Uber Facing Roadblocks, Controversies in U.S. and Abroad

December 10, 2014 by

Uber Technologies Inc. has hit an increasing pileup of regulatory and legal hurdles this week, with its mobile application challenged from India to California.

The car-booking app yesterday was sued by the district attorneys of Los Angeles and San Francisco over claims that it makes false assurances to customers about drivers’ background checks. That came after a judge in Spain banned Uber from operating in the country.

Earlier this week, Uber was sued by the city of Portland, Oregon, for allegedly violating local laws, while Rio de Janeiro declared the service illegal and the Netherlands halted ride- sharing service UberPop. In addition, New Delhi banned Uber this week after one of the service’s drivers was accused of raping a passenger.

“The-low cost premise is starting to look doubtful,” said Erik Gordon, who teaches entrepreneurship at the Ross School of Business at the University of Michigan. “If the lower costs arise from insufficient screening and supervision of drivers and no insurance, the advantage is not sustainable and the valuation could collapse.”

The developments amount to one of the heavier two-day periods of anti-Uber activity this year, as the San Francisco- based app runs into established transportation industries. They follow an upswing last week when Uber announced $1.2 billion in new funding at a $40 billion valuation, making it the most highly valued U.S. technology startup with a market capitalization greater than Tesla Motors Inc. and Hertz Global Holdings Inc.

In October, Uber’s vice president of policy and strategy, David Plouffe, declared that the company was undergoing a period of momentum — which he dubbed “ubermentum” — after Washington let ride-sharing service UberX operate in the city and following regulatory breakthroughs in Colorado and Illinois.

“There’s some ubermentum here,” Plouffe told Bloomberg West’s Emily Chang in the Oct. 29 interview.

“We think we should be regulated, but some of these laws go back 50 to 60 years ago and don’t work now,” Plouffe, a former top adviser to President Barack Obama, said in a conference call with press that same day. “What happened in D.C. should be a model elsewhere.”

Uber has long been controversial because the service, which lets people hail rides from their smartphones, has disrupted long-established taxi and limousine services.

Founded in 2009 by Chief Executive Officer Travis Kalanick and Garrett Camp, Uber has expanded to more than 250 cities in 50 countries, roiling the transportation markets in those locations. Uber is opening in a new city at the rate of one every other day.

“We are committed to the riders and drivers in those cities who want safe, reliable, hassle free options,” Nairi Hourdajian, a spokeswoman for Uber, said by e-mail.

Uber also thumbs its nose at regulations when it debuts its service. It typically jumps into a new locale in spite of laws protecting the taxi industry and forces regulators to adapt as consumers embrace the app.

Austin Geidt, Uber’s 29-year-old head of global expansion, has said she used to agonize over data on competition and demand in different cities to decide where to expand next. Now the company is moving too quickly to over-think the road map, she said in a recent interview.

“At this point we go so quickly, I wouldn’t say that it particularly matters,” Geidt said. “If we’re not there now, we’ll be there in a week.”

Earlier this year, Uber and similar services faced protests across Europe from taxi drivers. Uber is also coming to grips with regulatory challenges in Thailand, Colombia and U.S. states including Nevada.

The company has grappled with other controversies, as well. Last month, Uber executive Emil Michael made comments about how the company was willing to pry into journalists’ private lives, triggering questions about its data-privacy policies. Uber has since hired a law firm to conduct an internal privacy review.

–With assistance from Mark Milian and Karen Gullo in San Francisco and Siddharth Philip in Mumbai.

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