Uber might need every bit of the $1.2 billion it raised last week to fight the many legal woes it faces around the globe that threaten to stunt its growth. This week alone, the ridesharing company faces countrywide bans in India, Thailand, Spain and the Netherlands, and signs of trouble are brewing in Rio de Janeiro, where the city’s municipal transport department said it has filed a complaint with police against Uber for not requesting a taxi license.
Problems also have risen stateside. Uber was sued Monday by the City of Portland, Oregon, which says the startup is operating illegally after launching there last week. And in Uber’s home city of San Francisco, a former driver was charged by the city’s district attorney Monday with misdemeanor vehicular manslaughter for hitting and killing a 6-year-old girl last New Year’s Eve.
Legal troubles are nothing new for Uber, which has faced them repeatedly as cities scramble to decide how to regulate ridesharing services. But being banned in four countries in the same week could pose a big problem for the company. The ban in India could be particularly troubling for Uber.
There, a driver has been arrested and remanded in custody after a female passenger reported having been raped after using the service in New Delhi. The Indian capital banned the service Monday, saying Uber had failed to run a proper background check on the driver, who’d been held by police on suspicion of rape three years ago before being released, according to Reuters. Following the ban in New Delhi, India’s home ministry advised the country’s state governments to ban all ridesharing services.
“If there’s a rape in an Uber car in India, people will ask the question, ‘Why can't this happen in their home city?’ and that’s a very logical question to ask. These drivers don’t have the same training and the same registration as more established organizations do,” said Richard Torrenzano, chief executive of The Torrenzano Group, a reputation and high stakes issues management firm.
Uber apologized for the incident in a blog post and promised it would do everything “to help bring this perpetrator to justice and to support the victim and her family in her recovery.” But Torrenzano said he expects the incident to incite more problems for Uber. The company will have to repair the credibility of its hiring practices and background checks; it could face lawsuits; and ridership may take a hit, particularly among female customers. Uber’s regulatory compliance problems also could get worse.
“There will be an enormous backlash by governments and a push by Uber’s competitors in cities around the world who are more established and have been required to meet various government regulations,” Torrenzano said. “I think regulators and competitors are going to push back very hard now that they smell blood in the water.”
Already the sharks are circling. The taxi industry Tuesday said the rape in India is a result of Uber’s reluctance to abide by the same safety standards that regulated hired vehicles do in order to avoid paying higher costs.
“Again and again we’ve talked about the fact that they’re operating without the proper insurance and that their criminal background checks are putting people at risk,” said Dave Sutton, spokesman for 'Who's Driving You?,' a public safety campaign by the Taxicab, Limousine & Paratransit Association. “Uber needs to take responsibility for the fact that it’s a transportation company. It’s no longer acceptable to pretend that it’s a technology company and simply ignore safety rules, whether it’s in America or overseas.”
But some experts believe Uber will be able to weather the storm thanks to its deep pockets. The company is now valued at $40 billion after raising $1.2 billion last week in its seventh round of funding. Uber is also believed to be generating massive amounts of revenue every week from the cut it takes out of every ride given by its drivers in the 250 cities it operates in.
“To me, these challenges look typical for any disruptive force in a market,” said Julie Ask, an analyst for Forrester Research. “Thinking ‘outside in’ or customer first will prevail. Customer demand and the corresponding market forces will win even if there are a few corporate casualties along the way.”
Uber did not respond to a request for comment.