Multiple competition regulators questioned Uber-Grab deal

Reviewing Uber’s proposed sale of its Southeast Asia business to Grab, the Competition Commisison of Singapore (CCS) announced that it is looking into the transaction.

Broadly, CCS said the proposed transaction would bring “substantial lessening of competition in relation to the chauffeured personal point-to-point transport passenger and booking services market in Singapore.” CCS therefore required Uber and Grab to maintain their pre-transaction pricing, policies, and products, and not to exchange any confidential information.

After CCS’s statement of concern, Malaysia’s Land Public Transport Commission also announced that it would examine the proposed transaction. The Philippines’ anti-trust agency, the Philippine Competition Commission, then stated similar concerns: “There are reasonable grounds that the said acquisition may likely substantially lessen, prevent, or restrict competition.”

Coverage from TechCrunch and prior critique from the author of this site.

Poised to sell Southeast Asia assets to Grab

Uber announced plans to sell its Southeast Asia assets to Grab, the dominant ride-hailing firm in that region. This transaction raised competition concerns because Grab and Uber jointly controlled the overwhelming majority of ride-hailing service in the region. The transaction thus created an effective monopoly for Grab — allowing the company to charge higher prices and fees, to the detriment of both drivers and passengers.

Sold Chinese assets to Didi

Rather than continuing to compete with Didi Chuxing, the dominant ride-hailing service in China, Uber sold its Chinese assets to that firm — essentially ending competition in ride-hailing in that country.

This transaction raised several concerns. One, Didi and Uber jointly controlled the overwhelming majority of ride-hailing service in China. The nearest competitor had just 3.3% market share as of the time of the transaction. The transaction thus created an effective monopoly for Didi — allowing Didi to charge higher prices and fees, to the detriment of both drivers and passengers.

Two, as part of the transaction, Uber received 17.5% ownership of Didi, and Didi in turn held an investment in Lyft. So the Didi-Uber deal made Uber a part owner of its biggest US competitor.

Regulators sued Uber for failing to disclose data breaches

After a data breach in which hackers stole data from about 600,000 drivers globally, for which Uber paid a ransom to hackers but did not notify affected drivers, regulators pursued Uber’s violation of applicable law, including state laws about notifying those subject to data breaches.

  • The FTC filed a revised complaint adding additional concerns to a prior action against Uber. Uber responded by agreeing to expand its prior settlement with the FTC over charges that it deceived consumers about its privacy and data security practices. The FTC specifically criticized Uber for failing to disclose the breach to the FTC until November 2017, fully a year after the breach occurred, even though the FTC was already investigating other Uber data security practices.
  • Pennsylvania sued, threatening a penalty of up to $13.5 million ($1000 for each of the 13,500 Pennsylvania drivers affected).
  • The city of Chicago also sued (complaint), seeking $10,000 per day for each day that Uber violated the state’s disclosure ordinance, as well as $50,000 for violating the Illinois Consumer Fraud Act.

Australian study finds drivers paid below applicable minimum wage, concludes “exploitation”

Jim Stanford of the Centre for Future Work (Australia) analyzed payments to UberX drivers in six Australian cities. He found that drivers earn less than would be required under the applicable Australian wage requirements. After deducting Uber’s fees, applicable taxes, and the cost of vehicle and maintenance, the study found driver pay of A$14.62 per hour, well below the national statutory minimum wage (A$18.29) and less than half the weighted-average minimum wage including casual loading and penalty rates for evening and weekend work that would apply to similar waged employees in Australia (Modern Award #MA00063 for Passenger Vehicle Transportation). The study finds that this underpayment adds up to hundreds of millions of dollars per year in Australia alone.

The study notes that Uber’s prices are well below taxis, and asks how Uber gets the cost advantage that allows it to offer notably lower prices. Finding similar technology — drivers driving cars — the study concludes that underpayment of UberX drivers has been essential to Uber’s growth.

The study also criticized Uber’s right to change its contract with drivers at any time (which it suggested might violate Australia’s Competition and Consumer Act regarding fair contracts), Uber’s monitoring of driver performance through online ratings (which may not be reliable and are vulnerable to bias), that driver vehicles lack certain safety equipment regularly installed on taxis, that drivers work excessive hours, and that Uber seeks to provide excess capacity which can harm both drivers and congestion.

The study was particularly pointed in its assessment of who gains and who loses in Uber’s model: “The effective transfer of wealth from Uber drivers to the company’s owners (some of whom are billionaires)… is an especially galling distributional outcome.” The study’s conclusion is that Uber’s labor practices are “negative and exploitive.”

Study: Subsidising Billionaires: Simulating the Net Incomes of UberX Drivers in Australia and introduction

Uber CEO Dara Khosrowshahi’s Tweet criticized as “insulting” and “destroy[ing] months of hard work”

Responding to a study by MIT researchers that found low earnings by Uber drivers, Uber CEO Dara Khosrowshahi replied:

MIT = Mathematically Incompetent Theories (at least as it pertains to ride-sharing). criticized Khosrowshahi’s response, calling that Tweet inconsistent with a company “eager to learn from its mistakes and play nice with others” and questioning Khosrowshahi’s “mocking tone.”

MIT researchers estimated median Uber driver profit at $3.37/hour

Four researchers associated with the MIT Center for Energy and Environmental Policy Research studied Uber drivers earnings. Based on drivers’ responses to a survey, the researchers estimated that the median driver earned $3.37 per hour before taxes, and 74% earn less than minimum wage in their respective states. Net of vehicle expenses, 30% of drivers are losing money driving for Uber.

The authors also studied the impact of deductions on taxation of driver earnings. Based on IRS rules about deductability of vehicle expenses, the researchers estimated that 74% of driving is untaxes (because deductions exceed driver earnings).

Uber’s chief economist responded by questioning the researchers’ methodology, including survey questions, driver understanding, and possible errors in analysis. Uber CEO Dara Khosrowshahi responded on Twitter: “MIT = Mathematically Incompetent Theories (at least as it pertains to ride-sharing).”

After criticism, lead author Stephen Zoepf offered a statement agreeing that alternative methods of calculating revenue and profit yield higher profit to drivers, and planning a revision of the paper with this principle in mind. Zoepf also called on Uber to provide more data about driver profits net of vehicle costs and to distinguish actual and tax-reportable vehicle expenses in order to clarify driver true economic profit versus tax subsidies.

Kalanick re-debated with Uber driver, then (without authority) promised equity in Uber

After being caught on video arguing with Uber driver Fawzi Kamel, Kalanick sought to meet with the driver again to try to make things right. Bloomberg reports that Kalanick had planned to meet with the driver briefly, as little as five minutes, for a simple apology. Instead, the meeting lasted more than an hour, and Kamel and Kalanick reopened their debate about Uber’s pricing policies.

As part of the discussion, Kalanick suggested that he give the driver Uber stock. Uber attorneys rejected the proposal, seeing it as improper that Uber shareholders pay to clean up Kalanick’s personal problem. Kalanick ended up paying Kamel $200,000 of personal funds.

Covered up hack, paid hackers to delete data, and failed to disclose to regulators

In an October 2016 attack, hackers extracted names, email addresses, and phone numbers of 50 million Uber riders (details), as well as personal information about 7 million drivers (including 600,000 US drivers license numbers). Details from Uber. A subsequent FTC investigation found that more than 25 million names and email addresses, and more than 22 million names and phone numbers, were affected.

Uber did not tell the public about the hack or alert the affected drivers or passengers. Nor did Uber tell regulators, although at the same time Uber was negotiating with the US FTC about other claims of privacy violations. As of November 2017, when the attack was publicly revealed, Uber admitted that it was required to disclose the hack because driver’s license information was among the information taken.

Instead of disclosing the hack to regulators or the public, Uber paid the hackers $100,000 to delete the data and not tell anyone what had happened. The New York Times reported that Uber also pushed the hackers to sign nondisclosure agreements, and that the company “made it appear” as if the $100,000 payout had been part of a “bug bounty” program (paying hackers to find problems) rather than a response to hackers’ demands.

Uber then-CEO Travis Kalanick learned of the breach in November 2016, a month after it took place. Reuters indicated that new CEO Dara Khosrowshahi indicated only having learned about the problem “recently.”

Uber Chief Security officer Joe Sullivan oversaw Uber’s response to the hack. As part of Uber’s 2017 investigation of the situation, new CEO Dara Khosrowshahi fired Sullivan along with Craig Clark, who had been legal director of security and law enforcement (reporting to Sullivan).

Upon learning of Uber’s failure to disclose the privacy breach, multiple regulators criticized the company’s action and opened investigations.

Uber’s statement

In a December follow-up, Reuters reported that the hacker was a 20-year-old man from Florida.