Uber: The Anarchy

Uber is no stranger to controversy. Even given this, the files make for disturbing reading as they expose rule-breaking, lying about the data and preventing police and regulators from accessing it, aggressive lobbying using influential policy makers to change rules to suit it, corruption of academics and politicians, and exposing drivers to violence. It is a template that has been used before. The shock of the files is the substantiation of what was suspected and that it went beyond what was expected.

This exposé raises the issue of what is legal and ethical in the desire to expand business using all means. The gains to establishing essentially a monopoly through rapid expansion using an innovative business model were large. Uber changed the nature of the taxi-cab industry in the world and became a pioneer of the gig-economy model where workers are considered self-employed so not eligible for worker benefits.

Is Uber the only transnational company that has done this? The economist Constantine V. Vaitsos had studied the working of such companies in his remarkable book "Intercountry income distributions and the transnational enterprises," (1974). He called these companies transnational, rather than multi-national, as ownership and control is concentrated in one country rather than distributed across countries. The key purpose of these companies, according to Vaitsos, is a monopolistic advantage either through R&D, managerial skills, size of advertising and marketing, or a monopoly of resources. This advantage could be temporary before other competitors emerge so the aim is to maximise the profit that can be extracted and, as far as possible, destroy the competition. How the gains will be distributed between the company and host country will depend on their relative bargaining power.

While Vaitsos was writing about pharmaceutical, textile and other industries in Latin America, the framework is useful to understand Uber’s activities. Uber has sought to compromise the bargaining power of the host countries by influencing policymakers. It is not the only one. Facebook’s parent company, Meta, has elevated the ex-Deputy Prime Minister of UK, Nicholas Clegg to Head of Global Affairs. As its founder, Mark Zuckerberg says that Clegg is “a senior leader at the level of myself … who can lead and represent us for all of our policy issues globally.” Access to ministers, civil servants, and other policymakers is important as shown not only by the revolving door of UK cabinet ministers, and series of scandals in the UK, but also claims of pressure in other countries.

As there will always be attempts by companies such as Uber (or for that matter the big tech companies) to tilt the playing field to their advantage, there have also been repeated calls and attempts to regulate them effectively. The two big players in the West who can do this are the USA and the EU. The EU has taken steps in this direction. However, support for regulation in the USA has declined. There is also a tension in the EU as Ireland has lagged behind in enforcing regulations.

By leaving the EU through Brexit, the UK has signalled its own regulatory regime. It seems there is currently no effective regulation in place since the recent regulatory changes are just replicating the lost framework without any power to enforce them. The Uber files are especially worrying in this context as they show its power to influence policy through connections with both the Conservative and the Labour party grandees. The continuing lobbying scandals in UK demonstrate the power of money to influence policy. The consultative document Reforming the Framework for Better Regulation has generated controversy. The Uber files have brought out into the open the subversive power of large corporations and the need to carefully re-consider an effective framework for the future.