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Uber and other large technology firms have received their share of both good and bad press for ‘disrupting’ traditional business models. But what if the game is much larger and these companies are a threat to capitalism itself? Antony Funnell reports.
Public discussion about the dramatic rise of Uber is often grounded in the idea of a titanic struggle between old-fashioned expensive taxi companies and a new digital upstart. Uber usually comes out on top because it’s new, cool and part of the ‘sharing economy’.
But legal academic Frank Pasquale offers a very different perspective. Companies like Uber, he argues, represent a threat to competitive capitalism. Their modus operandi is to use populist discourse—and vast financial backing from venture capitalists—to ignore laws, overwhelm markets and establish monopolies.
Pasquale, who lectures in law at the University of Maryland, says that while Uber likes to present itself as a grassroots/collectivist organisation, it is in fact a massive top-down, San Francisco-based corporation with a market capitalisation of over US$50 Billion. In that sense, he argues, Uber’s claims to be a genuine part of the sharing economy appear to be more than a little disingenuous.
‘I think you can look back to the old Craigslist model where people were just putting up ads for free and maybe there was some residual advertising advantage for Craiglist to have this big set of people that wanted to find, say, a place to crash for a night or so or something like that. Yes, that’s great, it’s great to see the internet enable that type of collaboration,’ says Pasquale.
‘But what you see in a firm like Uber is an appeal to venture capitalists—speculative capital—that wants to see massive returns via monopolisation. Let’s not mistake the business model here. The model here is for one of these firms to come in and to take over various aspects of commerce.’
Uber’s financial backers are reported to include everyone from the government of the oil-rich sheikdom of Qatar to US-based venture capital firms like Benchmark Capital and NEA—New Enterprise Associates. And that level of backing has provided the ride-sharing app business with a massive war chest, which it uses to wage media/PR campaigns and to stymie often cash-strapped regulatory authorities.
‘Many regulators in countries around the world are completely overwhelmed,’ says Pasquale. ‘They know that if they go after a major Silicon Valley firm they will be dealing with the sharpest attorneys that are out there, the sharpest lobbyists, the people that have the best contacts.’
As a case in point, in 2014 Uber hired former Obama advisor David Plouffe as its senior vice president of policy and strategy.
‘What we have to understand is that in many, many places you have massive firms acting almost imperialistically to impose American corporate power,’ says Pasquale, who describes firms such as Uber, Airbnb, Amazon and Google as the ‘Silicon Valley oligarchs’.
According to him, these companies are defined by a belief that breaking or bending the law is just another cost of business. Pasquale worries that their huge wealth, combined with an open disregard for the law, is leading to the development of a two-tiered corporate environment in the US and elsewhere.
‘The problem is that it really destroys the level playing field because you’ll have one tier of firms that is operating in fear of regulation and another tier of mega-firms that simply routes around it, evades it, or co-opts it via lobbying. This goes to the core of capitalism, it goes to the core of whether we have markets that work or we have a situation where there is a race to the bottom, where lowest common denominator practices take hold.
‘When you have a scenario where very large companies can intimidate regulators by assembling very sharp legal teams that will sandbag them if there is any threat of enforcement, this two-tiered system happens and it’s an open invitation to firms to just get bigger and bigger.’
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According to Pasquale, the anti-regulatory approach of firms such as Airbnb and Uber can be traced to a broader sentiment within American society that paints regulation—and indeed government itself—as an obstacle to progress. Such sentiments, he says, are whipped-up by populist politics.
‘It’s unfortunate to see the politicisation here, because it used to be that in the United States the more right party, the Republicans, were very proud of being law and order, whereas more recently we’ve had Jeb Bush, the brother of George W. Bush, state that he wanted to be the “Uber President”.
‘On the one hand you could say that is a legitimate political platform, to deregulate as much as possible. Certainly that was much of the agenda under the George W. Bush administration, but when you combine that with the defiance towards duly constituted legal authority among many of the top managers of these firms, then it starts looking rather sinister. It starts looking like it’s less a political platform than an attack on the very idea of politics and governance and the rule of law.’
Pasquale sees the rise of monopolistic capitalism in the United States as a ‘juggernaut’; one that’s only likely to become more dominant with time as technology firms play an ever increasing role in people’s daily lives.
But he also believes we are seeing the beginnings of opposition.
‘In places like Europe … you have a critical mass of reflective regulators who see the long-term picture and who are trying to shape the development of technology by law, rather than just letting the wealthy people who are in control of many of the leading technology firms trample the law or change the law to their will.’
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He cites the EU’s anti-trust case against Google’s monopolisation of the search engine business as an example of the divergence between the attitudes of European regulators and those of their deregulation-friendly US counterparts.
‘I think that sort of divergence is going to be very similar in the sharing economy. We’ll see over a decade or decades how that works out economically.
‘My belief is that the European approach is the one that is necessary to really create the foundation for an innovative economy. While the US may look more appealing right now and may be jumping out ahead with some of these platform monopolists, in the long term Europe is really laying a foundation for a more innovative economy and a more level playing field for everyone.’
UberX: companies ‘face penalties’ for use of ride-share service
Australian businesses that allow staff to use Uber instead of taxis risk heavy penalties under work safety laws, experts warn, as job-related travel with the ride-sharing service soars internationally.
UberX, an app-based network in which drivers use their private vehicles as hire cars, has faced sustained attack from Australian state governments and the taxi lobby.
Now, workplace lawyers are voicing major concerns about employers that permit staff use of the controversial service because it could breach their duty of care.
Law firm Holding Redlich said UberX’s popularity was booming in Australia but it should be banned by employers because the service was unlicensed and unregulated and there were no in-car surveillance cameras, used in taxis, to deter assaults.
“The UberX service is unregulated,” said Joel Zyngier, a senior associate in workplace relations. “A driver of an UberX service in Melbourne can be approved as a driver after undergoing a 30-minute induction and providing Uber with a driver’s licence, birth certificate and current insurance policy.”
Mr Zyngier said that while UberX may be a safe travel option, an employer’s duty of care required it to ensure staff used the safest option available, “so far as is reasonably practical”. Failure to do so could expose employers to penalties and prosecution under workplace health and safety laws.
“Although UberX drivers may indeed provide a safe service, it appears objectively an employer could not say UberX is as safe as a taxi,” he said.
Uber has strongly defended the safety of its ride-sharing service in response to the warning to Australian employers.
“All Uber driver-partners have cleared criminal history and driving history background checks, and all UberX trips are fully insured and backed by $US5 million of contingent liability cover,” a company spokeswoman said.
“In addition, the safety features of the app mean that the anonymity that exists with taxi trips is removed … The rider has the driver’s name, photograph, registration plate and car model before they enter the vehicle and can watch the car arrive at their pick-up location, so there is no standing out on the street trying to hail an anonymous ride.”
The spokeswoman said thousands of Australian workers were choosing the ride-sharing service to “travel safely while making huge savings for their companies”.
The Uber spokeswoman added that Holding Redlich appeared not to have researched Uber’s processes, background checks or insurance standards, “leading us to conclude their opinion was made on less than all the facts”.
The calls for employment travel policies to restrict the service follow the release of statistics showing business travellers are increasingly bypassing taxi-rank queues in favour of UberX. Data from US expense-management company Certify shows 47 per cent of road travel by its users in March were through Uber, a figure that has tripled in 12 months.
In some cities, Uber’s popularity has shot well ahead of taxis for work-related travel. More than 70 per cent of rides processed through Certify in San Francisco were for Uber, while fewer than 30 per cent used taxis.
Victorian Taxi Services Commissioner Graeme Samuel is charging a dozen UberX drivers for operating a commercial passenger vehicle without a licence in a test case on the legality of the service. Mr Samuel has previously said attempts to penalise UberX are pointless because the service is popular with the public.
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A Perth Uber X driver says he earns as little as $5 an hour, after running expenses, driving for the ride-sharing company.
He says Uber’s promises to drivers of $30-an-hour returns are illusory, while raising fresh concerns about the company’s safety practices.
Steve, not his real name, lost his St Georges Terrace job in December because of the mining downturn.
He began driving with Uber X in February after a good experience as a passenger.
He said Uber’s decision to slash fares 20 per cent in April effectively cut his profit margin 40-50 per cent, making it “impossible” to earn a decent living.
Steve said this was further compounded by the Australian Taxation Office ruling that Uber drivers must pay 10 per cent GST like taxi drivers — though Uber said yesterday it was raising fares about 10 per cent to cover this.
He said that at first, working about 30 hours a week, he could make enough money to pay his $320 a week mortgage and “buy a bit of food”.
But it became “near on impossible” after April’s fare cut.
“They said, we’ve done this all over the world and we’ve found drivers make more money because of an increased customer base,” Steve said.
“Certainly that hasn’t been true in my case and other drivers I know are saying the same.
“There’s nothing that hurts more than a passenger (who) tells you how much they love Uber because it’s so cheap. We know it’s cheap.”
Uber said Steve’s comments were surprising, claiming Perth Uber X drivers earned “on average over $30 an hour” before expenses. It said his complaints “aligned with misinformed claims put out by the taxi industry”.
“We are always happy to chat to driver partners at our support centre and provide tips on how to get the most out of driving on the Uber platform,” Uber said.
Perth cab driver says Uber has been setting up illegal taxi ranks
A Perth taxi owner claims rival Uber illegally set up ranks outside HBF Stadium in Mount Claremont over the weekend.
Zoran Jankulovski said he got a call from a taxi driver on Friday night to say Uber had set up a massive neon sign saying “Pick Up Uber” on Friday night outside the stadium, which was hosting the Perth Darts Masters.
Mr Jankulovski said he drove down there to find 20-30 Uber cabs parked at a “rank”.
“The government says it’s spending money on private investigators to catch them [Uber] out, yet there are 20-30 cabs sitting there in public view,” he said.
“It’s just unreal. They are not allowed to set up their own rank.
“There are acts [in place], why isn’t the government enforcing them?”
While Premier Colin Barnett has previously said he thought ride-sharing service Uber was here to stay, legislation prevents the company operating as a taxi service in WA – and 29 drivers currently face charges as a result of that.
Mr Jankulovski said the Barnett government needed to act immediately and fine Uber for setting up ranks.
“‘It’s incredible – it’s beyond words,” he said.
“It’s policy on the run. We have to abide by the rules.
“I got fined $250 for not wearing a collared shirt [while driving a cab].”
But Uber says it had nothing to do with the rank, claiming it was set up by an “eager” event organiser.
While quick to point out it was not doing rank work, Uber suggested the organiser’s actions were indicative of the growing popularity of its service.
Uber launched its ride-sharing smartphone app in Perth just over a year ago and its appearance brought an instant reaction from state taxi companies, which responded with anti-Uber campaigns and industrial strike action.
In April, Perth taxi drivers took to the streets with hundreds of vehicles leading a convoy from the Perth Airport to Parliament to protest against the ride sharing service.
Mr Jankulovski and a number of other taxi drivers have engaged high-profile lawyer Martin Bennett to take on the WA government.
Mr Bennett has written to the Barnett government saying it will proceed with legal action if it does not respond by August 21, explaining why it hasn’t enforced laws against Uber.
Mr Jankulovski, who says he paid $900,000 for three taxi licenses, suggested his income had dropped by more than 30 per cent since Uber arrived on the scene.
“My drivers are struggling to make any money, especially on the night shifts,” he said.
“Some of the drivers that have leased cabs off me are even struggling to pay me. “
Uber rejects call to install car cameras
Ride-sharing company Uber has rejected any suggestion it should be required to install security cameras in cars driving on its platform and wants to self-regulate driver training and accreditation.
The company, which is booking thousands of journeys a week on its UberX platform despite the Barnett Government’s official position that it is not a legal service, sets out its position in a submission to Transport Minister Dean Nalder’s on-demand transport Green Paper.
The submission describes WA’s existing regulatory regime as “unjustifiably onerous” and says it does not recognise the difference between taxis and ride-sharing services.
It says Uber welcomes the Government’s attempt to reform the industry, but says aspects of the Green Paper are a “business as usual” approach to regulation which does not go far enough.
Uber says quantitative restrictions on licences are “economically insupportable” and says regulatory fees should not be an artificial barrier to entering the market. And though Uber says that “safety and consumer protection standards are paramount”, it chafes at mandatory installation of cameras, arguing that its “de-anonymised” technology platform — which is cashless, tracks journeys in real time and provides riders with the name, photo and vehicle registration of a hired car — is safer than CCTV.
Uber argues that its platform deters unethical or illegal behaviour by removing anonymity of riders and drivers, eliminates the threat of robbery or fare evasion and allows prompt investigation of incidents because of GPS tracking.
Uber describes calls from the taxi industry for a level playing field as a “monopolistic attempt to strangle new models in new markets”. It says that ride sharing is different from traditional taxi services because Uber drivers do not pick up passengers from street hails or taxi ranks.
The company rejects any special licensing for drivers, saying that “to insist commercial drivers should be trained and tested again on their knowledge of basic road rules is an admission that the original licensing system is not adequate”.
