ILLUSTRaTION 2.3 Uber drives into trouble

The Uber taxi-hailing company has often run up against local regulations.

The inspiration for the Uber's taxi-hailing app came on a snowy night in Paris in 2008, when co-found- ers Travis Kalanick and Garrett Camp couldn't find a cab. Uber began business in Kalanick's home state of California, launching in San Francisco in 2011. With early funding from renowned investment bank Goldman Sachs and Google Ventures, Uber expanded rapidly. At the end of 2015, the company was able to celebrate its billionth ride. It was operating in about 400 cities around the world, from Abu Dhabi to Zurich.

Uber's hectic growth was in part aimed at pre-empt- ing competitors. It is technically fairly easy to launch a local taxi-hailing app. Some of Uber's regional com- petitors grew rapidly, for example Lyft in the USA, Didi Kuaidi in China, Ola in India and GrabTaxi in South- east Asia. In December 2015, these four rivals to Uber declared a strategic alliance, promising to share technologies and offer common services to customers travelling from one region to another.

The pursuit of growth has frequently got Uber into legal trouble. There are three areas in which Uber's strategy is particularly controversial. First, there is the contention that the company does not employ its driv- ers, but just offers a technology platform on which drivers and passengers freely interact. With drivers considered independent contractors, the company appears absolved from costly obligations such as insur- ance, minimum wages, overtime pay and pensions. This has helped Uber undercut the prices of traditional taxi services: in New York, the traditional yellow cabs saw a 14 per cent drop in business after the local launch of Uber. In several localities, including its home state of California, the independent contractor status of Uber's drivers has faced legal challenges, leading to local bans or fines.

Second, by comparison with becoming a licensed taxi-driver, it is relatively easy for people to become Uber drivers. This creates safety risks, with cases of Uber drivers even assaulting passengers. In 2015, an Uber driver in Delhi was convicted of raping a passen- ger. Uber was accused of failing to conduct adequate

background checks after it emerged the rapist had been previously accused of assaulting women. The vic- tim lodged a lawsuit in San Francisco (later dropped) and Uber was temporarily banned by the Delhi local authorities.

A third source of controversy is Uber's apparent aggression. The motto of the company's growth team is: 'it is easier to ask for forgiveness than permission'. Uber is often careless of local regulations. Local offi- cials regarded by Uber as obstructive have allegedly become the targets of systematic attack. A hostile offi- cial in Virginia, United States, was flooded with emails and calls after Uber distributed his personal contact information to all of its users in the state. A senior vice president of Uber was widely reported to have suggested that Uber hire a team with a million-dollar budget to dig into the personal lives and backgrounds of media reporters critical of Uber: the company was obliged to disown the suggestion. During a bitter dis- pute in Portland, Oregon, the transportation commis- sioner called Uber management 'a bunch of thugs'.

In early 2016, CEO Travis Kalanick gave his view of Uber's approach to the Times of India: The way of an entrepreneur is the way of an adventurer. . . . . It can be conveyed as aggressive, but it is doing things people think is against conventional wisdom. . . . Ultimately, all rules have to bend towards people and progress.

Main sources: Financial Times, 15 September 2015; Times of India, 19 January 2016; Forbes, 17 August 2015.

Questions

1 Using the concept of 'varieties of capitalism', in which countries would you expect Uber to be most successful and in which less so?

2 What are the costs and benefits of Uber's aggressive approach to growth?