BY TIMOTHY P. CARNEY
Uber is very good at raising piles of money from investors, but it is not very good at making profits. So the company is resorting to a tried and true tactic of businesses in industries with small profit margins: lobbying for regulations that will kill smaller competitors and prevent new entrants.
Uber has issued a new lobbying agenda, and CEO Dara Khosrowshahi has placed an op-ed in the New York Times explaining why drivers and other gig-economy workers need more protections and benefits. Implicit in the piece is that Uber won’t help its drivers unless the government forces it to. It’s no mystery why it’s doing this: It’s naked regulatory robbery.
“Uber is ready, right now, to pay more to give drivers new benefits and protections,” Khosrowshahi says. “But America needs to change the status quo to protect all workers, not just one type of work.”
Translated: Uber won’t voluntarily treat drivers better but will instead seek burdensome employer regulations that Uber alone can afford, and which will crush smaller competitors.
Specifically, the CEO proposes that “states should require all gig companies to provide medical and disability coverage for injuries incurred on the job, creating a baseline safety net that we cannot give to drivers today without risking their independent status under the law.”
If that’s the problem, then why not remove the regulations that prevent companies from offering some benefits, but not all? After all, deregulation would maximize flexibility. Different companies could compete for drivers with different combinations of pay and benefits.
But that’s exactly the problem: If you’re Uber, you don’t want competitors trying something different from you. You want to release political pressure on you at the same time you crush your competitors.
Nothing does that like regulation.
“States should require all gig companies to provide medical and disability coverage for injuries incurred on the job,” Khosrowshahi writes, “creating a baseline safety net that we cannot give to drivers today without risking their independent status under the law.”
Apparently, Uber could afford to fund such a disability policy, but it chooses not to.
Khosrowshahi also proposes that “gig economy companies be required to establish benefits funds which give workers cash that they can use for the benefits they want, like health insurance or paid time off.”
Of his proposed regulation, the CEO notes, “Had this been the law in all 50 states, Uber would have contributed $655 million to benefits funds last year alone.”
Of course, Uber, with a much better record raising cash from investors than making profits in the market, could snap its fingers tomorrow and have $655 million in cash. It could fill that fund easily. Lyft or Via will have a harder time.
More importantly, for Uber, such a massive “ante” to enter the industry would keep out new competitors, for Uber, UberEats, and all sorts of other transportation services where Uber hopes to dominate.
And Khosrowshahi knows that regulations often harm consumers by increasing costs. In his op-ed, he points out that if Uber were forced to treat all drivers as full-time employees: “Uber would only have full-time jobs for a small fraction of our current drivers and only be able to operate in many fewer cities than today. Rides would be more expensive.”
Also, with its massive capitalization, Uber is in best position to invest in an autonomous fleet, thus mooting these regs for them.
Arthur Delaney of the Huffington Post puts it well.
Uber got the government to bail out its drivers by making them newly eligible for unemployment, and now Uber wants new rules on its competitors https://t.co/NR8No1mP0E— Arthur Delaney (@ArthurDelaneyHP) August 10, 2020
It’s not rare at all for companies to lobby for more regulation of themselves. A few examples:
- Philip Morris and its parent company Altria supported federal regulation of tobacco so much that the bill was known as the “Marlboro Monopoly Act.”
- H&R Block supported federal regulation of tax preparers, clearly trying to kill its smaller competitors.
- The largest food processors supported strict federal regulation of food, to the detriment of smaller producers.
- Mattel and Hasbro helped shape and pass a new toy-safety act, which included a very expensive way to opt out of the very expensive inspections — and Mattel was the first company to win that exemption.
What’s rare here is that Uber’s own consultants telegraphed this move of murder-by-regulation.
“Uber should lean into the progressive moment,” a former Uber adviser wrote in an op-ed last month. “It’s a PR masterstroke: The company continues its ‘we’re nice’ campaign, with a twist. Of course Uber wants to help drivers at all costs, especially now! And if being nice happens to result in crushing a rival? Call it killing with kindness.”
State lawmakers shouldn’t be fooled: Uber is calling for more regulation in order to reduce competition. When drivers and passengers have fewer choices, who do you think will be the winner?
Timothy P. Carney is a resident fellow at the American Enterprise Institute.