Uber, Lyft pay $328M for "cheating drivers" out of earnings, NY says
arstechnica.com
arstechnica.com
It surely can't be legal incompetence -- a large company like this has lawyers to review these things, and who know the contracts they've created.
But it's hard to imagine Uber/Lyft thinking they're going to get away with it -- obviously it's going to eventually turn into a legal suit and they're going to lose.
I really don't get it. Often these kinds of situations happen when the law is ambiguous or unclear, and the company it taking a calculated risk that the courts would rule in their favor. But this doesn't seem to be that, unless I'm missing something?
They needed the money then, and had no problem paying it back in 2011, many years later. And if they went bankrupt, well, no way to pay back anyway.
Classic “heads we win, tails you lose” situation.
Cheaper source of capital than venture capital. And no hit to the cap table.
https://theguardian.com/technology/2011/aug/24/google-settle...
See also: Comcast mis-billing customers.
But I think it's more than that, here. The settlement covers almost the height of when Uber and Lyft were desperately trying to undercut everyone else in the market--taxis, public transit, taking a bike, scooter-share, anything--and keeping these out of view of the customer helps a lot in that effort by making the price look lower.
> The Uber settlement fund is for people who "drove for Uber between November 10, 2014, and May 22, 2017, and had deductions taken for New York sales tax and Black Car Fund fees." The Lyft fund is for people who drove for Lyft between October 11, 2015, and July 31, 2017, and had the same kinds of deductions.
By my mind, it's in the same vein as businesses (everyone from Comcast to that small restaurant on the corner) that list one price in big numbers but tack on surcharges at the end. Obscuring the true price should be more illegal than it is.
In IT there was a UK battle years back when magazines were still a big deal about whether you could advertise prices without VAT. All these companies charge retail customers VAT of course, but in effect the way VAT works the price is without VAT if you are yourself a business that claims VAT refunds. So the argument in some of these magazines was, look, you can buy this magazine as a hobbyist, you can buy this Western Digital 200MB hard disk from an advertiser as a consumer, and you'd pay VAT. But actually they advertise in our magazine because many readers work in IT, so while they might get 10 hobbyist orders for that 200MB disk, they also get one or two business orders for a hundred drives, and those customers don't pay VAT so why must we show VAT prices ?
The issue is VAT is astronomical compared to the US and hits the poor hardest because consumption taxes are regressive. If it were more apparent on on pricing how much was tax, I could see people who make that argument here having a point. I find it hard to believe Europeans would not blink at seeing such a regressive tax day after day.
You don't just pay regressive VAT, you also benefit from progressive income tax, progressive education and health policies, etc.
The US state and federal governments spend 1.5 trillion per year on Medicaid, Medicare, CHIP, and VA health care. The actual number is even higher than this by a fair margin because many US health systems are owned by local governments, and US government employee health spending isn’t accounted for either. With 330million US citizens, that means per capita US government health care spending is 4500. Most countries are able to fund their entire public health care systems with very similar per capita numbers; America doesn’t have universal public healthcare because the system is broken, not because it needs the money. So very high consumption taxes aren’t the reason Europe can afford good health policies - the American government already spends the same amount, and could stand to dramatically increase income taxes on high earners.
Again the problem is that the taxes are different in every municipality and state which presents a calculating nightmare. I mean you do the math on 0.0625% of $17.23. It's super difficult to do and can change frequently anyone that wants to run a business in more than one or two municipalities would have to hire someone full time. Plus there's the extra headache of running a sale, etc.
It is more helpful to think of the US as 50 different states that have a common federal government rather than a single united whole.
At least not too many hotels or airlines offer “$99 at any of our locations in the country” deals. Dunno how it works for “free” stays paid with points in fixed amounts.
> anyone that wants to run a business in more than one or two municipalities would have to hire someone full time.
Yes, when you're trying to operate a nation-wide business, you should generally hire accountants and lawyers, or at least consult with them and take their good advice.
It isn't necessary for me to know that the sausage actually came from Poland, the bread from a specialist bakery six miles away, the "home made" cake actually was made in the proprietor's home surprisingly albeit at some scale, while the Coke travelled second furthest in its current form, from Wakefield in Yorkshire, over an hour away. These things matter in terms of the onward destiny of the tax money -- Poland gets tax revenue for producing sausages, but not for the bread made to a Polish recipe in a foreign country -- but to me the consumer they're irrelevant.
I'm not convinced that's obvious. I'm guessing for every story of "large corporation held to account for breaking wage laws / committing wage theft" there are 5 stories of them not being held to account. (I could be wrong - it could be 2 stories, it could be 10... but I'm willing to bet they get away with it more than they don't.)
Also - is the amount they pay out more than or even equal to what they grabbed, or less? If I read the settlement correctly this means that there won't be a full investigation, e.g. - a deep dive to find out how much money they actually skimmed. This is a settlement so I don't think they ever actually got an absolute tally of how much money was in question.
I'd also consider that the corporation may face consequences but the individuals who green lit the decisions are unlikely to suffer. In fact, by the time the bill comes due, legally, isn't there a good chance the folks have already updated their resume with glowing current numbers and moved on to another company? The time period in question was 2014-2017. How many people are even still at those companies from that time period that made these decisions?
... and on a schedule mostly convenient for you...
(Probably also on some level Lyft felt like they needed to follow suit in order to compete on price in their most populous and important customer region.)
Keep in mind that the lawyers aren't software engineers - if you tell legal that you're doing A but in the code you're actually doing B, they will tell you "A is perfectly legal, keep doing that." They're not going to review the code for themselves.
After all, they did get away with it, didn't they? 290 million is like 4% of one quarter's revenue for them, to pay back 6 years of operating illegally. Seems like a slap on the wrist if there ever was one.
I've worked in Monetization at 3 SaaS cos (admittedly all smaller than Uber, O(100-1000) employees), and at all of them I've seen mistakes of a similar proportion of revenue (~1%) made in both directions (overcharging and undercharging customers) in violation of the letter of our contracts with absolutely zero intent or malice.
Wage law adds several additional layers of complexity beyond that.
Odd that when this common thievery impacting the hardest working among us shows up among business inclined folks the reaction is oh it must have been in good faith, must be some kind of mistake. When lower stakes lower impact shoplifting occurs, people are immediately discussing punishments and outcries for jettisoning groups of people to preserve our social fabric.
Sure, a couple drivers might have needed to take out predatory loans to cover their stolen income, but hey at least the company still exists today to fund their future, unbridled income! They should be thankful, actually.
Yep, it is the mental gymnastics of might-makes-right.
Drivers in New York City proper are entitled to $17/hr for sick pay. If I'm reading it correctly, that is also the minimum wage that drivers must be compensated at.
However, drivers who begin trips in New York State _but not inside NYC_ are guaranteed pay at $26/hr [see paragraph 30 of settlement]. If I'm reading this right, drivers in Buffalo, Syracuse, Utica, Albany, etc. are all going to reap significantly higher pay from Uber while living in much lower cost-of-living areas.
[0-pdf] https://ag.ny.gov/sites/default/files/settlements-agreements...
just looking at the per minute numbers, if you worked 60 minutes of P2+P3 time you would make 33.84, which isn't even considering the per-mile pay.
Also inevitably someone chiming in about how cars in general are evil incarnate and everyone must convert to public transportation and bicycles.
You haven't engaged with even ONE concrete argument; ideally, you would scan all arguments and engage with in good faith the very best argument. Or alternatively just say: nope, not interested.
But you just strawmaned against nothing. Not so great.
Alas this has nothing to do with the post.
I've said it before, and I'll say it again - if you were to pay for real cost of overhead and to pay the driver, you'd end up with a price that no customer is willing to pay.
Uber has briefly entered profitability, but only by absolutely shredding any pay to their drivers, who will jump ship eventually.
The reality is that once investors wake up and close their pockets, these companies vanish into dust. It's either that or their drivers will abandon them.
They probably run real-life experiments to see “what happens if we increase prices 25% in a region” and have a model for how that can be applied everywhere and where they would just have to close up shop if they needed to go into profit-mode instead of maintenance or growth mode.
I'm sure Uber in NYC makes money, and DoorDash in NYC makes money... but those are also the places where those services have existed for many decades profitably.
The whole promise was that with [insert handwaviness] technology the business model can be made to work in places where it was never sustainable before (i.e., the suburbs and much smaller cities). This... overwhelmingly hasn't panned out.
I'm generally skeptical of the oversimplistic "you've invented [thing]" complaints that are often leveled at new tech, but in this case... the shoe does seem to fit.
The only places this business model seems to work are places where the business model has always worked!
The chief conceit of Uber is that the technology is what provided value. This justified exorbitant margins for Uber the company while squeezing drivers brutally. This conceit turned out to be ludicrously wrong - the vast majority of the value being provided by drivers, not the app itself.
And the market is starting to grok that. For example in NYC you can now hail a cab using the Curb app, which adds the two main user experience improvements Uber pioneered: hailing by phone and paying by phone. The app itself isn't non-profit nor publicly-owned but it does take radically less of a cut of a ride than Uber, reserving the bulk of earnings for the actual driver - as it should be, because it turns out the app is not the primary value creator here.
So in a way, "nature is healing" - the market is correcting and starting to (correctly) attribute value back to drivers rather than a parasitic central office.
FWIW I think this reckoning is coming for all gig economy companies - the vast majority act like (and charge $$ like) they are the main value creators in the chain when they are not. The entire past decade of the gig economy has been a massive wealth transfer from working-class gig workers to investors and office tech workers who have 100% failed to justify their exorbitant cuts.
this idea that we can't have products within a competitive sphere that are publicly-owned is completely stupid. if they're bad, people won't use them, and if they're good, it will force private competition to get better. there's a (Murdoch-pushed) idea that that's unfair competition. but who is it unfair on? it's unfair on the capital holders. it's not unfair on the workers. it's not unfair on the consumers. it's just unfair on the people in society who extract their wealth from the people who do all the actual work
How come taxis existed then? I find it hard to believe that taxis could turn a profit despite being very low-tech and inefficient compared to Uber.
I wonder if the real reason Uber isn't profitable is more due to "growth & engagement". How much money is wasted on US-salary engineers playing with microservices in their engineering playground or burned on ads?
Uber isn't profitable because their overhead is higher than a taxi service and they charge less than a taxi service.
Depends where. In NYC, taxis are usually cheaper than Ubers.
Maybe some individual companies might go bust, and probably rideshare prices will continue to increase towards typical taxi prices, but there’s no reason at all to think the apps are going anywhere.
But there's no way to make them profitable as it stands.
All of the services that rideshare apps offer were highly demanded before the apps existed, and they were all delivered at more expensive prices with perfectly decent profit margins.
If VC money stops funding these products, then the prices have to go up to something similar to “traditional” prices for those services, but consumers will still choose to use the apps, because the service they provide will still be substantially better than the traditional service.
Ah, growth, of course. Sure, they lose money on each delivery, but they’ll make it up in volume!
(They’re all over in Toronto)
It’s very possible that they have to pull out of a lot of places, but I think the model can work in the right places
I've had poor experiences with Uber/Lyft at airports. Taxis are way better. Sometimes there's not enough luggage space in the car for my luggage, and I won't know that until after I've called them and waited a long time. If I cancel, I end up paying.
(And it's not about me picking a small car - they've got a lot of their personal stuff in the trunk so the capacity is smaller).
Also, plenty of rude Uber/Lyft drivers ("Hey! You were on the wrong side of the road! I could get in trouble for picking you up on the other side of the road!").
We're talking about a single lane each way road, and I went to the other side because I knew he was coming from that direction.
Still, being able to call one via an app is convenient compared to taxis.
That's only because their software lacks the necessary feature (select driver based on imminent arrival at the curb, from a queue of arriving drivers).
Since that feature doesn't seem hard to implement, presumably the underlying reason is regulations to do with airport pickup.
That's a giant leap.
Yes, the wait times aspect is due to airport regulations. Not having enough luggage space is not. It's on Uber/Lyft to allow users to define things like how many suitcases they have so it shows only cars where drivers can commit to that amount of space.
It's just a basic thing if you're a driver and want to serve airport arrivals (or train or bus for that matter).
But rideshare apps are incredibly valuable at airports, especially in less developed countries where getting into the wrong cab at the airport gives you about a 90% chance of getting scammed or robbed, but getting an Uber or Grab from the airport brings that down to almost 0%.
Also investor subsidies due to low interest loans or cheap money from banks. Although that is quickly going away.
If it weren’t for these two items, Lyft/Uber would just be another mediocre taxi service.
Customer pays $100 for service, Uber takes (say) $45 => Driver allocation is $55. Uber now collects $10 tax from here and gives the driver $45.
That's wrong because the passenger should be paying the sales tax. So the right way to do it is
Customer pays $100 for service + tax, which is $90.91 service + $9.09 tax. Uber takes (same ratio) $40.90. Driver allocation is now $50.01.
Okay, so the accounting was wrong here. That makes sense. Does this mean that Uber will be going back to get that extra taxed money back from the government if they paid it?
You ( not you you but you hypothetical driver) may consider yourself as an employee but it would be if your own company, or self employed. Not Uber's employee except in a few jurisdictions. If you want employee protections by all means drive under your LLC for Uber and declare yourself an employee of your contracted self owned LLC... It sounds doable but IANAL.
It was something like, "Remember when computers used to be fun?"
It's analogous to saying that robbery at gunpoint isn't "cheating", because both sides agree to the terms. Technically it's not "cheating", but that's not the aspect most people care about.
No they are not, otherwise they could freely set the fare and the market would decide the final price, not Uber or Lyft. Clearly that's not the case here.
> From 2014 to 2017, Uber deducted sales taxes and Black Car Fund fees from drivers’ payments when those taxes and fees should have been paid by passengers. Uber misrepresented the deductions made to drivers’ pay in their terms of service, telling drivers that Uber would only deduct its commission from the drivers’ fare, and that drivers were “entitled to charge [the passenger] for any tolls, taxes or fees incurred,” though no method to do this was ever provided via the Uber Driver app.