suit to overturn the measure.[30]

Misleading Pay Claims

In 2017, Uber settled a lawsuit for $20 million with the U.S. Federal Trade Commission (FTC) over false claims about its wages. On its website, Uber stated that some drivers made more than $90,000 in New York City and $74,000 in San Fransisco, while the averages in those cities were $61,000 and $53,000 respectively.[31]

Price Gouging Accusations

Uber implements a dynamic price system which raises fees during periods of high demand. Critics have called this policy “price gouging” and accused Uber of exploiting consumers. In 2014, Uber agreed to cap its fee premiums during emergencies and natural disasters in New York City.[32]

“Principled Confrontation”

Early in its history, Uber often operated in a legal grey area as an unlicensed quasi-taxi company. Former Uber CEO Travis Kalanick implemented a strategy of “principled confrontation” wherein the company would enter a new city, ignore existing regulations, and eventually wage a lobbying and public relations battle to fully legalize its operations.[33][34]

Uber has argued that its business model existed outside the bounds of pre-ridesharing regulations. On numerous occasions, such as in San Fransisco in the early 2010s, Uber was issued cease-and-desist letters by city governments but opted to ignore them. Uber would then gain market share by offering lucrative sign-up bonuses for drivers to poach existing taxi drivers and even offered generous car lease agreements to prospective drivers without their own vehicles. [35] [36]

The expensive tactics allowed Uber to grow and gain market shares, while mobilizing drivers to support the company in regulatory battles. Often, drivers and customers will write letters to local politicians expressing support for Uber when the company comes under regulatory pressure.[37][38]

After Kalanick stepped down as CEO, Uber officially renounced the principled confrontation strategy.[39]

Greyball

In 2017, four Uber employees revealed to the New York Times that Uber was using a program called “greyball” to evade law enforcement in cities that had passed regulations against car-sharing apps, such as Las Vegas, Boston, and Paris. The program allegedly used data collected from the Uber app to identify specific customers, made fake cars appear to select customers, and automatically cancelled cars for others. Greyball’s official use was to prohibit problematic customers from using the service, but former employees alleged that Uber had used it to evade law enforcement officers engaged in sting operations to catch the company operating illegally.[40]

Data Breach

In November 2017, Uber revealed that its database had been hacked the previous year, resulting in the leaking 600,000 drivers’ and 57 million customers’ personal information. Uber paid the hackers $100,000 to conceal the data breach.[41] In September 2018, Uber agreed to pay the U.S. Federal Trade Commission $148 million to settle lawsuits brought by all 50 states and Washington, D.C. for improperly safeguarding employee and consumer data. It was the largest multi-state settlement for a data breach in U.S. history.[42]

Antitrust

Uber has been sued by taxi companies across the United States and the world for alleged anti-competitive and antitrust practices. Despite numerous local legal violations, nearly all courts have ruled in favor of Uber on anti-competitive cases.[43]

Uber’s primary competitor, Lyft, has accused the company of ordering its drivers and employees to order and then cancel thousands of rides from Lyft in new markets to hinder its operations.[44]

Political Contributions and Lobbying

In the 2020 election cycle, employees of Uber gave $1.5 million to political candidates, by far the most of any cycle in the company’s history. From its founding in 2009 to 2018, Uber employees only gave $500,000. In the 2020 cycle, 90% of Uber employees’ donations went to Democrats, including $314,000 to then-presidential candidate Joe Biden and $151,000 to U.S. Senator Bernie Sanders (I-VT). Then-President Donald Trump received $113,000 in contributions from Uber employees that cycle.[45]

Since its founding in 2009, Uber has spent $12.2 million on lobbying. Annual lobbying expenditure has steadily increased, peaking at $2.6 million in 2020.[46]

References

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  2. “A.G. Schneiderman Announces Agreement With Uber To Cap Pricing During Emergencies And Natural Disasters.” New York State Office of the Attorney General. July 8, 2014. Accessed August 10, 2021. https://ag.ny.gov/press-release/2014/ag-schneiderman-announces-agreement-uber-cap-pricing-during-emergencies-and. ^
  3. Thompson, Rachel. “Uber loses its final appeal in UK Supreme Court in landmark ruling.” Mashable. February 19, 2021. Accessed August 10, 2021. https://mashable.com/article/uber-loses-appeal-supreme-court-uk. ^
  4. Blystone, Dan. “The Story of Uber.” Investopedia. January 10, 2021. Accessed August 10, 2021. https://www.investopedia.com/articles/personal-finance/111015/story-uber.asp. ^
  5. Blystone, Dan. “The Story of Uber.” Investopedia. January 10, 2021. Accessed August 10, 2021. https://www.investopedia.com/articles/personal-finance/111015/story-uber.asp. ^
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  8. Kirby, William C. “The Real Reason Uber is Giving Up On China.” Harvard Business Review. August 2, 2016. Accessed August 10, 2021. https://hbr.org/2016/08/the-real-reason-uber-is-giving-up-in-china. ^
  9. “Uber’s Battle for China.” FT Weekend Magazine. Accessed August 10, 2021. https://ig.ft.com/sites/uber-in-china/. ^
  10. Kirby, William C. “The Real Reason Uber is Giving Up On China.” Harvard Business Review. August 2, 2016. Accessed August 10, 2021. https://hbr.org/2016/08/the-real-reason-uber-is-giving-up-in-china. ^
  11. Kirby, William C. “The Real Reason Uber is Giving Up On China.” Harvard Business Review. August 2, 2016. Accessed August 10, 2021. https://hbr.org/2016/08/the-real-reason-uber-is-giving-up-in-china. ^
  12. Kirby, William C. “The Real Reason Uber is Giving Up On China.” Harvard Business Review. August 2, 2016. Accessed August 10, 2021. https://hbr.org/2016/08/the-real-reason-uber-is-giving-up-in-china. ^
  13. May, Patrick. “Uber gets trashed for cutting prices during pro-refugee taxi protest at JFK.” Mercury News. January 29, 2017. Accessed August 10, 2021. https://www.mercurynews.com/2017/01/29/uber-gets-trashed-for-cutting-prices-during-pro-refugee-taxi-protest-at-jfk/. ^
  14. Carson, Biz. “Over 200,000 people deleted Uber after the company operated its service at JFK airport during the Trump strike.” Business Insider. February 2, 2017. Accessed August 10, 2021. https://www.businessinsider.com/over-200000-people-deleted-uber-after-deleteuber-2017-2. ^
  15. Etherington, Darrell. “Uber CEO Travis Kalanick quits Donald Trump’s business advisory council.” Tech Crunch. February 2, 2017. Accessed August 10, 2021. https://techcrunch.com/2017/02/02/uber-ceo-travis-kalanick-quits-donald-trumps-business-advisory-council/. ^
  16. Fowler, Susan. “Reflecting On One Very, Very Strange Year At Uber.” Susan Fowler. February 19, 2017. Accessed August 10, 2021. https://www.susanjfowler.com/blog/2017/2/19/reflecting-on-one-very-strange-year-at-uber. ^
  17. Lee, Timothy B. “A viral blog post is forcing Uber to address its sexism problem.” Vox. February 22, 2017. Accessed August 10, 2021. https://www.vox.com/new-money/2017/2/22/14697736/uber-travis-kalanick-apology. ^
  18. Isaac, Mike. “Uber Fires 20 Amid Investigations Into Workplace Culture.” New York Times. June 6, 2017. Accessed August 10, 2021. https://www.nytimes.com/2017/06/06/technology/uber-fired.html. ^
  19. Gibbs, Samuel. “Leaked Uber sex memo throws new spotlight on frat-house culture.” Guardian. June 9, 2017. Accessed August 10, 2021. https://www.theguardian.com/technology/2017/jun/09/leaked-uber-sex-memo-frat-house-culture-sexism-ceo-travis-kalanick. ^
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  21. O’Brien, Sara Ashley. “Uber to pay 56 workers $1.9 million for harassment and discrimination claims.” CNN Business. August 22, 2018. Accessed August 10, 2021. https://money.cnn.com/2018/08/21/technology/uber-settlement/index.html. ^
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  24. Campbell, Alexia Fernandez. “New York City passes nation’s first minimum pay rate for Uber and Lyft drivers.” Vox. December 5, 2018. Accessed August 10, 2021. https://www.vox.com/2018/12/5/18127208/new-york-uber-lyft-minimum-wage. ^
  25. Fingas, J. “Uber has to pay New Jersey nearly $650 million in employment taxes.” Engadget. November 14, 2019. Accessed August 10, 2021. https://www.engadget.com/2019-11-14-new-jersey-uber-employment-tax-bill.html. ^
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  29. Hiltzik, Michael. “Column: Uber reneges on the ‘flexibility’ it gave drivers to win their support for Proposition 22.” Los Angeles Times. May 28, 2021. Accessed August 10, 2021. https://www.latimes.com/business/story/2021-05-28/uber-flexibility-prop-22. ^
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  32. “A.G. Schneiderman Announces Agreement With Uber To Cap Pricing During Emergencies And Natural Disasters.” New York State Office of the Attorney General. July 8, 2014. Accessed August 10, 2021. https://ag.ny.gov/press-release/2014/ag-schneiderman-announces-agreement-uber-cap-pricing-during-emergencies-and. ^
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Uber

1455 Market St
#400
San Francisco, CA 94103
United States