Über Gross? The Rise and Reach of Unseemly Business Tactics

 

I do not have a dog in the Proposition 1 hunt. I can’t remember the last time I rode a cab in Austin, and I’ve taken an Uber or Lyft car only once in my life. I do not know which side is projected to win the upcoming referendum, but almost every person in my (admittedly) small circle of acquaintances intends to vote against Proposition 1 and, therefore, against Uber and similar ride-sharing services. Their reasons have little to do with the supposed focus of the proposition — rider safety — and provide a lesson in business strategy for Uber and all other businesses.

Our society has certain expectations for companies that go beyond a good product at a good price. Uber has created a new technology to join riders and ride-providers, but its future financial success will depend more on its lawyers and lobbyists than on its coders. As Ken Cohen, then-Vice President for Public and Governmental Affairs at ExxonMobil, told one of my classes last fall, “Even we have to earn our license to do business.” 

Uber has been abusing that license by playing hardball in ways that may not embody the most effective corporate strategy.

What reasons do my acquaintances give for voting against Uber? 

“Uber is trying to buy the referendum.” Uber and its allies have poured $8 million into this election in ads and robocalls that are starting to annoy even me.

“Uber is trying to bribe me.” Prices for many rides have suddenly dropped to uncommonly low levels just as the election looms on the horizon, making even loyal riders, grateful for the low price, deeply suspicious of Uber’s electoral tactics.

“Uber is misleading voters.” Louis Black pointed out in the Chronicle this week that through social and traditional media, Uber supporters are urging people to vote for Prop 1 if they support Uber and to vote for Prop 1 if they oppose Uber. That’s a false choice.

“Uber is a bully.” No one likes a bully, and Uber’s threats to pick up its ball and go home in Austin, Houston, and elsewhere if it does not get its way are not playing well.

“Uber is a law-breaker.” It has not escaped people’s attention that Uber enters markets in blatant violation of local law with the goal of changing the law once it has established a beachhead, rather than seeking the legal change first.  So far, Uber has viewed the resulting fines (such as the $12 million imposed by Pennsylvania regulators last week) as a mere cost of doing business.

“Uber takes advantage.” There are obviously good financial reasons for surge-pricing, but substantial evidence shows that people generally resent companies that take advantage of people’s desperate circumstances by price gouging. Economists often do not understand this, but psychologists do.

“Uber mistreats its drivers.” While attempting to control drivers as though they were employees on its payroll who would be entitled to a wide range of legal and financial benefits, Uber simultaneously labels them “independent contractors” in order to deny them those benefits and to minimize its liability for drivers’ errors.

“Uber cheats.” Uber has been accused of or fined for inflating safety data, ordering fake rides from competitors and canceling them at the last minute, and threatening to dig up personal dirt on media critics.

Headlines follow any time an Uber driver attacks a customer, but these isolated examples do not truly indicate to Austinites whether safety concerns should cause them to vote for or against Prop 1. Uber’s poor corporate citizenship, however, gives many Austin voters pause. Austin is still a small town that doesn’t like to be pushed around. If Uber prevails in this referendum, it will be despite its hardball strategy, not because of it.

Robert Prentice is a professor of business law and business ethics and Chair of the Department of Business, Government & Society at the McCombs School of Business at The University of Texas at Austin. He is also the faculty director of McCombs’ Ethics Unwrapped program.

Disclaimer

The views expressed are those of the author and not necessarily The University of Texas at Austin.
 

About The Author

Robert Prentice

Professor, Business Law,

Robert A. Prentice is chair of the Department of Business, Government and...

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