In terms of illegally deducting sales tax and black car fund fees from drivers' pay... I genuinely don't understand why a large corporation ever messes up like this in the first place.
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?
Sometimes it is incompetence; someone flags a certain thing as the wrong classification and it comes out of the wrong bucket.
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.
The trouble is that Americans seem to be onboard with not adding taxes, and so that's your slippery slope right there. In Europe regulators are like "If the headline price is €10 but actually nobody pays €10, that headline price is wrong and must be fixed" and they're including taxes in that.
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 ?
Americans also don't know how much their taxes are. Retailers often use taxes to hide extra charges by bundling both into a "taxes and fees" section, which if enumerable always includes more fees than taxes. Uber Eats, GrubHub, etc all do this.
> The trouble is that Americans seem to be onboard with not adding taxes, and so that's your slippery slope right there. In Europe regulators are like "If the headline price is €10 but actually nobody pays €10, that headline price is wrong and must be fixed" and they're including taxes in that.
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.
Gee, if only ride share apps had access to both your starting and ending locations so that they could accurately assess taxes and fees. This is not an intractable problem when your product is a software platform that can look at the location data and do the math for you.
> 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.
Yep, if it's "too complicated" to follow the laws in the areas where you have chosen to do business, then you should not do business in those areas, or you should hire someone smart enough to work it out.
They can and do (airline tickets for example). Most hotel web sites will also give you an "all-in" price, although they retain the dark patterns of displaying the ex-tax rate by default, and slipping in a "resort fee" when you check in.
Airline tickets and hotels are straightforward because everyone will pay the same sales tax.
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.
I’ve never been sympathetic to the American argument that we want people to constantly feel how much they’re paying in taxes, but VAT might be a good point in their favor. VAT is very high (20-25% in many countries) and horrifically regressive. It would be a nonstarter for even people like me, who support raising taxes in the US, because of that.
VAT has other benefits though that would fix a lot of weirdness that traditional sales tax has. Taxing the value added makes a lot more sense than taxing the "sale", IMO. It distributes the tax fairly among all businesses in the supply chain and eliminates double-taxing that can happen when the local mom and pop shop resells soda from Sam's Club.
There is of course no national US sales tax and every state does it differently - some even have no sales tax at all - but generally speaking, it’s already structured to prevent double-taxing situations like the one you’re describing (plus groceries are usually exempt anyway in both cases.)
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.
It certainly matters to the poorer people who could buy more stuff if their tax burden was shifted more fairly. This has concrete effects: VAT has no impact on a wealthy person say, stocking every room in his house with a 80” 4K TV, while it makes a big difference to the poor person who wants just one TV. The effect compounds over time, obviously, and for more important purchases as well.
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.
But somehow this isn't a problem in the EU. I can order from Germany? Spain? Italy? Yet the price is what is shown 'on the sticker'. Of course there are delivery charges, which seem to vary quite a lot (though often free for big ticket items).
In the US the sales tax rate can vary by city, county, and state. Aside from shipping charges, the shipping address is needed to know which governments need to be paid how much.
I suspect it might be how taxes are organised - in the EU we have VAT, so paid to the government where the good/service was created, but in the US it is sales tax, so paid to the government where the good/service was purchased. That's my guess anyway.
Although VAT ultimately flows to where the value was created the consumers are paying tax when they purchase the final product. If I buy a loaf of bread, a sausage, a "home made" cake and a bottle of Coke at the Polish store, the tax for me, the consumer, is local tax.
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.
If they do something illegal and don't get caught they win.
If they get caught, but the fine is less than they made breaking the law, they win.
If they have to pay back the same amount of money, but can pay it years later, they win.
If the only punishment for bank robbery were paying the bank back if you got caught, we'd probably see a lot more bank robberies.
The Pinto Memo is a great exposition of this... $140M cost to retrofit a modification to the fuel system against a $50M "benefit to society" (ie. legal costs) saving 180 deaths and 180 serious injuries per annum.
Same for US hospitals and health insurance. They constantly make “mistakes” in their favor and the worst thing that can happen is that they have to pay what they are required to pay anyways.
"obviously it's going to eventually turn into a legal suit and they're going to lose."
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?
Barring evidence to the contrary (internal emails/discussion), I definitely would assume mistake over malice.
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.
at least one cloud provider service over (and sometimes under) charged customers for several years on a particular product due to a misinterpretation of some complex rules. it happens at all orders of magnitude.
To these companies, the law is just another cost of doing business to be accounted for and amortized whenever possible. If they can feign success in the early years, they get a bunch of investor dollars that they can then use to pay off or bribe their way out of legal situations later, when they're much bigger.
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.
The way it would usually go is that one or more higher-ups whose job it was to optimize pricing decided to get "creative" with the law. People who eventually noticed that things seemed shady/irregular probably spoke up but their concerns were dismissed (with the same reasoning you mention - "the lawyers probably looked at all of this - of course it must be perfectly legal!") and so they stopped wasting their breath.
(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.
The worse thing of all is that these companies dont care for its drivers. On what kind of earth do we live. Hopefully these kind of companies will be seen as pure evil in history books in 100 years from now.
Isn’t wage theft the most common and largest form of theft? The reputation of business in the US precedes itself
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.
This is a wage theft. From the sheer scale of wage theft going on in this country, yes, they do think they will get away with it. And the punishment if they don't is inconsequential.
Fraud/theft only happens to the common man. When a company does it it's either good business acumen or (if they got caught) a "technical glitch affecting a small percentage of users".
It's a loan to the Uber at t=x, issued by Uber at t=y+x. The interest on the loan is legal fees and penalties. When the value of the money at t=x is greater than the predicted cost of interest, and you aren't bound by ethical scruples, you take the cash.
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.
The terms of the settlement[0-pdf] are kind of interesting.
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.
The quotation marks in the headline make it sound like uber lost money to fraudulent drivers, rather than the actual story, the drivers were the ones ripped off.
Quotation marks in headlines normally mean they're quoting a source. The disengenuous "scare quotes" are a recent degradation in journalistic integrity, which ars isn't doing here.
Always love how any thread on Uber or Lyft inevitably contains a debate about Uber/Lyft versus taxicabs and how someone’s have had bad experiences and vow never to use one or the other.
Also inevitably someone chiming in about how cars in general are evil incarnate and everyone must convert to public transportation and bicycles.
I had a car, that was in fact evil incarnate. It ate four transmissions, three engines, and managed to destroy six CV joints before the manufacturer put a lemon wood stake through it's black, little, mechanical heart. It had a sixth sense. It knew exactly where to break down. It would bide it's time until you were at least eight miles from civilization, and had no cell phone coverage. Then it would seize up, with the engine frozen in gear, so you were left with the choice, stay with the car and wait for someone to help, or leave it, guaranteeing you'd have to pay for a tow and impound.
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.
It's only a matter of time before Uber and Lyft cease to exist. Lyft lost what, $1.5 billion last year? The trend isn't towards profitability, and they have had plenty of years to work out the kinks and figure out structural issues.
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.
My guess is that they’re profitable in some regions and losers in others. They don’t need to disappear everywhere if they run out of capital to work with.
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 suspect you're right, but there lies the bitter disappointment with these companies.
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!
my question is: why do we need taxi companies that make money? why can we not have non-profit or publicly-owned taxi apps? I'm not saying make taxis free, just provide the infrastructure without the need to extract any money from workers, or gouge prices for consumers. why do we just accept feudalism with extra steps? why are the bbc and npr the only publicly-owned entities on the web with any presence at all?
I do think you're onto something - though I don't think we actually need non-profit or publicly-owned taxi apps.
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.
what happens in 5 years time when Curb has loss-led to the top? the exact problem again, only possibly worse. maybe this time Curb learns the lesson of Uber and finds a way to anti-compete away the possibility of another "Curb"
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
> if you were to pay for real cost of overhead and to pay the driver
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?
Their success is largely due to the fact that American cities are built so poorly. Emphasizing suburban sprawl and associated highway, parking, and street infrastructure over safe and walkable/bikable cities.
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.
I almost never use Uber or Lyft rideshare (sometimes on business travel if no reasonable public transport, but since I'm not paying I'm less cost sensitive there), but Lyft runs the bikesharing system in my city, so hopefully that can be salvaged, since I use that lot...
Terrible take. Rideshare apps aren’t going anywhere, because they are strictly better than regular taxis, and demand for taxis isn’t going anywhere.
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.
> Rideshare apps aren’t going anywhere, because they are strictly better than regular taxis, and demand for taxis isn’t going anywhere.
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.
Well some airports prohibit rideshare all together (just like some cities or countries do), so trying to use it in places where the local authorities have intentionally made it difficult will probably always suck.
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%.
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.
> 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).
Depends on the market. I have heard from someone who I trust deeply and knows the financials well (worked there) that Uber is profitable in certain markets.
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
Of course there is, once the investor subsidies go away they won’t have to compete on price so much, and prices will go up.
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.
Traditional services have gotten way better — in that, they got an app. Teo went from an obscure local taxi service to a great local taxi service, and now undercuts uber because they don’t have an insane advertising burn to subsidize.
Part of the value prop of the big rideshare apps is that you can use them basically anywhere in the world (you probably need to have 3 or 4 of them to get most of the world covered). Nobody wants to land at the airport in Toronto, figure out what the local taxi app is, download it and get yourself onboarded, and then order a cab. People just want to step out of the airport and order an Uber.
With all the fees that Uber tacks onto Uber Eats, I'm absolutely baffled that they could possibly be losing money on that service. That's just... insane.
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?
Here the UK government addressed this issue by marrying worst elements of employment and self-employment. With the revised IR35 rules, a company can bring someone on board as a "deemed employee". This means they have to pay the individual through a fee payer, that deducts employee and employer taxes. However, even though these workers are taxed like employees, they are officially self-employed and therefore do not receive the usual employment rights and benefits. So things like minimum wage don't apply.
When your business (model) is built around skirting labor laws, you either become big and powerful enough to change those laws to your own advantage, or you pay the piper when that time comes around, and pivot/change your business model...or simply cease to exist.
Labor laws say you can't declare the drivers to be corporate entities. Presumably because employers would use that as a way to circumvent employment law.
Uber explicitly lets you drive under an EIN/LLC. If you want to IC it you can as well.
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.
I am wondering how much of silicon valley “success” is just theft and lies? Yesterday’s unicorns, today’s ai, all seem to gravitate around shady practices.
It's not cheating anyone when both parties knowingly agree to the terms. This is just heavy handed regulation that destroys options for workers and consumers.
Both parties did not knowingly agree to the terms. From the article, quoting the office of NY Attorney General Letitia James:
> 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.
But in this case, Uber/Lyft were breaking workers' unwaivable legal protections.
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.
The Uber driver is basically a business owner fulfilling contracts to customers brokered through an online clearinghouse. They're hyper capitalists exploiting regulatory advantages over taxi drivers then sad face at the downsides to that.
> The Uber driver is basically a business owner fulfilling contracts to customers brokered through an online clearinghouse. They're hyper capitalists exploiting regulatory advantages over taxi drivers then sad face at the downsides to that.
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.
I would argue Lyft/Uber are merely shitty brokers. You can definitely contract with a broker to use take it or leave it price fixing, it's just not a quality I would particularly desire.
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?