The role of the modern general counsel is changing and companies are stating to adapt
One day, Hopefully soon...Uber Will Have Its Day of Reckoning
What does an Uber ride actually cost? That simple question is often lost among the many controversies facing Uber, but it is surely one of the most important question of all when it comes to determining the value of Uber which has built its business on massive subsidies to both riders and drivers, producing huge losses in the process, and has yet to show that it can maintain growth without them.
Although a private company dos not need to release its financial data, Uber has started releasing limited financial data, and in May reported a loss of $708 million for the first quarter, down from $991 million in the fourth quarter. While their upcoming financial report may show further improvement on margins, Uber continues to spend heavily on subsidized rides.
The question vexing everyone is what the company is worth. Truthfully, I really don't care. Not just because I am anti-Uber but because their entire business model is based upon explanation of persons and creating the myth of providing jobs when their true intent is to totally divest itself, in due course, of all drivers. How drivers do not see this and continue to driver for them is beyond me. Maybe I am wrong in my forecast or perhaps I just simply do not like illegal monopolies.
Uber’s losses stem from its drive to win global market share at almost any cost. That strategy was built on the assumption that Uber could achieve a dominant position in many big cities quickly and eventually raise prices. Kalanick himself said low fares were temporary. But eight years in, the strategy is now in doubt as competition in many markets continues to intensify. Uber must solve the problem of how to eliminate subsidies without losing customers and thereby undercutting its valuation.
At some point in time, Uber will have its day of reckoning as they will eventually have to raise prices and get rid of driver subsidies. And we all know what happens when you raise prices - demand goes down. And when you give up driver subsidies - supply of drivers goes down.
Regardless of their Valuation, in my humble opinion, Uber has become an illegal monopoly. I have conducted my fair share of research on the Sherman Act and its progeny since the late 1800's when certain monopolies were declared illegal. Monopolies are bad for the public, bad for the economy and bad for competition. Uber will eventually raise its prices and do away with driver subsidies...and then the riding public will see Uber for what it truly is. Not an aid to the Salvation Army, but a money hungry technological monopoly that is built on a house of cards. When one of the cards start to fall, the others shall follow. Then I hope to see Kalanick himself driving around in his own vehicle with the stupid "U" in the front window.
Your Corporate Counsel…Doctor Or Fireman?
I believe in the old saying that an ounce of prevention will prevent a pound of cure. A little precaution before a crisis occurs is preferable to a lot of fixing after afterwards. To put it another way, I believe a lawyer can either serve a corporation as being a doctor or fireman. If a corporation looks at a lawyer as a doctor, then they will seek effective legal counsel before there is a problem for the specific purpose of preventing a problem before it occurs. This is akin to yearly checkup at your internist’s office. On the other hand, some corporations treat a lawyer as a fireman. In other words, some corporations only seek out legal counsel when there is a problem (a.k.a. fire) and then the lawyers placed in the difficult position of having to act like a fireman, triage the problem, act quickly and effectively and hopefully put out the fire. Of course, is much more expensive to have the fire department responded fire than it is to go to your doctor's office for periodic checkup. There is no difference in the corporate world. If you want to prevent the problem, then the leaders of the corporation must decide whether they want to ensure compliance with the law by hiring the proper professionals or if they want TO take the risk of noncompliance and deal with the prospect of costly lawsuits. While the cost of compliance with the law is never cheap, the cost of noncompliance is often greater than the cost of compliance
Companies Should Consider Outsourcing Their Organizations HR Compliance Functions
For both small and midsized companies, effective human resource management is critical to success — especially in today’s competitive business climate. HR management is a complex, ever-changing discipline burdened with trials that impact employee productivity, HR compliance, and ultimately, the bottom line. Company HR managers and those who deal with HR corporate compliance must look at six key areas: hiring, payroll, benefits, employee relations, risk & safety and employee relations. Since HR compliance lies at the heart of effective human resource management, it is alarming to discover that most HR managers either express concern about their ability to comply with HR laws and employment laws or know that they are not in compliance with the law, but do not know what to do about it.
Companies Often Lack Confidence in their Organizations’ HR Compliance Capabilities
Locating and hiring qualified HR Managers should be a top business concern for many corporations. Most companies have a moderate or slight level of confidence — or even no confidence at all — in their ability to comply with important HR and employment laws, rules and regulations. This is very troubling, especially considering the fact that most legal problems can be avoided with an ounce of prevention.
HR Compliance Challenges Are Expected to Increase Moving Forward
HR managers should expect the compliance legal landscape to become even more challenging over the next one to three years. Given their compliance concerns — both today and looking forward — it’s not surprising that the vast majority of companies seeks professional legal advice to address compliance issue and would even consider outsourcing their HR function entirely.
Where HR Managers See Room for HR Compliance Improvements
In my experience, many HR managers are less than confident with regard to compliance in noteworthy aspects of hiring, employee relations, and risk & safety. Non-compliance in these areas could put small and midsized businesses in jeopardy of FLSA and OSHA violations, as well as employee grievances.
Taking Steps to Minimize HR Compliance Risks
Given the risks associated with non-compliance, companies should consider taking steps to address any HR compliance issues sooner rather than later. With employee litigation — and compensatory awards — on the rise, companies face major potential legal liabilities if they fail to comply with HR and employment laws, rules and regulations. Statistics compiled by Jury Verdict Research show that employment lawsuits have risen 400 percent in the last 20 years, with the average compensatory reward in federal employment cases now exceeding $490,000. For small to midsized businesses, these statistics highlight the need to address any compliance concerns, even if that means seeking guidance from third-party professionals or outsourcing the HR function entirely.
Addressing HR Compliance Issues is Key to Effective Human Resource Management
In order to achieve a competitive edge, today’s business are striving to operate as efficiently and cost-effectively as possible while maintaining HR compliance and attracting and retaining top talent. However, HR managers are recognizing the challenges of complying with complex, dynamic HR laws and employment laws. Since shortcomings in key areas of HR compliance can put businesses at a competitive and financial disadvantage, it only makes sense that small and midsized companies use the many effective tools and services available to become — and stay — compliant.
Conclusion
A little precaution before a crisis occurs is preferable to a lot of fixing after afterwards.
Time for the Public to see Uber for What they Really Are.....and to go elsewhere
Uber’s global pattern of driver mistreatment, corporate bullying and legal transgressions should be tolerated no more. For years, Uber managed to conceal its bad behavior with expensive P.R. campaigns and by claiming they are a technology company and not a transportation provider. Their games may have worked for a while, but their grand plan is quickly unraveling.
Uber is convenient and fast in New York City. The combination of cashless transactions and location technology make for a great service. But no amount of convenience can cover up the toxic culture that has taken hold at Uber. This hold true now not only in the treatment of its huge driver workforce, but at the company’s headquarters as well. Uber’s CEO has finally been forced to resign, but this is simply not enough.
We all know by now that Uber’s wrongdoing does not end at the door of its corporate headquarters. Just as evil is Uber’s model of “employment”. In my opinion, under New York law, Uber is an employer, but offers no employee benefits to its drivers and does not pay the taxing and regulatory costs associated with employing persons. In the vast majority of cases, Uber drivers are offered low pay, no sick pay, no vacations, no 401K. In return, they are promised “flexibility”, or the freedom to work whatever hours suit them. In practice, many Uber drivers are working long, long shifts for extremely poor pay in order to try to make ends meet. On the other hand, Uber continues to operate outside of the law with impunity.
Politicians are yet to condemn Uber. Perhaps their political contributions are just too large to refuse. I am at the point where I refuse to believe politicians will intervene and Uber is surely not going to change its business model on its own volition. But not using the app will surely send them a clear message. The consuming public needs to use its power as customers to force Uber to change their behavior. The workforce of drivers need to stand up to Uber and say “no more”, by disaffiliating with them and refusing to accept their dispatches.
While Uber is convenient and fast in New York City due to their combination of cashless transactions and location technology, there are plenty of other car services in New York City that do the same exact thing. The only difference is that Uber operates outside of the law, while the car services that provide the same type of service in New York City have been in business for decades and know who to operate a transportation business. The consuming public and the drivers affiliated with Uber should use their collective power and go elsewhere. Uber is not going to change on its own, but you do have the power to “vote” by not using their service. Uber is no longer the sexy newcomer with a cool service. It is a lawless entity that uses drivers like slaves and laughs at the consuming public along the way. Why should anyone put up with this type of service. The time has come for the public to consider that Uber did force many of the incumbents in the industry in New York City to revolutionize and create their own technology to meet the demands of the public. It is now time to go back to these companies and use their service. You deserve better
When will the Elected Leaders of the State and City of New York Learn from Its Past Mistakes?
During the 1920s and 1930s, easy entry into the taxi cab industry led to an oversupply of taxis, resulting in traffic congestion, fare-cutting wars, low driver wages and other unsafe and sometimes illegal activities. The Great Depression created an influx of unemployed workers which worsened these problems, with the number of cabs spiraling to 21,000 in 1931.
To address problems of oversupply, in 1937 the City of New York enacted the “Haas Act” (sponsored by City Alderman Lew Haas) in order to freeze the number of taxi medallions. In 1996, 2004 and 2006, the City auctioned off a total of 1450 medallions. Thus, by 2012 the total cap was set at 13,237. While being a passenger in a taxi was not always the most pleasant of experiences, it was just another option for the millions of New York City residents and the multi millions of City visitors to obtain transportation for-hire on demand. Of course, demand always exceeded the supply of available taxis. That is why the value of the yellow medallion soared from $10 in 1937 to approximately $1,000,000 (one million dollars) in 2012. The purchase of the yellow medallion was one the best, if not the best investment in the world. It also provided many immigrants with the ability to realize the “American Dream”.
While the yellow taxis have traditionally served those persons who live and seek transportation in Manhattan, the non-medallioned “livery” industry has always served the residents of the 4 outer boroughs of New York City. The residents of Brooklyn, Queens, the Bronx and Staten Island always had a reliable car service to call to obtain transportation by pre-arrangement. By 2012, the livery industry has some 38,000 licensed drivers in 23,000 vehicles that were affiliated with approximately 450 bases.
As far back as January 2011, Mayor Bloomberg first proposed allowing non-medallioned livery vehicles to accept street hails (i.e., a person standing on the street waving to vacant taxicabs to be picked up, as opposed to a trip pre-arranged by telephone or other means) outside of Manhattan. With the help of the Mayor Bloomberg and then TLC Commissioner Yassky, the State legislature created a law, later known as the “Street Hail Law” that allowed the Mayor to issue up to 2,000 new taxicab medallions and allowed the TLC to issue 18,000 “HAIL licenses,” valid for street hails outside the Manhattan Central Business District. Thus, the creation of the green taxicab. These granny apple green cabs were supposed to provide the residents of the 4 outer boroughs of New York City with more transportation options.
Those who had been heavily involved in the for-hire transportation industry and knew much more than the elected leaders in Albany about what was good and what was bad for the transportation industry in New York City were essentially ignored. The leaders of the taxi and livery industry knew that the Mayor’s proposal and the state’s new law was a bad idea and vigorously fought it all the way to the New York Court of Appeals, New York State’s highest court. The Court of Appeals upheld the law as it is required to give great deference to enactments of the State Legislature when it comes to matters of health, safety and welfare of its citizens. Of course, transportation always involves the health, safety and welfare of the citizens of New York State and New York City.
On the implicit promise from the City of New York that these green cabs would be money makers, similar to the yellow medallions, and because the City was offering incentives for green cabs retrofitted to accommodate passengers in wheelchairs, many small time investors bought into this bad bill of goods. A new generation of immigrants who were looking for the same “American Dream” that their predecessors did via the yellow medallion, bought into the green cabs. All the while, there was this little know company named Uber that was lurking in the background.
The leaders of the taxi and livery industry knew at the time that Uber was operating illegally. They surely complained to the City Council, the TLC, the New York State Attorney General and even the Federal Trade Commission. All elected leaders and those in power ignored the pleas of the leaders of the taxi and livery industry to stop Uber from operating illegally. It was not a matter of Uber taking away business from the yellow taxis and the livery bases, but a matter of fairness. Two entities that provide the same service were being treated differently. The taxi and livery industry have always been heavily regulated, but Uber was not being regulated. This created an unfair playing field that is the antithesis of our American way of life that has thrived on fair play and substantial justice. This was the seed of the downfall of the industry. The City’s failure to regulate Uber created a vacuum that allowed it to expand in ways that Uber surely planned, but the City’s leaders refused to acknowledge.
The elected leaders of the City and the TLC took no action to regulate Uber. They all bought into Uber’s claim that they were not a transportation company, but a technology company. While I believe that Uber’s technology was surely excellent, I also believe in the old saying of don’t pee in my ear and tell me it is raining. By the time the City and the TLC got around to regulating Uber, it had become a behemoth with money, political power and influence. In no time at all, Uber’s fleet of vehicles eclipsed the number of yellow taxis….and then some.
I and many of my friends and colleagues in the for-hire vehicle industry pled to the City Council Transportation Committee and the Mayor to place a temporary cap on the growth of Uber until all interested parties could get a handle on what the effects of Uber were likely to be. The City’s leaders took no action and the City’s transportation regulators even took affirmative action to let Uber thrive. Before Uber’s explosive and unchecked growth, the yellow taxi industry was still doing well and the livery industry too. Then the TLC allowed a driver of a for-hire vehicle to accept dispatches form more than one base. This old requirement that a livery or black car vehicle be affiliated with only one base and its driver only be allowed to accept dispatches from that base was created for the safety of the public. All of a sudden, without any real reason or justifiable explanation, the TLC allowed drivers to accept dispatches from bases in which there was no affiliation. This was the equivalent of the ability to mint 18 carat gold bars for Uber because it allowed them to send dispatches to virtually anyone it wanted and thus expand its fleet in ways that few, except Uber, ever imagined.
Today, Uber and other companies such as Lyft, have an army of nearly 50,000 licensed vehicles that transport hundreds of thousands of people across the city every day. Uber and Lyft are rapidly transforming transportation in New York. They not only threaten the existence of the taxi industry, but they siphon passengers away from subways and buses, all while raising concerns over worsening street congestion. According to city data, the proliferation of Uber and Lyft appear to be contributing to increasingly gridlocked streets. Average travel speeds in the heart of Manhattan dropped to about 8.1 miles per hour last year, down about 12 percent from 2010. Uber and Lyft are also succeeding at the expense of others. The Metropolitan Transportation Authority has taken a hit to its budget because it receives financing from a 50-cent surcharge on taxi trips. Officials at the MTA say the shift from taxis to Uber has cost the MTA about $28 million since 2014.
So back to the taxis industry. Many of those who invested in yellow or green cabs have seen their investments wiped out. For-hire vehicle drivers are flocking to Uber with their false promise of making large sums of money all while being your own boss. Since 2013, approximately 5,000 taxi drivers have thrown in the towel. Those who own yellow medallions are either barely paying their loans back or are in foreclosure. Last month Queens-based Melrose Credit Union, one of the largest lenders of money to those who purchased taxi medallions, was seized by state after delinquent taxicab loans soared tenfold in just 18 months. The stock price of another one of the City's taxi lenders, Medallion financial Corp., has fallen so far that one share of its stock now costs less than a ride on a NYC subway. And lets not forget that the City itself has a financial interest in the sale of medallions as it takes a 5% transfer tax on each sale/transfer. This is much less money to go to the City coffers.
Moreover, the drivers that have flocked to Uber and Lyft are not looking at the big picture. Uber has made its plans to develop a self-driving vehicle very clear. In other words, the day will come very soon, when Uber will no longer need drivers. Then the for-hire vehicle drivers will have no work. The taxi industry will be on life support or dead and the out of work drivers will then cause the unemployment lines to swell. Worst of all, the public just does not see the ills inherent in Uber and Lyft. Their explosive growth was made possible by luring riders away from taxis and the traditional modes of for-hire vehicle transportation (livery/community car services) with artificially low prices because they are being subsidized by a massive influx of cash by large pocketed investors. Uber has engaged in anti-competitive conduct since its inception. Competition has always been good for the consumer as it keeps prices low and the incentive to innovate high. This is why the law prohibits monopolies. So all while Uber and Lyft take all measures necessary to kill off the competition, they continue lure the public to their apps.
The public and the elected leaders of the City and State need to wake up and realize that at some point in the near future, the combination of significantly reduced competition with the eventual need for Uber to turn a profit, will lead Uber to drastically increase prices. When Uber has little or no competition, what options will the public have? Taxis may very well be gone, community car services will slowly be wiped out and the MTA is always in disarray, financial and otherwise. Uber will then be in the position to raise prices to whatever it wants and will be able to fleece the pockets of anyone with a smartphone. If we stay on this path, the public will have two options. One is to walk to their destination or be financially raped by Uber. Neither sounds like a very good option to me. And what will the elected leaders do then? Will they seek to regulate the prices of Uber trips? Will they create further regulations to stagnate the vitality of for-hire transportation in the City? Will they do nothing and just let the public deal with the problems? At this point in time, all I know is that the City and State have not learned the lessons from their past errors and mistakes. Someone needs to force the elected leaders of the City and State to open their eyes…or perhaps the public should just vote those with blinders on out of office.
So at this point in time, what can the public do, short of voicing their opinion through the power of the ballots? The public can support their tried and true local car service. Don’t turn your backs on the liveries that provided transportation to the City during a past time in recent history, such as the late 80‘s and early 90s, when it was unsafe and unpopular to so, especially in the outer boroughs. Car services such as Carmel Car and Limousine Service and Dial 7 Car and Limousine Service have been in business since the late 1970's/early 1980’s and have apps that are just as good as the one created by Uber and Lyft. Carmel and Dial 7 have been there for the public in its time of need and now the public should return its loyalty to Carmel and Dial 7, and other livery bases, by refusing to utilize Uber and Lyft. Support your local car service is akin to only buying American made goods. Sometimes it may be hard to do so, but in the end, who will be the loser by continuing to use Uber which will allowing Uber to kill off the competition. The public will suffer. I speak my peace not because I have the magic 8 ball that allows me to see into the future, but because I care. I take the time to think about the future of our City, the needs of the public and the path to destruction that the transportation industry is now on. I hope that some elected leaders take a good long look at history, think about what I am saying/preaching in this article and give my opinions its due consideration and not let campaign donations and the desire to stay in office cloud their judgment. I also hope that members of the public think about what I am saying and use your good sense to realize that Uber is not the solution, but is the problem.
Vision Zero- the Mayor has no Vision
New York City’s Mayor Bill de Blasio said in an interview Monday that he would categorize drunk driving “that doesn’t lead to any other negative outcome” a minor offense. This is absolutely absurd. Is Mayor de Blasio serious about this. Drunk driving a minor offense so long as no one gets hurt!!!! I guess all that really matters to Mayor Bill de Blasio is that traffic accident statistics go down. The means to achieve such are irrelevant to him. In other words, driver fatigue rules look good on paper, but in reality all they will do is add window dressing for Vision Zero. To say that drunk driving a minor offense so long as no one gets hurt is kin to dying that armed robbery is a minor offense so long as no one gets hurt. Driving drunk or walking into a bank with a gun, both have potential to cause massive harm and are akin to a scourge on society, but according to this Mayor, no big deal.
How about the big deal of limiting the ability of for-hire vehicle drivers to make a living. Limiting the number of hours they can work without any proof, statistics, studies or data (data and/or studies that apply to New York City) is an absolute outrage. For-hire vehicle drivers are doing the best they can to make a living in this day in age. considering the state of the market right now, that i a hard feat to do. the market is flooded with part-time Uber drivers, thus limiting the amount of jobs a regular full time professional driver can perform. Less money for drivers means they are going to seek a job elsewhere. NYC will be left with nothing but part time in experienced drivers. Would you rather be driven by an experienced driver who knows how to manage their time and fatigue or a part time inexperienced driver who knows how to manage neither.
How many NYC taxi medallions need to be foreclosed upon until the Mayor understands that limiting the number of hours a for-hire vehicle driver can operate is not going to be good for local small businesses in the outer boroughs of NYC, is not going to be good for persons who drive people for a living, is not going to be good for the ability of drivers to continue to service those persons most in need of transportation, is not going to enable the driver to make his/her car payments, etc, etc. In other words, limiting the ability of drivers' ability to operate is not going to be good for the consumer or the the economy.
If the Mayor or the NYC Taxi and Limousine Commission had some empirical data or studies to support their arbitrary time limit, then there may be nothing to complain about, as we are all in agreement that limiting accidents in NYC is a laudable goal. But limiting drivers ability to work and make a living based upon no proof of a problem and no proof that the means sought to be imposed by the NYC Taxi and Limousine Commission are the best means to prevent accidents wholly unreasonable.
It is clear that the Mayor and the NYC Taxi and Limousine Commission are more concerned with what looks good to the public rather than what is good to the public. Accidents in NYC will never reach zero. It is a fact of life, just like crime in NYC. It will always be there. We can try to limit it, but both will be there. Police don't go after criminals and solve crimes without proof, evidence an/or data. They don't operate based upon a hunch. The NYC Taxi and Limousine Commission should not be allowed to make rules based upon a hunch either.
The Mayor's comments about drunk driving not being a big deal so long as no one gets hurt is proof that the Mayor is not really concerned with limiting accidents, but simply with the appearance that he is doing something to limit accidents. That is fine, but before you take away the ability of a for-hire vehicle driver to make a living, perhaps the Mayor should consider having some proof or evidence that the NYC Taxi and Limousine Commission proposed rules on driver fatigue be based upon some proof or evidence. Otherwise, the for-hire vehicle driver is being hurt and punished more than the drunk driver who does not cause any accidents or harm to others. Think about it. It is not just the end result that matters. The means used to achieve those results are often the difference between a well executed plan that leads to good results and a poorly executed decision that causes harm to many without any justifiable basis.
Time to Consider Deregulation of the FHV industry
Deregulation in the for-hire vehicle industry is something that should be seriously considered these days. It is obvious that the New York State government, in its various versions of the TNC (Transportation Network Company) bills it has recently created, proves that while there is virtually no difference in the service provided by a TNC like Uber, from that of the traditional car and limousine service, the various services are being treated differently, all without any real reason or rationale. Can someone really tell me with a straight face that providing transportation via a TNC is not transportation for hire? Is the State Legislature and the Governor going to serious claim that the provision of transportation via a TNC is not a commercial transaction. Ride Sharing is simply a misnomer. While the ride can technically be shared by more than one person, we are no talking about legalized hitchhiking. It is a commercial transaction for which a service is being provided to one person and that person is paying for the service. At least create rules that are the same for all services. Otherwise, the playing field is hardly level and will only lead to destruction of all for-hire transportation providers other than Uber and Lyft.
While new competition from all sides of the car service industry are forcing operators to improve their business, it is impossible to adapting through improved driver retention and customer service when Uber and Lyft are able to operate the same type of business as a traditional car service but can play by rules which are either non-existent or so lenient as to make it unfair competition. If there is going to be regulations, then there should be regulation for all that provide the same service. Otherwise, the government should de-regulate the entire industry.
Transportation deregulation in the airline, railroad and shipping industries have produced enormous benefits for consumers. Airfares are down sharply; trucking rates have fallen; the nation’s railroads are offering new services. A few years ago, passenger and freight transportation were among the most heavily regulated industries in the United States. Now much of the red tape regulation has been totally eliminated.
This wave of deregulation stems from a growing recognition that government controls of transportation have not fostered the public interest. Regulatory agencies tend to protect the interests of the industries they regulate. Studies by experts representing the whole spectrum of political persuasion have confirmed that regulatory agencies reduce competition at the expense of the public. Typically, industry-oriented individuals are appointed to commissions, often from industry itself. Once in office, regulators perceive their duty as protecting the financial health of the companies they regulate. The easiest way to accomplish this is to reduce competition, thereby increasing rates and creating monopolies. This seems to be the exact case in New York City and soon to be throughout New York State.
Uber and its Destructive Revolution is Bad for the Consumer
Creative destruction is a process through which something new brings about the demise of whatever existed before it. The process of creative destruction stems from competition and innovation, which drive changes in the market. The success of Netflix is an excellent example of “creative destruction. Netflix has driven the video tape/disc rental business, along with companies like Blockbuster, into extinction. Federal Express created the overnight delivery industry and all but decimated the U.S. Postal Service. Kodak was an iconic American company synonymous with photography. But long entrenched in film manufacture, it did not see the shift to digital photography, one that required no film. But the iconic exemplar of creative destruction was Apple. Its story needs no re telling as it is the stuff of culture and legend. Apple unified the worlds of computers, internet, phone, photography and music by bringing them all together in a single device. Last, but not last, there probably has not been a better example of creative destruction than the ascendance of Uber.
In New York City, the taxi industry continues to collapse under the forces of Uber’s disruption. Traditional taxi drivers and medallion owners, after being protected from competition by government regulations for many generations, are the obvious losers from the “Uber effect”. Some people believe that consumers are the winners from Uber’s creative destruction in the transportation industry, as we now have more choice, better and faster service, friendlier drivers, cleaner cars, and most importantly — lower prices. Competition is said to breed competition as it forces business to rethink their methods of doing business and to devise methods of doing business in a better and more efficient fashion. At the very least, competition often causes businesses to maximize their responsiveness to consumers. But for competition to be beneficial to the consumer, competition must be fair. In New York City, Uber can hardly be said to have been competing fairly. They burst into the market claiming they were not a transportation company subject to regulation by the New York City Taxi and Limousine Commission (“TLC”), but were a technology company. Their business model was the same as the traditional car services, yet they refused to abide by the rules of the TLC, which all other car services that provide identical services must play by. Compliance with government regulation is very costly, but by the time the TLC got around to regulating Uber, it was too late. The damage had already been done. Uber’s methodology was to break the law, and obtain absolution from the TLC by eventually agreeing to submit to the rules that all other car services in NYC had to play by. Misclassifying its drivers as independent contractors is just another example of how Uber not only continues to take advantage of their drivers, who in my opinion are employees and not independent contractors, but also avoids having to pay the massive costs associated with paying employees (e.g. health insurance, payroll tax, time and a half for overtime, compliance with labor laws). Of course, there are the stories of Uber engaging in a concerted effort of calling other car services for transportation and then eventually cancelling the trip at the last minute, thus upsetting the driver who lost a fare. All this causing the driver to reconsider working with Uber rather than staying with the traditional law abiding traditional car service. And we should not forget about Uber’s massive subsidies of each trip for its drivers and Uber’s obscene subsidization of “sign on bonuses” given to for-hire vehicle drivers to lure them away from the local community car service. With a $65 Billion dollar valuation, Uber can afford to provide subsidies to drivers to lure them away and even to prospective customers to get them to become customers. The list of unfair business practices can go on and on. All of this may seem like legitimate business operations, but in my opinion, it is not only not legitimate but it is destructive to the for-hire vehicle industry in an extremely negative fashion.
Uber did do one good thing in its creative destruction. It caused the for-hire transportation industry to modernize. The yellow taxis had a government backed monopoly for years with no end in sight. As such, there was no incentive for them to modernize or pay more attention to customer service. Car services were forced to modernize by obtaining smartphone applications to allow its customers to book a trip or summons a car, just like one may do with Uber. If a company is forced out of business because it refuses to modernize and adapt to the times, just like Blockbuster and Kodak, then that is the forces of the market that caused their demise. But by engaging in unfair business practices, Uber is forcing the competition out of business for reasons other than market forces. This is patently unfair and should not be condoned.
The City of New York turned its backs on the yellow taxis and is also turning its backs on community car services. Many of these small car services are mom and pop shops, mostly minority owned and operate a legitimate business that have served the transportation needs of the local communities in the outer boroughs of NYC for decades. They provided a service to the City in the 80’s and 90’s in areas of the city that most people did not want to travel to. These small businesses are being forced out of business not just because of Uber’s unfair competition, but also due to the onslaught of new, burdensome and irrational government regulations. The cost to comply with most of the irrational government regulations are so high that small car services cannot afford it. When government regulations serve a genuine purpose, and are rationally related to a legitimate goal, then compliance is required, regardless of the cost. But for the past 6 years, the TLC has been engaging in a pattern of creating new regulations that serve no legitimate goal. Most importantly, government regulation, while sometimes mandatory, is not a market force, but is a governmental requirement.
Most of the governmental leaders of the City of New York have allowed Uber to grow and grow at an unchecked rate. This has caused many unfortunate circumstances. First, it has caused the demise of the yellow taxi industry. Medallions that were worth 1 million dollars a few years ago are worth about half of that now. Even with the plummeting values, medallion owners are still unable to meet their loan obligations because the unchecked rise of Uber has shifted the actions of consumer base from hailing a cab to summonsing a car on demand from Uber. Taxi and car service drivers were once able to make a legitimate and decent living. Now, most can hardly afford to make their car payments. Full time professional drivers are a thing of the past. Uber and the actions and inactions of the TLC have created a market filled with part time unskilled drivers. So what happens to the full time drivers….they become unemployed, unable to pay their bills, unable to feed their families and eventually bankrupt.
I believe in the free market. So if all of this destruction was caused by market forces, then I would have no problem. But when the government turns its back on long standing, law abiding businesses and allows a super-rich and super powerful entity like Uber to operate outside of the law, then the end result will be another government backed monopoly…..all in the form of Uber. So back to the consumer, because that is really what matters here. Right now, the consumer is happy. No more stinky yellow cabs. No need to wait for a car service to pick you up. No need to be concerned about costs because the cost of an Uber trip is the same as a trip with a yellow cab or a traditional car service. But the public usually does not realize the inherent problem until it is too late….and that problem is that non-market forces in the form of unfair completion from Uber along with irrational and needless regulations from the TLC are all combining to cause all other car services to go out of business and make the yellow taxi extinct. So the typical question from the consumer is this….what is wrong with that ultimate scenario since Uber will be left standing the consumer can always use Uber’s app to get transportation? The problem is that the end game of Uber’s creative revolution is a destructive revolution where only one company is left standing….and when Uber is left to be the only company in town, they will be free to jack up their prices because there will be no competition to keep their prices in check. It also reduces their willingness to serve the public interest or provide top customer service. All of this surely make us all worse off. This is why the government is supposed to prevent monopolies from being created or from continuing to operate. Since the late 1800’s monopolies have been largely outlawed. But in the meantime, Uber continues to make massive “donations” to politicians’ campaigns, all to get them the lawmaker to see it the “Uber way”.
If the history of transportation in NYC has taught us anything it has taught that we need to move away from the ubiquitous crony capitalism that protects well-organized, well-funded, concentrated companies like Uber. In the long run, it will only lead us down the same vicious cycle of high prices and poor service. Think about what I am saying here. Look at the dynamics of the industry. Take a thoughtful view of the future and decide if creating another government created and government backed monopoly is in the best interest of the public. I think you know that my opinion is a resounding “NO”.