Uber, the smartphone-based ridesharing service long known for operating in the face of unknown legal consequences while daring regulators to bring legal action,1 may be adopting a new approach. Instead of facing regulators with defiance, the company has started to push for new laws that would bring its services into a clearer status of legality.2 Lobbyists and lawyers from Uber have been negotiating with government officials to enact laws that will bring the company into compliance.3 It seems to be working. Last year, seventeen U.S. cities and four states passed pro-Uber laws.4 And while the company is unlikely to depart completely from its founding strategy of “principled confrontation,”5, Uber is ostensibly giving diplomacy a try both domestically and abroad.
Generally speaking, Uber and its competitors, such as Lyft, are now being regulated as “transportation network companies” or TNCs.6 Many of the rules obligate conduct that Uber already has in practice, such as background checks for drivers, vehicle inspections, training programs, and insurance policies.7 The exact make-up of these laws can vary greatly. For example, Uber entered into an agreement in New York City to cap prices during emergencies. 8 The parties are in ongoing negotiations about Uber providing quarterly reports of trip logs. 9 Colorado regulators allow TNCs as long as they provide up to one million dollars in liability insurance.10. Illinois law mandates that TNCs’ apps show a picture of the driver and an estimate of the fare. 11 Internationally, Uber is working with regulators ranging from those in New Delhi12 to the European Commission13 to ensure the legality of the company’s conduct.
Although Uber was valued at $41 billion in a recent funding round,14 regulatory concerns are among the largest uncertainty for investors. 15 In addition to the cost of the lobbying efforts, much of the compromise necessary to cement its legal status may chip away at the company’s cost advantage. 16 Also, the lobbying process can be slow or simply unsuccessful. Uber and city officials in Portland, Oregon negotiated for more than a year before Uber simply launched without any new law in place to allow its services. 17 In response, the city of Portland filed a lawsuit in Oregon State court. 18 While Uber avoided the lawsuit by agreeing to stop operations for three months while the rules barring TNCs are revised, the delay will be costly. 19
As Uber becomes more adept in its lobbying efforts, it seems likely that Uber will push for more explicit legalization in all of the cities that it will launch in. While these efforts are contrary to some of the principles on which the company was founded, Uber expects its net revenue to be roughly two billion dollars this year. 20 Clearly, the deviation in strategy has not hurt the company yet.
Douglas Macmillan & Lisa Fleisher, How Sharp-Elbowed Uber Is Trying to Make Nice, Wall St. J., Jan. 29, 2015, http://www.wsj.com/articles/hard-driving-uber-gives-compromise-a-try-1422588782 (quoting Uber’s General Manager in Western Europe, Pierre-Dimitri Gore-Coty, as pronouncing that Uber “will never make any changes until we are forced to.”). See also Jeremy Allen, Uber, Lyft ignore Ann Arbor’s cease and desist demand; no tickets issued following city’s orders, July 07, 2014, Mlive, http://www.mlive.com/business/ann-arbor/index.ssf/2014/07/uber_lyft_ignore_ann_arbors_ce.html, for an example of this defiant attitude towards regulators in Ann Arbor. ↩
MacMillan & Fleisher, supra note 1. ↩
Id. ↩
Douglas Macmillan, Uber Laws: A Primer on Ridesharing Regulations, Wall St. J., Jan. 30, 2015, http://blogs.wsj.com/law/2015/01/30/uber-laws-a-primer-on-ridesharing-regulations. ↩
MacMillan & Fleisher, supra note 1 (quoting Uber chief executive Travis Kalanick). ↩
Macmillan, supra note 4. ↩
Id. ↩
MacMillan & Fleisher, supra note 1 (“As a snowstorm approached New York City on Monday, Uber told customers that ride prices wouldn’t exceed 2.8 times the company’s normal fare.”). ↩
Id. ↩
Macmillan, supra note 4. ↩
Id. ↩
See MacMillan & Fleisher, supra note 1 (stating that, in New Delhi, following a woman’s allegations that she was raped by a driver booked through Uber, the company applied to become a radio-dispatched taxi company in compliance with Indian regulators). ↩
Id. (stating that, in response to a new French law forbidding non-taxi services and subjecting violating drivers to possible prison time, “Uber has asked the European Commission to block the law and vowed to fight any prosecutions, claiming the law is discriminatory.”). ↩
Mike Isaac & Michael J. De La Merced, Uber Closes $1.6 Billion in Financing, N. Y. Times Dealbook, Jan. 21, 2015, http://dealbook.nytimes.com/2015/01/21/uber-closes-a-1-6-billion-financing. ↩
MacMillan & Fleisher, supra note 1. ↩
Id. ↩
Id. ↩
Id. ↩
Id. (statement of Brooke Steger, Uber’s general manager in the region) (“Uber generally takes many months to start making a profit in any given city, and the three-month shutdown in Portland substantially delayed the company’s timeline for profitability there”). ↩
MacMillan & Fleisher, supra note 1. ↩