Uber car service in New York City
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The Latest Victim of Uber's Disruption May Be Itself

Updated: Mar 09, 2017 2:02 PM ET

To say that Uber, the brash ride-hailing upstart, has had a tumultuous 2017 would be an understatement. The still-young year has been wreckage.

The company’s latest misstep: a dodgy program, dubbed Greyball, with which Uber actively prevented officials in cities that resisted its operation from hailing rides—one in a string of recent controversies that has called into question Uber’s aggressive business practices. Since its founding in 2009, Uber has led a vast economic and regulatory disruption in the U.S. and abroad, unlocking the value of people’s untapped automotive resources while making more than a few enemies along the way. But the present spate of problems has the world’s highest valued private company—it’s appraised at nearly $70 billion—rethinking its combative approach.

“When you have a culture that is as aggressive in all regards as Uber’s is, you’re going to get people being mistreated and the misuse of company assets,” says influential Silicon Valley investor Mitch Kapor, an early Uber backer who, along with his wife and business partner, Freada Kapor Klein, published an open letter last month lamenting Uber’s “destructive” workplace environment.

Already this year, Uber has weathered a boycott during which a reported 200,000 people dropped its service, many of whom accused the company of trying to profit from a taxi strike in New York City inspired by President Trump’s first immigration order. (CEO Travis Kalanick resigned from a council advising the President after an outcry.) Waymo, a unit of Google parent Alphabet, slapped the firm with a lawsuit for allegedly stealing self-driving car technology. (Uber called the claim “baseless.”) A former engineer blasted the company for fostering a culture of entrenched sexism. (Uber assigned ex–U.S. Attorney General Eric Holder and board member Arianna Huffington to investigate.) And late last month, footage leaked of Kalanick hurling profanities at an Uber driver from the backseat of a car. (He apologized.)

As if all those scandals weren’t enough, then Greyball surfaced.

Here’s how it worked: whenever Uber entered a new market, the firm identified and barred local regulators from hailing rides by tracking their behavior on the Uber app, tracing credit-card numbers back to police credit bureaus, serving up fake versions of the app that featured “ghost cars,” and adding restrictive “geofences” near municipal offices, according to the New York Times, which first reported the program.

On March 8, Uber’s chief security officer Joe Sullivan said Greyball will no longer be used to thwart law enforcement and other officials. “We are expressly prohibiting its use to target action by local regulators going forward,” Sullivan wrote in a statement, noting that the program had more benign uses, such as in software testing and marketing promotions. “Given the way our systems are configured, it will take some time to ensure this prohibition is fully enforced,” he said.

For critics though, the damage had been done. Greyball confirmed their worst fears about Uber: an unregulated livery business excluding certain people, or classes of people, based on its own prerogatives. (Unlike traditional cabs, Uber has not been bound by “common carrier” laws, which guarantee service to all comers.) Christian Sandvig, an Internet scholar at the University of Michigan, said he was amazed, for instance, at how much Greyballing reminded him of “redlining,” a discriminatory technique once employed by banks to deny loans to certain segments of the population, especially minorities. (Federal regulation has since banned the practice.)

“That the very technologies this company uses to serve its customer base were being used to evade regulations that sought to protect the public is highly disturbing,” said Michael Cox, a spokesman for the mayor’s office of Portland, Ore., one of the cities whose investigators were Greyballed by Uber. Asked whether the city would pursue action against the firm, Cox said its government was “still in the information gathering and fact-finding phase,” and was speaking with mayoral offices in other cities, including Los Angeles, Washington D.C., and Richmond, Virginia.

At a minimum, Greyball makes apparent the lack of oversight governing disruptive new firms like Uber. In an upcoming research paper, Alex Rosenblat, a researcher at the Data & Society Research Institute in New York City who first uncovered evidence of Uber’s phantom cars during the course of her research two years ago, and Ryan Calo, an assistant professor at the University of Washington School of Law, argue that deceptions like Greyball indicate a bigger problem: middlemen like Uber, Airbnb, Lyft, and others have a remarkable level of control over every aspect of their marketplaces and user experiences. That’s why Rosenblat and Calo have chosen to paint the so-called sharing economy with a less rosy name: the “taking economy,” as they’ve titled their paper.

Greyball is “part of much longer pattern of manipulating or fudging variables they control,” Rosenblat says, offering examples, such as Uber’s classification of drivers as independent contractors rather than employees, of its setting unequal “surge” prices for different customers, and of its history of disputing ride-cancellation fees that might benefit drivers.

In Rosenblat and Calo’s view, government agencies like the Federal Trade Commission need to more actively step up and investigate possible abuses by peer-to-peer platform operators. Earlier this year, Uber agreed to pay $20 million to the agency, which charged that the company’s advertising had misled recruits about how much income they could expect to earn as drivers. Still, they would prefer to see the FTC dig deeper, prying into their digital back-ends rather than relying on publicly posted documentation. “So much misleading and unfairness can happen away from view, designed into system,” Calo says, comparing Greyball to the emissions-cheating software that got Volkswagen into hot water last year.

However disturbing, several legal scholars TIME consulted were hesitant to judge Greyball’s legality, saying it occupies something of a, well, grey area. Even if the program doesn’t violate the law, “that doesn’t mean it isn’t troubling,” says Elizabeth Joh, a law professor at University of California Davis. “It’s a deliberate attempt to thwart—not just evade—law enforcement,” she says, comparing it to the license plate-obscuring sprays some people use to escape surveillance.

Uber's image problem, however, is not open to debate, and the company faces a crucial moment to clean up its act. After Greyball came to light, Kalanick posted a job notice on the company’s website. He said his team intended to hire a chief operating officer, “a peer who can partner with me to write the next chapter in our journey.” If the past is any indication, that journey will be a bumpy one.

Correction: An earlier version of this article misstated the publication date of researcher Alex Rosenblat's paper revealing Uber's phantom cabs. It was July 2015, not 2016.

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