
Uber to pay $20M to settle U.S. claims it misled drivers - lis
http://www.reuters.com/article/us-uber-ftc-idUSKBN15334C
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tabeth
I suspect there's some legal strategy here, but this fine seems pretty meh.
The real punishment should be paying them what they advertised: 600,000 * 0.10
(at least 10 percent of all drivers were paid less) * 15/hr (average
advertised wage) * 40 hours = 36M minimum. More if you do a more granular
analysis. Keep in mind, this is just paying them what they advertised. There
should also be a large consequence for lying to begin with.

Without severe punishment for doing this, there's little reason to not do it.
You and your team can just do a cost-benefit analysis and see if it's worth
lying. Why not have a super severe punishment to discourage this type of
behavior forever? Say 10% of all revenue since this was in place? This is just
another practice that supports big-business. Large firms can easily absorb
these kind of minimal fines. To pay they'll layoff the people who had nothing
to do with this. Leadership isn't going to be affected by this.

All companies with revenue in the billions should be fined in the billions at
minimum. As a society, are we going to allow companies to lie and deceive in
the name of "disruption"? We already know how that went once during 2008 (of
course it's not the same thing here).

EDIT:

I realize that I used the word 'fine', when really this is a settlement.
They're not the same, but I hope the point I'm making still gets across.

~~~
kartan
For a long time in Spain fines for polluting were lower than the cost of
actually fixing the issue. As you can expect factories continued polluting.
Then that changes to bigger fines or even to stop the factory until the
problems were fixed. In no time factories hired people to fix the problems and
to make sure that it didn't happen again.

If a company is allowed to break an agreement with no consequences. How do we
expect it to abide to the rules?

> As a society, are we going to allow companies to lie and deceive in the name
> of "disruption"?

I dont' see any disruption in Uber business model. They just offer a service
without paying the proper taxes that other companies (taxi) have to pay, and
without paying minimum wage or having other guarantees for the employees. That
is as old as the rule of law and taxes have existed, the only novelty is that
they use an app to do so. And apps have been already out for a while.

~~~
EdHominem
The disruption is that it surfaces all those problems which already exist for
taxi drivers in the current system. They often work insane shifts, lose money
if it's a slow day, etc. They have to enter into long exploitive contracts
just to rent a medallion from the politically-connected rent-seeking
monopolist who owns it.

Also, I often see drivers who don't resemble the photo ID in the cab at all.
Likely they're unlicensed friends of the medallion renter, who help cover the
insane shifts they rent the medallion for. But it negates much or all of the
supposed value of taxis.

By giving those drivers an identical (somewhat crappy, as you point out)
choice which doesn't lock them in, it's shaking up the taxi industry. And by
reducing the value of the medallion it's hurting the monopolists who lobby to
keep the number of medallions low, etc, which helps us in the long run with
healthier markets.

As for Uber specifically, their value is surge pricing. And I say this as a
customer, not a shareholder. I routinely wait for taxis that never come when
I'm in cities that have banned Uber. But I never wait for an Uber where it
exists - I can choose to pay if I want it. If I'm late for a meeting, I'll
pay. It's a service that was unavailable before at any price.

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dustinmoris
I can't help myself but I really dislike Uber just for everything they do.
Their model is entirely based on exploiting drivers at every corner just to
provide users a little bit better service than what taxi companies already did
for us. I think with technology we can do better than what Uber does.

~~~
smeyer
> just to provide users a little bit better service than what taxi companies
> already did for us.

I'm not saying I'm a fan of all their business practices, but (at least in
Boston) Uber has been a massive improvement over what taxi companies provided.

~~~
puddintane
In Denver the taxi's are horrible - half the time you smell puke or some
horrible odor, the other half you have to wait an hour to just get a ride. I'm
not saying I like Uber as a company, nor what they did to drivers, but they
(as well as others like Lyft) have created a fresh fast way to get around and
it costs the same as a taxi most of the time. It's hard to not flock to that.

~~~
Pigo
The only reason for this better experience is because you're riding in a car
that Uber doesn't have to maintain. There's a lot of Uber drivers who go out
of their way to create a pleasant ride, which is what makes it great. If the
drivers aren't getting compensated appropriately for this, then that's a huge
problem in my opinion.

~~~
sfifs
Then they will stop driving for Uber and find something else to do that pays
them better.

I'm generally more concerned about the precedent Uber sets riding roughshod on
legal regulations, but fairness of compensation is very much an emergent
market phenomenon and people are free to not drive for Uber if they find
themselves inadequately compensated.

~~~
jeromegv
The argument that people can just "not drive Uber" would be a fine one. Except
that Uber has a history of drastically changing their compensation structure
overnight.

This fall in Toronto, they reduced their UberEat compensation by half,
overnight. People have rent, invoices, bills, and have car payment and comes
to expect a certain amount of money to come in after week, and when you do
those kind of changes overnight without warning people, this is just pure evil
capitalism.

They use the same tactic when they open a new market, they advertise certain
rate, people buy a car or rent a car to start working for Uber, and then few
months down the line they reduce the price, and again, and again, and again,
and then people are stuck with a car where they have to drive twice as much to
bring back the same income.

~~~
sfifs
I've talked to a number of drivers in India where Uber changes compensation
structures every couple of months and everyone has got in knowing Uber
can/will do these things - no one seems to be as credulous as you claim. They
limit their risk exposures accordingly - many choose to drive for other car
owners vs. invest in their own car.

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kirykl
I drove for them for a while. This is from an old email in 2014, they loved to
ignore the costs drivers incur, and slyly referred to earnings instead of
profit:

"NEW UBERX RATES

Uber’s goal is to ensure strong driver earnings and offer the best value to
riders. Maintaining low prices will keep demand high into August and
September, and help you do more trips during this time. From this promotion,
we have learned that a 20% price cut will keep driver earnings higher than May
peaks and keep demand at record levels. We have seen similar effects in other
cities where lower rates increase trips and increase driver earnings.

In short:

\- Average driver earnings will be higher than May levels \- Uber’s 25%
promotion to riders will end \- Prices will be reduced by 20% for both riders
and drivers"

~~~
mcintyre1994
> Prices will be reduced by 20% for both riders and drivers

Do they refer to their share of the fare as the driver's price? If so that's
quite clever in that they can say the price you pay is going down when they
give you a paycut..

~~~
tyingq
Ugh, that's terrible. Since the highest fixed costs (fuel, car payment) are
part of the driver's "earnings", it's clearly a more than 20% cut for the
driver. Trying to act like both reductions are 20%, as if they should be the
same is disingenuous.

~~~
rahimnathwani
"Since the highest fixed costs (fuel, car payment) are part of the driver's
"earnings", it's clearly a more than 20% cut for the driver."

A couple of problems with your position:

\- Fuel is not a fixed cost. It's a variable cost. More trips -> more miles
driven -> higher fuel cost.

\- The presence of large fixed costs (as you say 'car payments') means that
increases in total revenue will have a tendency to increase overall profit

Let's say I have a business which has large fixed costs, but no variable
costs. If my price per unit goes down by 20%, but I sell 25% more units, then
my revenue is up. But, because my costs are fixed, my profits are also up by
exactly the same amount.

If you had said that the drivers have large _variable_ costs (fuel,
maintenance) or that the opportunity cost of the drivers' own time was high,
that would be more convincing.

~~~
tyingq
You're right, wrong terminology. Was trying to express that the largest costs
of the trip are the driver's fuel and car costs. By "fixed" meaning the driver
has no obvious way to change those other than whatever car they bought in the
first place. So, a 20% cut in revenue to the driver is significantly _more_
than a 20% cut in earnings/profit.

~~~
rahimnathwani
"So, a 20% cut in revenue to the driver is significantly more than a 20% cut
in earnings/profit."

I wasn't talking about the implication of a 20% reduction in _revenue_. I was
talking about a reduction in 20% in per unit _price_ , with a simultaneous
increase of >=20% in _unit volume_. Together, these would create an _increase
in revenue_.

Given that at least some costs (car payments) are fixed, we cannot know
whether this 20% reduction in price will reduce driver profit, without knowing
(i) the marginal cost per unit, and (ii) what the % increase in unit volume
is.

For example, if fuel costs (and additional maintenance costs) are 25% of the
price of a ride, then decreasing ride price by 20% whilst increasing # rides
by >=27% would increase _both_ revenue _and_ driver profit.

~~~
ThrustVectoring
Small math quibble: a 20% reduction in per unit price requires a 25% increase
in unit volume. 20% reduction = 0.8 times the price, 25% increase = 1/0.8
times the volume.

For a reducto ad absurdum that I use to help remember this thing: a 100%
decrease in price isn't counterbalanced by a 100% increase in volume.

~~~
rahimnathwani
Oops. Yes, I stated 20% increase earlier in my answer. But I think the final
number (27%) is correct. It's higher than your 25%, because I assumed non-zero
fuel costs. So breaking even on revenue wouldn't be sufficient to break even
on profit.

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kapilkale
$33 / US driver... I'd say Uber came out on top here.

~~~
wavefunction
And _much of_ the monies won't even go to the drivers.

~~~
pyrale
I wonder if this opens ground for drivers to fill a class-action against Uber.

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CamelCaseName
I would like to see where Uber's numbers came from. How did they overestimate
wages by such a huge margin? (48% and 39%)

~~~
RodericDay
They probably faked the numbers to scam people into driving for them and
entrench themselves in the market.

~~~
jaclaz
... or at least if it was anything different they completely failed to
convince the FTC commission ...

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gaius
Pennies for Uber... a $2Bn fine might make them pay attention.

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yeukhon
Uber is burning a lot of money. We are talking about a few billions. As a user
I find Uber and its likes useful because they enable me to travel around the
city on-demand. But drivers aren't making enough and a just a single bad
review can literally ban a driver from driving (lock your account and you'd
have to explain to Uber rere).

Can Uber investors continue to be happy with the rate of money burning? Even
if Uber does go to IPO, Uber can't continue to burn money forever. There's
almost a burst I am selling...

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pyrale
It would be interesting to compel companies to publish exhausting anonymous
data regarding their contractors. Without such datasets, it's hard to assess
reasonably on whether these shemes are used legitimately, or merely to bypass
labour regulation.

