Uber-dodgy

Uber shares dropped over 5% when the market opened on Monday as an investigation by the Guardian and others revealed a questionable institutional culture, including the lobbying of politicians (some of which proved successful), widespread illegality and the deception of law authorities. What was revealed in the over 124,000 leaked documents show a company with apparently little regard for the law, something that should give investors much to think about.

Uber rose to prominence by offering convenient ‘taxi’ services through its rideshare app, linking customers with couriers for cheap rates that undercut pre-existing taxi markets worldwide. It now transpires that this was sometimes achieved through breaching local law and taxi regulations. Uber’s record on this front is well known, from infringing registration laws to failing to give drivers ‘employee’ status.

What wasn’t clear was the extent to which Uber knew this was illegal. Leaked emails show staff referred to Uber’s status as “other than legal”, with one leaked message from an executive proclaiming, “We’re just f***ing illegal.”

Uber also developed means of foiling legal or regulatory checks. A “kill switch” was developed, whereby executives, upon hearing of an office raid, would send out instructions to IT teams to cut access to Uber’s main data systems. This was deployed at least 12 times around the world. The company wasn’t just trying to avoid the law.

They were also trying to change the laws themselves, often through backdoor and opaque lobbying. In 2016, the tranche of leaked emails revealed a GBP90 million budget for lobbying and PR purposes. That in itself is not illegal, and companies of similar sizes often devote millions to protect and enhance their image.

What is not so widespread is the use of backchannels to lobby politicians behind closed doors, exploiting political desires to be seen as ‘tech friendly’ and welcoming investment into the economy. A meeting between Uber’s Travis Kalanick and then Vice President Joe Biden in Davos saw him amend his speech to include a passage for workers to have the “freedom to work as many hours as they wish, manage their own lives as they wish.” It also emerged that Uber attempted to lobby Olaf Scholtz, now German Chancellor but then mayor of Hamburg, over his insistence on the minimum wage for drivers.

That was ultimately unsuccessful, but there appears to have been more success in interactions with Emmanuel Macron, then French economy minister and present day president. Macron went to what the Guardian calls “extraordinary lengths” to help Uber, even negotiating a secret deal that would help the company grow in France. That looks even more suspect given Kalanick’s instruction for Uber drivers in Paris to launch a counter protest to that of Parisian taxi drivers against Uber’s dominance, even at the risk of violence, given that “violence guarantee[s] success.” Uber also lobbied then Irish Taoiseach, Enda Kenny, Israeli Prime Minister Benyamin Netanyahu and British Chancellor George Osborne.

It’s worth noting that Uber has continued to be highly active on the question of employment status under its current CEO, supporting the successful Prop 22 initiative in California, and a similar one in Massachusetts that has faced a legal challenge. PIRC has engaged with companies supporting such initiatives to make clear our disagreement as we believe significant changes to employment rights should be decided through a deliberative process at federal level, not through lavishly-financed ballot initiatives.

The bottom line for investors is that the company is at risk of criminal proceedings that could cost millions. They might also consider that the leaked documents reveal an internal culture at Uber that sought to compensate for a business model that could not turn a profit through legal means