US Department of Justice begins criminal investigation into Uber
The U.S. Department of Justice has recently launched a criminal investigation into Uber Technologies Inc. The investigation is focused on Uber’s use of a software tool, known as Greyball, that allows the company’s drivers to avoid local transportation regulators.
According to Reuters, the company has admitted that Greyball helped drivers identify and keep away from government officials who sought to restrain Uber in places where its ride-hailing service was not approved.
Greyball worked by allowing Uber to show an altered version of its standard app to users the company had marked. This app would keep hidden the real location of Uber cars in a number of assorted situations.
Greyball was part of a larger Uber system called “Violation of Terms of Service,” which, according to employees at the company, gathered credit card, device type and device location data to determine whether a request from the user of the application was legitimate.
Uber claims that the technology was mainly used to protect its own drivers from competitors or potential attackers. If a ride request from a user was considered illegitimate, Uber’s application would display bogus information and the user would be ignored by drivers. For example, to protect its drivers, the Greyball is used if there is the risk of physical threat, such as a passenger being likely to get into an altercation with an Uber driver in a dangerous, crime-laden area of a city. Additionally, it also allowed the company to test out new features on special cars without having to pick up passengers.
The problem is that Uber used the software to mark and avoid government officials, which may have violated federal law. Using the “Violation of Terms of Service” system at Uber, all types of data were collected, which allowed Greyball to identify and avoid government employees.
Managers at Uber would note the locations of government offices and requests for service from those areas would be blacklisted. An individual might be blacklisted if his or her credit card was connected to a law enforcement credit union. Social media accounts were also parsed through to determine if someone was a likely member of law enforcement.
According to The New York Times, “Enforcement officials involved in large-scale sting operations meant to catch Uber drivers would sometimes buy dozens of cellphones to create different accounts.”
To counteract this, Uber employees went to local electronic stores and listed the device numbers of the cheapest phones for sale, which were the phones most likely to have been bought by government offices. The employees then used Greyball to blacklist Uber requests from these phones.
Uber largely used Greyball in cities where it faced opposition from regulators and rival taxi and transportation companies. In cities like Portland, Oregon, the Greyball software let Uber operate without the permission of city regulators. Since local officials could not hail an Uber car, it was difficult for them to fine Uber drivers or impound their cars. This ignorance of the law was key to Uber’s early growth.
The cities in which Uber first started to operate had largely different regulations, with some laws being difficult for the company to fulfill. An efficient strategy soon emerged. Uber would discreetly enter the transportation market in a city and establish a loyal customer base, so when regulators would start to scrutinize Uber’s activities, its customers would clamor in support of Uber, often leading to the lessening or complete abolishment of legislation that hindered the company.
For example, in 2012, the Council of the District of Columbia was trying to decide if Uber met taxicab regulations in that city. It drafted legislation to determine Uber’s legal status, but the proposals would have stifled the company’s growth. One such proposal advocated forcing Uber to charge a price much higher than the minimum taxicab fare, limiting the company’s market and protecting regular taxicabs from the competition that Uber presented.
However, Uber had begun service in Washington long before and had a lot of devoted customers in the area. The company asked aforementioned customers to complain to the council, which they did, and the proposal was scrapped.
This recent criminal investigation into Uber’s practices is merely the latest in a long line of events the company has received strong criticism for. As a result, the company has taken action to remedy its negative publicity. It recently launched an internal investigation into both its workplace culture and claims of sexual harassment from female engineers. It has also hired and fired a large number of management.
Executives at Uber are leaving in large numbers. The former president of Uber, Jim Jones, quit the company after less than a year. Besides its internal issues, Uber also has a plethora of competitors in the ride-hailing market, including direct rivals such as Lyft in the United States and international rivals, including Didi Chuxing, Grab, Ola and others.
Despite all of this, thanks to Uber’s aggressiveness, it is now the most valuable private startup in the world, valued at $69 billion as of press time. We have yet to see if Uber’s handling of these issues will impact its market valuation.