A criminal investigation into the multinational ride sharing company Uber has been launched by the U.S. Department of Justice.
According to Reuters, two sources familiar with the probe said it concerns the use of a software tool the company used to help drivers evade transportation regulators, called “Greyball.” Following a New York Times article that revealed the software’s existence in March, Uber promptly ended its use and maintained the program was created to check ride requests in order to prevent fraud and keep drivers safe.
“We are expressly prohibiting its use to target action by local regulators going forward,” Uber’s chief security officer, Joe Sullivan said. “Given the way our systems are configured, it will take some time to ensure this prohibition is fully enforced.”
According to the New York Times, Greyball allowed Uber to essentially set up a fake version of its app so that it could trick regulators and law enforcement agencies that were attempting to undermine its service. The company has always been a thorn in the side of government.
Uber provides a quality service at an affordable price that the government-cartalized transportation industry just can’t match. As a true free market entity, Uber operates outside of government regulation allowing customers to voluntarily choose from a variety of drivers in their area for their transportation needs.
The company’s smartphone app connects someone who needs a ride with someone willing to provide it. Uber is already in use in more than 200 cities across the United States and more than 80 other countries.
It’s very popular with riders, who generally pay less than they would for a cab with faster service, and drivers, who tend to drive part-time for extra income.
Uber drivers are insured contractors subject to background checks and vehicle inspections. Those aren’t the only steps taken to make sure riders aren’t harmed or scammed however. The Uber app allows riders to rate drivers, data that become accessible to future potential passengers. If a driver is rude or reckless, he’ll get a poor rating and Uber riders won’t get in his car. Meanwhile, drivers can rate passengers who are rude or get sick in the car.
Payments are handled electronically, through the app — no cash — with Uber getting a percentage of the fare. Another advantage of using the company is that because drivers and passengers agree on a price before departing, passengers don’t have to worry about a meter or being long-hauled.
Without a large barrier of entry imposed via government licensing and regulation, every individual with a car is a potential small business owner. The way government is treating Uber drivers and riders exemplify perfectly the relationship between regulation and the poor. Licensing prices poor people out of the market on both the provision end and the consumption end of a service.
Regulations on transportation services are intended to protect consumers, but for the most part succeed only in raising prices and reducing quality of service, according to a report by the Mercatus Center that contends ridesharing services like Uber and Lyft are “revolutionizing taxicab and transportation services,” but have come under fire from “entrenched interest groups… [that] use government to protect their privileges and stifle market innovations” – a process known as rent-seeking.
“The goal of rent-seeking,” the report explains, “is to create higher profits by lobbying politicians to impose costly regulatory burdens, such as licensure, safety prescriptions, and price controls, on their new competitors.”
It is hard for the political left to accept that their good intentions promote the exact opposite of their desired result. For those at the top of their respective industry however, government regulation promotes precisely the desired result: the elimination of competition from the market.
“It doesn’t take a lot of money to become a taxi owner-operator and earn more than $40,000 a year. One needs a car, an insurance policy and ancillary interior equipment to make a car a taxi,” George Mason University economics professor, Walter E. Williams says. “In New York City, to be a taxi owner you’d have to purchase a license – called a medallion – that [now costs around $250,000 a piece]. New York’s Taxi and Limousine Commission restrictions that generate such a license price outlaw taxi ownership by people who don’t have access to [$250,000.]”
By contrast, in Washington, D.C., the annual fee for a license to own a taxi is around just $300. “I’ll let you guess which city has more taxis per capita, cheaper fares and more minority taxi ownership,” Williams says. “There are vested interests who benefit from keeping outsiders out and therefore enrich both companies with large fleets and single taxi owners at the expense of would-be owners and the riding public through higher prices.”
Consequently, the competition provided by companies like Uber and Lyft has cut New York taxi medallion prices dramatically. Costing over $1 million as recently as 2015, a medallion sold for $241,000 in April, the lowest value the licenses have been in the 21st century.
One might think government, which attempts to portray itself as champions of the poor, would be thrilled about a cheap transportation alternative that provides the disadvantaged with job opportunities. The U.S. Department of Justice investigation proves that is not the case however.
According to Reuters, Uber has received a subpoena from a Northern California grand jury seeking documents concerning how the company used and deployed Greyball indicating that a criminal investigation is indeed underway. In response, Uber has reportedly retained a law firm to conduct its own investigation into how the software program was utilized.