On Tuesday, The Verge reported that Uber is sending “hired brand ambassadors” undercover to recruit drivers from its biggest rivals in the ridesharing space, especially Lyft.
A “hired brand ambassador” seems to be a trumped-up way of saying “contracted employees.” So, in other words, Uber is reportedly telling contracted employees to take rides with Lyft, and during those rides, the Uber employees are trying to poach Lyft drivers for Uber.
Uber’s CEO Travis Kalanick confirmed that documents used in The Verge’s report were real, tweeting the following:
Uber’s campaign, called Operation Slog, is an aggressive business manoeuvre. But is it illegal? Probably not, according to a law professor we spoke with.
Since Uber’s contractors are paying Lyft drivers for their service, it would be difficult to prove this poaching technique significantly damages Lyft, according to Mark R. Patterson, a professor of law at Fordham University.
“They’re not misrepresenting what they’re doing,” Patterson told us. “They [Uber contractors] are hiring them [Lyft drivers] for a trip, and even if it’s a shorter trip he [the Lyft driver] still agrees to accept it. Otherwise, it’s not clear that there’s a misrepresentation or harm to the driver.”
Under federal antitrust law, it’s illegal to engage in conduct that serves no other purpose than to exclude competition. Indeed, Uber’s practices could could hurt Lyft’s “business with their legitimate customers,” according to Patterson.
Earlier this month, CNNMoney reported Uber had allegedly instructed 177 of its employees to order Lyft rides and then cancel them before the car arrived. CNNMoney’s report was partially based on Lyft’s claims that Uber employees have ordered and cancelled more than 5,000 rides since last October.
If this is true, this would significantly cut into Lyft’s business, since fewer Lyft drivers would be available to pick up legitimate customers. Moreover, Lyft drivers would be consuming resources like fuel without receiving payment.
After CNNMoney published that report, Uber said these claims were “baseless and simply untrue,” adding that Lyft employees had carried out a similar strategy by calling and then cancelling nearly 13,000 Uber rides.
In a blog post explaining Operation Slog, Uber also writes: “We never use marketing tactics that prevent a driver from making their living — and that includes never intentionally cancelling rides.”
At the same time, however, another Uber competitor claims Uber employees have intentionally ordered and cancelled rides. GetTaxi, a ridesharing service available in New York, London, Moscow, and Tel Aviv among other cities, told Business Insider that Uber employees had called and cancelled rides from the company during a two-week period in January and February of this year.
The truth behind the situation is unclear, but this alleged “cancelling” practice, according to Patterson, could be considered exclusionary conduct without a legitimate cause.
Antitrust lawyer David Balto shared a similar take on the situation in an interview with National Journal, saying the practice of trying to poach Lyft’s drivers during a trip probably wouldn’t merit an investigation from the Federal Trade Commission. But some of Uber’s other alleged tactics, such as ordering and cancelling rides from a competitor, could raise antitrust concerns, Balto said.
However, the alleged cancellation practice still wouldn’t be considered illegal from an antitrust standpoint unless Uber (or Lyft, for that matter) has a large enough share in the market to be considered a monopoly, Patterson told us.
This would depend on how the market is defined — i.e. whether Uber is considered to be competing with other on-demand app-based car services such as Lyft, GetTaxi, and Sidecar, or whether standard yellow taxis are included.
“If taxis are included, then Uber probably wouldn’t have a large share,” Patterson said.
Therefore, Uber’s tactics would not be illegal.
The question, according to Patterson, isn’t whether or not Uber’s tactics are hurting Lyft.
“It might be,” he said. “But it’s whether [Uber] is injuring [Lyft] enough for them to bring it up in a legal way.”
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