The ride-share service’s apparent attempts to sabotage its competitors might become red meat for the Federal Trade Commission or state attorneys general.
By Dustin Volz, August 27, 2014
Uber is the darling of Democrats and Republicans alike, but the
company's cutthroat campaign against its ride-share rivals could land it
in hot water with state and federal regulators.
company has reportedly equipped an army of independent contractors with
burner phones and credit cards as part of a "sophisticated effort to
undermine Lyft and other competitors" and poach drivers, according to an
article published by The Verge this week.
The San Francisco start-up's aggressive recruitment methods are
already well documented, but the size and sophistication of its exploits
revealed by The Verge could warrant an antitrust investigation
by the Federal Trade Commission or state attorneys general, according
to several antitrust experts and former government officials interviewed
by National Journal.
former FTC official, who spoke on the condition of anonymity, said that
reports of Uber's misrepresentation aligns strongly with similar
antitrust investigations the agency has conducted in the past.
heart of what's offensive here, the indispensable ingredient, is the
canceled orders," the official said. "That kind of behavior would be
seen as having no redeeming benefits at all, poses competitive burdens,
and falls within the conception of unfair competition."
Uber stands accused of employing street teams of contractors to
disrupt Lyft's launch plans in New York City who were handed "two
Uber-branded iPhones and a series of valid credit-card numbers to be
used for creating dummy Lyft accounts." Uber has also allegedly made a
habit of ordering Lyft rides and canceling them to avoid detection, a
method that would prompt rival drivers to waste time driving to the
pickup spot. Lyft contends Uber has caused thousands of canceled rides,
something Uber denies was done intentionally.
ordering a Lyft ride and trying to convince the driver to switch sides
is likely not enough to merit an inquiry by the FTC, which polices
against "unfair" and "deceptive" business practices, said David Balto, a
former policy director at FTC and an antitrust lawyer.
the apparent sophistication and duplicity of Uber's so-called "Operation
SLOG" in New York City raises antitrust concerns. "The calling and
canceling would make it very difficult for [Lyft] to effectively
operate," Balto added. "That's the kind of thing that could very well be
investigated by the FTC."
may be a 21st-century innovator, but it looks like it's pulling out the
tactics of a 19th-century robber baron," Balto said. "Some of these
tactics are things that John D. Rockefeller would be proud of."
In a blog post published shortly before The Verge's
story, Uber denied it ever intentionally cancels rides, but
acknowledged that "we can't successfully recruit drivers without talking
to them—and that means taking a ride."
all about more and better economic opportunity for drivers," the
company wrote. "We never use marketing tactics that prevent a driver
from making their living—and that includes never intentionally canceling
which now boasts a presence in more than 160 cities around the world,
is confronting a new wave of scrutiny just a week after hiring
former Obama campaign wizard David Plouffe to lead its policy team. In
announcing his new gig, Plouffe wrote that he was eager take on Uber's
main opponent, the "Big Taxi cartel," which he maintains "has used
decades of political contributions and influence to restrict
competition, reduce choice for consumers, and put a stranglehold on
economic opportunity for its drivers."
The tech company has also recently earned the adoration of a number
of Republicans looking to curry favor with its young, largely urban
Earlier this month, the Republican National Committee launched a petition
soliciting support for "innovative companies like Uber," in response to
backlash from the traditional taxi lobby and ride-sharing regulations
proposed in some cities and states. And Sen. Marco Rubio has touted the company as an example of free-market ingenuity that should not be subject to strict regulatory red tape.
company's success, size, and influence is likely to increase the chances
of triggering either a regulatory investigation or private litigation,
said Richard Feinstein, former director of the FTC's antitrust
The FTC has historically been an ally to the booming app-driven ride-sharing industry. In April, the agency wrote a letter
articulating its belief that regulations should be limited to safety
and consumer protection and not for the purposes of levying higher
license fees than those placed on traditional taxi fleets.
An Uber spokesman accused The Verge story of being thinly sourced and revealing nothing new, telling National Journal that it lacks "any verification" of the claims or documents published.
has never publicly taken responsibility for reports of employees
ordering phony rides from Lyft. In January, the company issued an apology
on its website acknowledging that some employees in New York were "too
aggressive" in its tactics of ordering rides from competitors and
canceling them moments later. But the apology indicated the tactics were
orchestrated by local staffers and not approved or initiated by
corporate higher ups.
"We have messaged city teams to curtail activities that seek lead generation in this manner," the company wrote.
Lyft did not respond to a request for comment for this story.