Headed for the junk heap?

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Uber Is Lobbying for All of Us

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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Uber has become a fearsome, relentless lobbying machine. That much is clear from Karen Weise’s remarkable account in the current Bloomberg Businessweek of how the company overcame taxi-industry opposition and pesky local laws to bring its on-demand drivers to Portland, Oregon.

Similar campaigns are in the works all over the country, and the world. From Weise’s article:

Over the past year, Uber built one of the largest and most successful lobbying forces in the country, with a presence in almost every statehouse. It has 250 lobbyists and 29 lobbying firms registered in capitols around the nation, at least a third more than Wal-Mart Stores. That doesn’t count municipal lobbyists. In Portland, the 28th-largest city in the U.S., 10 people would ultimately register to lobby on Uber’s behalf. They’d become a constant force in City Hall. City officials say they’d never seen anything on this scale.

The natural first reaction to this is to recoil. This big, aggressive company is using the almost $6 billion it has raised from venture capitalists and other investors to subvert the democratic process. It also, as in Portland, often proceeds by simply breaking the law and daring local authorities to do something. It feels icky.

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Except … local taxi and car-service regulation has long been a classic case of narrow interests prevailing over the public interest. In most American cities, taxis are used chiefly by out-of-towners and people who can’t afford cars. New York City is the great exception -- lots of affluent and politically influential people take taxis here -- and thus had relatively consumer-friendly regulation and a relatively functional taxi system (at least in Manhattan) before Uber came along. Elsewhere, the users of taxis and other car services had very little clout and the owners could, with only modest effort, shape rules that protected them from competition and shortchanged consumers.

Then Uber came along. Its interest in getting its drivers on the road in more and more cities largely coincides with the consumer interest in having more convenient ways of getting around. It’s not a perfect match -- consumers without smartphones are excluded from its beneficence, for example. And it’s not as if the incumbents trying to fend off Uber’s inroads are all fat-cats; a lot of them are just taxi drivers trying to make a living. Still, Uber and its customers together represent something a lot closer to the public interest than what the taxi industry and lawmakers were offering before it came along.

Those customers have actually been essential to Uber’s lobbying success. From an article earlier this year by Buzzfeed’s Johana Bhuiyan:

In January 2014, the Illinois House and Senate went after Uber with a series of new rules. They banned its drivers from airports, and capped how many hours they could sit behind the wheel each day. Yet instead of backing out of the market, Uber mobilized close to 90,000 customers to petition the governor to veto the rules. He did. And then Uber went for the throat, releasing contact information for legislators who otherwise might have tried to override the veto. When a legislator did file a motion to do so, the Illinois legislature had been sufficiently intimidated by outraged Uber customers that the motion was promptly denied.

It would be one thing if this were all a zero-sum game, in which Uber cars simply displaced existing taxis. But it seems like -- I don’t know of a lot of hard evidence that one can point to just yet -- Uber and other app-centric, easy-to-use car services are actually increasing the size of the available market, especially in cities such as San Francisco and Los Angeles where taxi service wasn’t very good to begin with. In San Francisco, where Uber got its start and now claims to be bringing in more than three times as much revenue as the local taxi industry, the company contends that it is changing life in the city to a point where “car ownership will become more of a luxury than an economic necessity.” That could well be true, and it would be great for San Franciscans.

There will come a day -- not all that long from now, one has to think -- when Uber will be the entrenched incumbent rather than the upstart changing how transportation works. At that point, its lobbyists will presumably devote their days to preserving privileges and fending off competitors. That won’t be great, and it’s worth looking now for ways to draft laws that encourage continued competition. The debate over whether Uber drivers are employees or independent contractors may actually be a help here. To be reliably classified as independent contractors, Uber drivers need lots of freedom to drive for other services, and that means rival startups would have fewer barriers to entry.

For now, though, it’s worth standing back and enjoying the moment. The biggest, scariest lobbying machine in the nation is hard at work lobbying to make most Americans’ lives a little bit better. How often is that going to happen?

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor on this story:
Paula Dwyer at pdwyer11@bloomberg.net