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13 min read

    13 min read

    Harry here.  My contact form was broken this week so if you sent me a message through the contact form and never heard back, please e-mail me again!

    A couple huge stories broke this week and we’ve got some good analysis as usual from senior RSG contributor John Ince.  Not a huge surprise that the $100 million settlement was rejected since Judge Chen has made his feelings about Uber and their business model pretty clear from the onset of the trial (hint: he doesn’t like it one bit).  But it will be interesting to see how this all plays out.

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    Lots to talk about on this week's round up! The Uber lawsuit, are passengers more aggressive than drivers, and self-driving cars all in the news this week -

    Uber’s $100 Million Driver Pay Settlement Rejected by Judge [Bloomberg]

    Sum and Substance: Uber Technologies Inc. may come out ahead by failing to win court approval of a $100 million settlement with drivers. Even before a San Francisco federal judge rejected the deal on Thursday, the drivers’ lawyer said the ride-hailing giant may have the upper hand to walk away from further negotiations because an appeals court hinted that it might overrule a key pretrial ruling in the fight over whether drivers must be treated as employees.

    If the three-year-old lawsuit collapses, the world’s most valuable technology startup would escape without any significant changes to its business model or financial sacrifice while keeping hundreds of thousands of California and Massachusetts drivers classified as independent contractors. While Uber faces driver lawsuits elsewhere, as well as challenges to its pricing and business practices, the California case was seen as the most likely to upend its gig-economy workforce model because of the state’s relatively tough labor laws.

    Before an appeals court added a new wrinkle to the California case, the biggest task for drivers’ attorney Shannon Liss-Riordan was to convince U.S. District Judge Edward Chen that the agreement she reached with the company in April is fair and reasonable. Dozens of drivers and other lawyers claimed the deal would let Uber off the hook too easily. Liss-Riordan told Chen in a June 17 filing that if the U.S. Court of Appeals overturns a ruling by him that invalidated Uber’s arbitration agreements with drivers in a different case, the result would be to eviscerate her class action, reducing it to “a few thousand drivers.”

    The three-judge panel’s comments and questions at a June 16 hearing showed that it may be poised to overrule Chen, and even that “leaning” may give Uber leverage and dramatically diminish Liss-Riordan’s “ability to negotiate modifications to the agreement,” she said.

    While acknowledging the risk a trial presents for both Uber and the drivers, Chen rejected the deal as unfair. He said he wasn’t convinced that the change to the tipping policy will result in the “substantially increased income” promised by Liss-Riordan.

    A legal scholar who’s been following the case said Uber may now decide that rather than negotiate with Liss-Riordan, it’s better off trying to force the vast majority of drivers she represents into arbitration, where the company can fight them one-on-one. “There’s a good chance that the parties would be unable to reach a new settlement — at least not one that covers all 385,000 drivers now in the class,” Charlotte Garden, an associate professor at Seattle University School of Law, said before Thursday’s ruling.

    Uber and Liss-Riordan were roundly attacked in court filings and at a June 2 hearing before Chen over claims the agreement benefited them at the expense of drivers. While Liss-Riordan argued that she negotiated the best deal possible and faced a significant risk of recovering nothing for drivers at a trial, she later offered to cut $10 million from her $25 million fee request and earmark that money for drivers.

    My Take:  The net result of this development is that the matters in this high profile case are even more murky now. It vastly increases the risks both for Uber and for the drivers.

    If the appeals court rules against the plaintive (drivers), then the number of drivers covered by the lawsuit decreases dramatically, and the previous $100 million settlement would look like a good deal for drivers.  But if the appeals court upholds Judge Chen’s previous ruling that the arbitration clause is unenforceable, then suddenly Uber is up the proverbial creek.

    If that happens, Uber would likely attempt to settle and put a lot more money on the table. Personally I’d like to see this case go to trial, if for no other reason then I’d like to have a very public hearing and discussion of the issues involved.  Uber execs probably wouldn’t been too keen about that, so we can all expect some form of settlement that’s either be very large or very small depending on how the appeals court rules.

    Let me put this now to you the drivers: when you were confronted with that arbitration agreement on your smartphone and told you either agree to it or you can’t go online to start driving, did you click through to the agreement and read all the fine print? Or did you just agree to it and start driving?  One would think the appeals court would consider this in their ruling, but apparently the questions they posed in the earlier hearing suggest otherwise. And so the convoluted process of “justice” marches on.

    Uber’s first self-driving cars will start picking up passengers this month [TechCrunch]

    Sum and Substance: It’s been a while since news broke in early 2015 that Uber was working on self-driving cars. Earlier this year, the company openly admitted it was testing cars in Pittsburgh, but we haven’t heard much more over the last 18 months. With Google, the self-driving car leader, slowly making progress with its autonomous cars, you’d be forgiven for thinking Uber’s efforts are far behind and barely visible in its frenemy‘s rearview mirror. Well think again! It turns out Uber has been making very rapid progress on its plan to replace its one million-plus drivers with computers. Bad news if you’re an Uber driver…

    In an interview with Bloomberg, CEO Travis Kalanick revealed that the company is preparing to add self-driving cars to its fleet of active drivers in Pittsburgh as soon as this month. The company will deploy around 100 modified Volvo XC90s outfitted with self-driving equipment. Each vehicle will be staffed by one engineer, who can take the wheel as/when needed, and a co-pilot to observe and take notes. There will also be a “liquid-cooled” computer sitting in the trunk recording trip and map data.

    That will mean that regular Uber punters in the city have a chance of getting an autonomous vehicle for their ride — their trip will be free if so. Precious little was known of Uber’s plans for self-driving cars, but the company told Bloomberg that it will outfit cars with autonomous driving kits rather than develop its own vehicles as Google is doing.

    To do that, Uber has quietly snapped up Otto, a promising startup that launched this year to bring self-driving technology to trucks. Otto’s technology can be fitted to existing trucks, and, according to Bloomberg, the technology will be adapted to create a lidar — laser detection — system to power autonomous Uber vehicles.

    The Otto acquisition is hugely notable, not only for the technology but the personnel involved. The company was founded by former Googlers Anthony Levandowski, Lior Ron, Don Burnette, and Claire Delaunay. Levandowski led Google’s self-driving car efforts, Ron was an executive on Google Maps and Motorola, while other staff have spent time with Apple, Tesla and other notable automotive firms. The deal is set to close as soon as this month, after which Levandowski will lead Uber’s driverless car efforts. In addition, two new R&D centers will open up to speed the technology’s development.

    My Take:  This is a major development, that could materially affect the entire industry.  However, I’m wary of announcements like this from Uber.

    Uber CEO Travis Kalanick has leaked information before which has the effect of generating investor interest or allay investor concerns. This has all the markings of such an announcement. When he releases information like this there are precious few details.

    Surely regulators are going to have a lot to say before true driverless cars start hitting the road, and the regulatory process is notoriously slow.  These cars in Pittsburgh won’t have to score with regulators because there will be someone sitting in the driver seat – hence they are not really driverless cars.

    Before Uber or anyone else gets the go ahead, there will have to be a ton of data to support the contention that these are truly safe.  In the meantime, the novelty aspect is sure to generate a lot of media attention and investor interest.  Mission accomplished.

    Uber investigating drivers’ post disclosing riders’ information [WSMV, Meredith Corporation]

    Sum and Substance: Uber is launching an investigation following reports of drivers posting their entire routes to social media. An east Nashville news blog has posted screenshots of the drivers’ social media posts. They show the drivers posting routes and addresses after they have dropped off their riders. Some of the posts are fairly innocent, but still include the rider’s address.

    An Uber spokesperson said this is not an acceptable practice and it violates driver terms. The company said it will look into the issue and will be reaching out to drivers to resolve the issue.

    Uber officials said company policy forbids disclosure of “confidential information of the other party to any third party. Confidential information includes company data, driver IDs, as well as user information (i.e. information about a user made available to you in connection with such user’s request for and use of transportation services, which may include the user’s name, pick-up location, contact information, photo, etc.)

    My Take:  This story is trending on the social media because it raises a lot of potentially explosive issues about compromising passenger data.  As a writer who is collecting passenger stories from my time as a driver, I have to be extremely careful never to use real names or disclose enough information that a passenger could be identified or an address given. Privacy laws in this country are a serious matter, and with Uber / Lyft’s hair-trigger reactions to potential violations, drivers need to use an uncommon amount of common sense when posting on the Web.

    Uber says most of its safety incidents involve ‘abusive riders on drivers’ [Chicago Tribune]

    Sum and Substance: The 65-year-old Uber driver was on his third day on the job when a young passenger allegedly brutally attacked him. In an attempt to flee, the driver razed through several residential mailboxes in a cul-de-sac in Stafford County, Virginia, police said. He sustained injuries to his neck and lower left leg.

    The July 20 incident is one of the latest in which passengers have assaulted drivers of the popular car service- an obscure side issue of the debate surrounding safety in ridesharing, which mostly has focused on the protection of passengers. “The truth is that most of our safety incidents are abusive riders on drivers,” David Plouffe, Uber’s chief adviser, told a group of journalists gathered in Washington last week.

    The San-Francisco-based company declined to provide data to back Plouffe’s assertion. But company officials say they use technology to track passengers’ bad behavior. Specifically, Uber depends on its rating system, which allows riders and drivers to rate each other after a ride using a scale of 1 to 5 stars. When a rating is low, Uber can investigate and terminate the user’s access to Uber.

    “Really abusive riders can get kicked off the platform,” Plouffe said. Uber spokeswoman Brooke Anderson confirmed that riders have been deactivated for bad conduct, but declined to provide data. She said a decision to end someone’s access is not only based on the rating, but takes into account feedback from the driver and rider.

    My Take:  This is a central question in the industry – who’s usually to blame for incidents on the ridesharing platform? Blame is seldom 100% one way or the other, because incidents don’t escalate unless both parties participate. If indeed, as David Plouffe says, the passenger is more often the instigator, they why is the driver the first to get booted off the platform?

    Of course, the answer is simple – both Uber and Lyft must make their platforms seem safe.  Anything that even remotely compromises their safety stance has to be nipped in the bud.  What do you think? Is Uber and Lyft’s stance here fair?

    GM expressed interest in buying Lyft, but Lyft declined [TechCrunch]

    Sum and Substance: Close partners GM and Lyft were apparently nearly even closer: The Information reports and TechCrunch has separately confirmed that the carmaker expressed its interest in purchasing Lyft, going so far as to specify a price it would’ve been wiling to pay. Lyft apparently explored what other strategic partners might be offering before deciding to say no to GM and opt instead to raise new funding.

    Lyft declined to comment to TechCrunch on the report, but a source close to the matter confirms that the on-demand service provider turned down GM. GM also declined to comment on any acquisition reports, but noted that they were extremely pleased with how the strategic partnership with Lyft was going. The Information’s info suggests that GM’s interest in the car sharing market extends beyond simply partnering up with an external party. Other carmakers like Daimler have opted to own their own car sharing subsidiaries, with the German automaker operating Car2Go, and commanding a controlling stake in the merged Hailo/MyTaxi European on-demand ride provider.

    In statements to The Information, both companies expressed continued excitement and enthusiasm about their ongoing partnership. Most recently, this partnership has resulted in the expansion of their Express Drive program, which offers potential Lyft drivers without their own qualifying cars the ability to rent vehicles to use for Lyft with fees based on usage.

    Lyft and GM also plan to test self-driving taxis, with autonomous systems installed in all-electric Chevy Bolt vehicles. Self-driving Bolt tests using tech provided by GM acquisition Cruise have already begun in SF and Arizona. Depending on the size of the offer on the table, this could prove a risky move by Lyft. It already faces steep competition from Uber, which has far more cash on hand thanks to a series of monster equity and debt raises. Meanwhile GM could decide it wants to own its own operation, and either look around for another acquisition target like Daimler, or build an in-house on-demand ride service, which is what Ford appears to be doing with its Smart Mobility subsidiary.

    Of course, the fact that GM made overtures and Lyft decided to pass this time around doesn’t forego future merger potential. But it does make watching the partnership’s progress far more interesting from here on out.

    My Take:  Given that Lyft hired Quatalyst Partners to explore additional financing options including the sale of the company, this rebuff may indeed be a negotiating ploy on Lyft’s part.  Lyft knows that Uber has a deep war chest.  Lyft knows they’re bleeding $50 million a month in red ink.  Lyft knows that GM has deep pockets and a sale of the company would provide investors with the liquidity that they desperately want.  Stay tuned on this one,  I suspect there will be more offers forthcoming and at some price Lyft will bite.

    Readers, what do you think of this week’s round up?

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    -John @ RSG

    John Ince

    John Ince

    John Ince is a former Fortune reporter and Wall Street banker. He has about 1,000 rides under his belt driving part time for Uber and Lyft.  He’s writing a book about his experiences entitled:  Travels With Vanessa:  A Rideshare Driver Tries To Make Sense of It all - For a sneak peak visit the link above.