Photo Credit: Uber
Ride-hailing apps are disrupting the taxi business, giving consumers more options and drivers another source of income. But at the same time, the rapid growth of these services has triggered some questionable business practices and raised new questions over how best to regulate the sharing economy.
On-demand ride service provider Uber saw another round of bad press this week when its competitor Lyft released data showing Uber was using heavy-handed techniques to stall other ride-sharing services.
According to Lyft, Uber employees have made more than 5,000 ride requests since last October, all of which were canceled, wasting the driver’s time and keeping them from serving customers.
There have been other similar incidents at Uber. Earlier this year, Gett, a New York City town car service, received more than 100 reservations that were abruptly canceled. “It turned out when we investigated the online profiles on LinkedIn and Twitter, they were Uber employees in New York,” the company's CEO told CNN Money. “To me, it’s very unethical.”
In the New York City case from earlier this year, Uber admitted that its sales tactics to lure new drivers were “too aggressive.” Uber has accused Lyft of employing the same practice of making bogus reservations, as part of a strategy to compel Uber to acquire Lyft, according to a report.
These ride-sharing services are creating tensions with regulators as well. Questions remain over liability for drivers who work for these vehicle-for-hire and ride-sharing companies. In California, there’s an effort to introduce new rules regarding insurance, background checks and drug testing as the industry grows.
The companies that developed these services have largely resisted being regulated the same way taxi companies are, arguing that they are "technology providers" that enable more people to offer taxi-like services.
One bill would require drug and alcohol testing and deeper background checks for crimes, such as credit card fraud. Sunil Paul, the CEO of RideShare, called it "a burdensome approach that is backed by the taxicab lobby, really, to try and shut us down. If it passes, it is a disaster -- it would literally spell the end of the ride-share industry."
The problem for both the industry and consumers is that regulators are having trouble keeping up with the issues raised by these services. This week, Berlin, Germany banned Uber from the city, citing passenger safety.
Thorny issues over rules and regulations extend to other sharing economy services, such as Airbnb, which allows people to rent out their homes. In response, the National League of Cities yesterday announced a set of guidelines and an advisory group called the Sharing Economy Advisory Network to help cities capture the economic benefits of the sharing economy while enacting rules to ensure safety and health of citizens.
The appropriate level of regulation and classification of sharing economy services will take time to sort out. That’s a problem for the service providers and their investors rushing to capture the market. Uber is already valued at more than $3 billion.
For now, these companies may continue to battle each other as much as they're battling the status quo.