Thousands of Current Uber, Lyft Drivers Fail New Background Checks

Harry here.  Today, senior RSG contributor John Ince takes a look at Massachusetts’ new stricter background check laws, a new round of fundraising for Lyft and more.

In this round up, we take a look at Massachusetts' new stricter background checks, a new round of fundraising for Lyft and more.

Thousands of current Uber, Lyft drivers fail new background checks [Boston Globe]

Sum and Substance: More than 8,000 drivers for ride-hailing companies including Uber and Lyft have been denied licenses to operate in Massachusetts under a new state background check process. 

The most common reason for rejections were related to driver’s license status: many had suspended licenses or had not been driving long enough to qualify for the ride-hailing services. But statistics released by the Massachusetts Department of Public Utilities revealed that hundreds of drivers were rejected for having serious crimes on their record, including violent or sexual offenses, and others for driving-related offenses, such as drunk driving or reckless driving.

The state said it rejected 51 applications coming from sex offenders. The new Massachusetts law regulating ride-hailing companies required drivers to undergo a two-part background check—one from the companies, and a follow-on check by the state government. Previously, the drivers were only checked by the companies. The state checks began in January, and the names of applicants were due Monday. On Wednesday, the Baker administration announced the outcome of its review, saying 8,206 drivers out of 70,789 who submitted applications were rejected. …

Uber reacted angrily to the state’s results, saying the unlimited reach of the government’s background checks is unfair to drivers who are trying to overcome past troubles. “Thousands of people in Massachusetts have lost access to economic opportunities as a result of a screening that includes an unfair and unjust indefinite lookback period. We have an opportunity to repair the current system in the rules process so that people who deserve to work are not denied the opportunity.” 

Meanwhile, Governor Charlie Baker said in a statement that, “Massachusetts has set a national standard for driver safety and we look forward to future partnerships with Uber, Lyft and others to grow this innovative industry and support more jobs and economic opportunities for all.”

My Take:  For a company whose entire business model is predicated on the perception of safety – especially safety for passengers – I can’t see how CEO Travis Kalanick can seriously make the argument that the more rigorous background checks required by the new Massachusetts law regulating ride-hailing companies aren’t justified.

TK’s argument is that these background checks catch a lot of people they shouldn’t catch. TK says the more rigorous tests unfairly penalize those with criminal records, preventing them from making an honest living.  So TK is a social crusader? Oh, but wait, it also just happens to be good for business if they can get more drivers on the road. But consider who got denied here:  Multiple serious driving offenses – 1058 … Serious violent crimes – 958 … Less serious violent crimes – 601 … Inactive license – 562 … Sex, abuse, and exploitation – 352 … Multiple violations of traffic laws – 347 … Felony fraud – 342 … Felony convictions – 334

These statistics drive the nail in the coffin of TK’s line of reasoning.  Are these the kind of people any reputable and responsible company wants being the face of their brand – transporting complete strangers in the intimacy of their car?  I don’t think so.

Meanwhile, taxi operators and other anti-ridesharing forces are seizing upon these figures to raise the fear flag. According to Fox News,  “It’s absolutely terrifying because if you multiply these numbers for Uber and Lyft on a national scale, you see why there are so many sex offenses from these drivers,” Dave Sutton, a spokesperson for the for-hire vehicle safety group Who’s Driving You, told Fox News. Who’s Driving You is an initiative of the Taxicab, Limousine & Paratransit Association. “These company checks protect violent offenders and put people at risk,” Sutton said. 

The results of the Massachusetts’ checks have prompted other states and municipalities to consider more stringent measures for evaluating drivers working for ride-hailing services. In Austin, Texas, city officials are pointing to the Massachusetts results as a reason why a proposed law in the Lone Star State to require only company background checks and prevent local governments from adding stricter measures should not pass.

Lyft Gets $500 Million in New Funding as Its Rival Uber Wobbles [New York Times]

Sum and Substance: For years, Lyft has trailed its larger rival Uber in the battle to conquer the ride-hailing market. More recently, Lyft has gotten a boost. The smaller ride-hailing company has secured up to $500 million in a new round of funding that values Lyft at $6.9 billion before the addition of new capital, according to two people briefed on the discussions, who asked to remain anonymous because the details were confidential. The privately held company may raise an additional $100 million, these people said.

The financing gave Lyft a $2.4 billion increase in value since the company last raised money in 2016. It was not immediately clear which investors were participating in the new financing. Lyft’s previous investors included the venture capital firm Andreessen Horowitz and Chinese e-commerce company Alibaba. A Lyft spokesman declined to comment on the financing, which was earlier reported by the Financial Times.

Lyft is being bolstered by the woes at Uber, which has been dealing with scandals involving the company’s workplace culture and aggressive leadership team. A grass-roots movement to boycott Uber has sprung up around the country, with the hashtag #deleteuber spreading quickly across Twitter related to the company’s shortcomings. Lyft has been trying to capitalize on the stumbles of its opponent. The company has shown investors a recent surge in ride requests, buoyed by Uber’s negative publicity. It has also presented itself as a kinder alternative to Uber.

In an interview with Time last month, Lyft’s president, John Zimmer, said of Uber’s problems: “We’re woke.” He added that Lyft, in contrast to Uber, was “a better boyfriend.” Uber has rejected assertions that its business has been materially affected by its troubles. The company has said its growth over the first 10 weeks of 2017 was larger than the same period in 2016, and trips in less mature regions like Latin America were up 600 percent from a year earlier.

My Take:  The gist of this article is right, but the numbers are wrong.  Lyft actually raised a $600m round at a valuation of $7.5 billion.  Both numbers are a significant uptick from their last round.

Clearly Lyft is gaining ground in its battle with Uber. On the face, Lyft’s $7.5 billion valuation puts it at roughly one tenth the size of Uber’s $69 billion valuation. But Uber’s valuation came before Uber’s run of bad PR began.  They would be hard pressed to find investors today who will put in money at a $69 billion valuation.

So Uber and Lyft are moving in different directions financially. Lyft has the wind at its back, while Uber is facing strong headwinds. But in an industry like this, you never quite know when the winds might shift. That’s why Lyft was smart to lock up this round now. With that kind of capital in the bank and with a much lower burn rate than Uber, Lyft now has the staying power to give Uber a run for its money.

Safr, a female-friendly Uber alternative, launches with mission to empower women []

Sum and Substance: Positioning itself as a female-friendly alternative to Uber, Safr, a new Boston ride-hailing service that launched last month, faces an uphill climb to take market share from an industry leader. But with Uber’s seemingly unending stream of bad news this year, and a new report revealing that thousands of Uber and Lyft drivers in Massachusetts have failed the state’s new background checks, time seems ripe for a safety-conscious ridesharing service. 

“There is obviously a need for another option for women in ridesharing,” says Joanna Humphrey Flynn, a PR and marketing manager for Safr. “The current environment doesn’t really allow women to fully participate. Safety concerns create roadblocks, and make it harder for women to ride and drive at night.”

Safr seeks to stand apart by offering a safer ride via a number of safety features and better driver training and recruitment processes. Riders can choose which gender they feel most comfortable riding with via the app—drivers have the same same gender preference option—and can also take advantage of a number of built-in safety features, including a feature that can call 911, send a text to a pre-assigned contact, or dial Safr’s 24-hour command center. A color-matching system, which sends riders and drivers a color-coded message during pickups, also helps ensure passengers get into the correct vehicle.

Safr says that drivers for the service, which are currently all women, go through a more extensive recruitment, vetting, and training process than competitors. New drivers have a “deeper on-boarding process,” including an extensive background check, an in-person meeting, and an hour-long driving session with Safr staff. Recruits are also assigned a more experienced mentor and undergo safety training before hitting the road.

Safr’s more secure ride comes at a slight premium. According to Humphrey Flynn, an average ride costs about 10 percent more than UberX (that comes out to about $1 more for an average $12 fare). The service says that it also pays its workforce more. The first 1,000 drivers who sign up will have a higher guaranteed commission rate, taking home 90 percent of each fare. After that, additional drivers will take 80 to 85 percent of each ride. 

My Take:  Uber’s stumbles are someone else’s gain and it appears that Safr definitely plans to play up the “safer” aspect of its service. Fear is a powerful motivator in today’s world, and Safr appears to be pushing all the right buttons in its rollout – doing the things that Uber could have done, but chose not to do. Uber could have given drivers and passengers the option of choosing a gender preference.

Safr stepped into the void. Although Safr has a unique selling point with women, they’ve still got a huge hill to climb. SheRides and See Jane Go have also entered this space, and the latter appears to making a go of it in Orange County California. Stay tuned, ridesharing is still in its infancy.

Italy issues a nationwide Uber ban [The Verge]

Sum and Substance: Uber’s latest regulatory roadblock happens to be the entire country of Italy. In a court ruling issued today, all of Uber’s services were banned in the European country after a Rome judge ruled in favor of Italy’s major taxi associations that the ride-hailing service amounted to unfair competition, according to a report from Reuters. That means Uber’s Black, Lux, Suv, X, XL, Select, and Van services are all blocked from operating in Italy, and Uber cannot advertise at all in the country. 

“We’re shocked,” Uber’s lawyers said in a statement obtained by Italian newspaper Corriere della Sera. “We will appeal this ruling that is based on a 25-year-old law. Now the government can’t waste more time and needs to decide whether it wants to remain anchored to the past, protecting privileged profits, or whether it wants to allow Italian to benefit from new technologies.” 

The lawyers for Italy’s top taxi associations were a bit more celebratory. “This is the fourth ruling by an Italian judge that ascertains Uber’s unfair competition, the latest battle in a legal war that began in 2015 to stop the most striking form of unfair competition ever registered on the Italian local public transportation market,” the lawyers told Corriere della Sera.

Uber plans to appeal the ruling. It has 10 days to do either that or cease operating its service in Italy. If it does neither, it faces fines up to $10,600 for every day it continues operating illegally. The news ends another rather rough week for Uber, as the company continues sustaining bad press over its treatment of drivers and female employees and remains stuck in a high-profile legal battle over trade secret theft with Alphabet’s Waymo division.

My Take:  In Italy, the battle lines have been drawn and Uber is losing. Just like here in the United States, it’s Uber vs Regulators and Uber vs Taxis. But in Italy, it seems that Uber’s brashness has finally caught up with the company as regulators figure things out. Despite the ruling, Uber plans to appeal.

Readers, what did you think of this week’s round up? Do you think stronger background checks are needed or do you agree with Travis that these types of background checks unfairly disadvantage certain people?

-John @ RSG