Author: bedelman

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Holder report offered devastating critique

In the midst of a series of scandals, Uber retained former US Attorney General Eric Holder to review the company’s practices and problems. The report recommended forty-seven changes, including restructuring Uber’s board of directors, restricting alcohol and drug use at company events, and firing then SVP of business Emil Michael .

Reviewing the version of the Holder report available to the public, one compliance consultant described the findings as “one of the most remarkable discussions of a complete workplace culture disaster that has ever been rendered for a multi-billion business.” The consultant continued: “If you changed some of the business and legal language, you might well think you were reading a report on Animal House.” (quote from New Yorker)

The version available to the public (linked above) is just 13 pages long and focused on recommended improvements, but Mike Isaac’s Super Pumped (p. 324) reports that the full report was “hundreds of pages long” and listed numerous specific concerns.  Isaac summarized:

It was … a winding, repetitive list of infractions that had occurred across Uber’s hundreds of global offices, including sexual assault and physical violence. The company had numerous outstanding lawsuits against it, and would likely face many more.

No one outside Uber’s Board of Directors would see the full text of the report. (Isaac p. 330)

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Uber backup drivers fell short in safety functions

CityLab reported widespread shortcomings of the backup drivers who were responsible for supervising Uber’s self-driving cars. One, it is unclear whether humans can do a good job supervising machines that work well most of the time — requiring intense concentration to identify the occasional error, when most of the time, there are tempting distractions. Uber’s 8 to 10-hour shifts, with one 30 minute lunch break, were grueling — and drivers were often assigned to repeat the same driving “loops” which likely made the task particularly dull for drivers. Additional challenges included working entirely alone (without other humans) (after Uber removed a second staff person from each vehicle), and, CityLab reported, the vehicles’ frequent hard braking.

Meanwhile, CityLab spoke with multiple drivers who were dismissed from Uber for safety infractions, including using a phone while a vehicle was in motion — undermining any suggestion that all safety drivers do as instructed.

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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.

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Relationship with Arizona governor questioned

In its efforts to court Arizona governor Doug Ducey, Uber built a relationship with Ducey that was unusually close. The Guardian obtained emails showing that the relationship included joint press conferences, Uber service on the governor’s policy committees, Uber providing meeting space to the governor when he visited San Francisco, and even the governor potentially wearing an Uber shirt.

Ducey enacted policies favorable to Uber. In Phoenix, city staff reported “pressure placed on us by the governor” to enact policies that Uber requested. In one episode, Uber asked that the governor promote Uber Eats via a tweet, which he did the next day. Ducey’s Uber dealings were particularly close on the subject of self-driving cars. After California revoked DMV registration of Uber vehicles that had not obtained the permits California said were needed, Uber sought to bring those vehicles to adjacent Arizona, which the governor permitted. Moreover, prior to Uber’s announcement of its self-driving vehicles on the road in Arizona, Ducey had allowed the vehicles to operate unannounced.

The public benefit of Ducey’s pro-Uber policies was not always apparent. The governor touted collaboration between Uber and Arizona’s College of Optical Sciences, but that school’s dean commented that “Our dialog with Uber has not led to any significant ongoing research engagement.” The governor allowed Uber to test self-driving vehicles on Arizona roads, only to backtrack when an Uber self-driving vehicle struck and killed a pedestrian in Tempe, Arizona. The governor touted economic benefits expected to result from Uber’s activities in Arizona, but while Uber brought self-driving cars to the state, its engineering teams largely remained elsewhere.

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Overlapping investor SoftBank sought to reduce competition

As Uber announced its sale of Southeast Asia assets to Grab, some flagged the overlapping investor that facilitated the transaction. In particular, SoftBank (a Japanese investment firm) held shares in both Grab and Uber. Owning part of both companies, SoftBank stood to profit no matter which one prevailed in the markets where both operated — but stood to lose if the firms engaged in continued competition with each other.

Furthermore, SoftBank specifically sought to broker peace between Grab and Uber: When investing in Uber in December 2017, SoftBank sought a discount exactly because it could influence Uber’s competitors across Asia.

Similar concerns arose from SoftBank holding shares in both Uber and Ola, a ride-hailing competitor in India. Discussing those overlapping holdings, SoftBank told the Economic Times of India: “we are hoping that we make peace between them at some point.” Such a “peace” could raise competition concerns in so far as it entailed competitors agreeing not to compete.

See Edelman’s critique of SoftBank’s role as well as economist Martin Schmalz’s tweet on the impact of cross-ownership.

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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.

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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.

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