Latest unwelcome newsflash for the incoming CEO: The ride-hailing giant’s use of a software program which tracked activity of a rival, Lyft, is being investigated by the FBI over whether it constituted an illegal interference with a competitor, the WSJ reports.
An Uber spokesman confirmed to TechCrunch that it is co-operating with the investigation, further noting the program is no longer operational.
Uber’s use of the internal software program was revealed by The Information earlier this year, which reported that between 2014 and the early part of 2016 Uber used a secret software-based effort to track how many Lyft drivers were available for new rides and where they were — citing as its sources a person involved in the program and a person who was briefed about it.
The software, which was internally codenamed “Hell”, also apparently showed Uber which Lyft drivers were also driving for Uber so it could better target its efforts to lure them away from its rival.
A key question for the FBI probe is whether Uber’s software program constituted unauthorized access of a computer, according to the WSJ, citing people familiar with the investigation.
On this, Uber’s spokesman flagged the dismissal of a class action lawsuit last week brought by Lyft drivers over use of the software — in which Uber’s lawyers had argued the plaintiff didn’t make a proper case it had intercepted the information, with the company rather claiming the data was “readily accessible to the general public”. As the Verge reported, the judge dismissed the case but gave the plaintiff leave to amend his complaint and file another lawsuit — which the WSJ reports is coming later this month.
According to the WSJ, the FBI investigation into Hell is being led by its New York office and the Manhattan U.S. attorney’s office — it also notes of the latter that it has been pursuing an investigation into anticompetitive strategies at Uber since at least early 2016, again citing several people familiar with the matter.
Its report includes some additional detail about Hell which Uber has never official discussed. According to its sources Uber created fake Lyft accounts and used those to trick its rival’s system into believing that prospective customers were seeking rides in various locations around a city — allowing it to see which Lyft drivers were nearby and what prices they were offering for various routes, presumably so it could set its own prices to undercut its rival and poach customers.
Investigators will have to weigh whether such actions constitute unauthorized access, or, as Uber has already sought to argue in the class action lawsuit, an instance of it accessing data available to the public.
Uber would also apparently target cash incentives at drivers working on both platforms, as part of the Hell strategy, to try to get them to ditch Lyft as well, according to the WSJ.
The probe is not the only federal investigation underway into Uber’s business practices that Khosrowshahi will have to grapple with.
The company is also being investigated in California over its use of another software tool, known as “Greyball”, and apparently designed to try to evade regulatory and law enforcement oversight.
And last month the WSJ also reported that the Justice Department has taken preliminary steps to investigate whether managers at Uber had violated a U.S. law against foreign bribery.
Meanwhile, some of the other problems facing Khosrowshahi at Uber include accusations of systemic sexism and a bullying corporate culture; a lawsuit with rival Alphabet over allegedly stolen trade secrets; a high profile boardroom bust-up and lawsuit, with added drama; and what looks likely to be unfavorable legal judgement looming on the classification of its business in the European Union that could undermine its efforts to eke out more growth there — to name just a few.
Oh one more: Last month Uber agreed to settle an FCC investigation into privacy and security failures by agreeing to two decades of external audits — a probe that had been partially triggered by reports of it using another piece of internal software, called “God view”, which was apparently used by staff to track individual riders, risking users’ privacy.
Buckle up Khosrowshahi, it’s going to be a long and bumpy ride.