Did Uber use computer software to illegally get an edge on their competition? According to a new FBI probe of the ride-sharing company, that appears quite likely.
Uber and Lyft are two ride-sharing companies that have substantial markets in many major U.S. metropolitan areas. The two have cut deeply into the profits of taxi companies, and have done a great deal to offer consumers an alternative to the monopoly of taxis in big cities like New York.
However, it’s apparently not all good-natured competition, especially over at Uber. The company is now under a federal probe for using software to illegally get a leg up on competitors like Lyft, using a program designated “Hell” for several years, the Wall Street Journal is reporting.
The way the program reportedly worked was by tracking Lyft’s drivers, and using the data to lure customers to Uber away from Lyft. The issue is that the company allegedly set up fake accounts, and then would use them to adjust their routes and prices. The WSJ’s sources explained it this way:
Uber created fake Lyft customer accounts, tricking Lyft’s system into believing prospective customers were seeking rides in various locations around a city. That allowed Uber to see which Lyft drivers were nearby and what prices they were offering for various routes, similar to how such information appears when an authentic Lyft app is opened on a user’s smartphone, these people [WSJ sources] said.
The program was also used to glean data on drivers who worked for both companies, and whom Uber could target with cash incentives to get them to leave Lyft, said these people, who added that the program was discontinued last year.
The question that investigators will have to answer is if this constitutes unauthorized access to a computer system. By creating so many fake accounts, the company basically accessed large portions of data that only Lyft should have had.
The company has had to offer perks to draw customers away from Lyft, such as reluctantly adding a tipping option, and improving the Uber app to make consumers more drawn to it. But apparently they also needed to use a computer trick as well.
This is the third active federal probe of Uber. There is now a “laundry list” of challenges facing the new CEO, Dara Khosrowshahi. The company also has to deal with a probe of employee treatment that led to the departure of the former CEO Travis Kalanick. But their trouble don’t even end there.
The U.S. attorney’s office in the Northern District of California, working with FBI agents there, is investigating another Uber software tool, known as “Greyball,” which helped its drivers evade local transportation regulators, according to people familiar with the matter. The FBI has issued subpoenas to public officials in Portland, Ore., Philadelphia and Austin, Texas, in connection with that investigation, according to officials in Portland and people familiar with the matter.
Uber has since said it stopped using Greyball to evade officials. Uber has said it has used the technology for other purposes. An Uber spokesman declined to comment on the investigation.
In addition to that, the DOJ may also investigate a possible violation of the Foreign Corrupt Practices Act, as the company possibly bribed foreign officials to use the service.
As the company continues to deal with many woes surrounding its employee treatment, competitive strategies, and possible bribery of foreign officials, consumers ought to carefully consider doing business with the company given such information.
The beauty of a free market, one with many suppliers, is that if one company happens to engage in corrupt business practices, consumers can switch to another company that does not engage in such chicanery.
Uber created a brand new market for transportation in metropolitan areas, their business model was innovative and angered the cronyists who have long protected the taxi cab cartel.
Yet a company that fights one form of corruption may itself also fall to corruption as well. As consumers, we should be aware of the quality of the product we buy, but also integrity of the company itself. As time progresses, Uber may find itself out on the market thanks to such practices; especially if convicted in court.
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