Trouble revs up for Uber
The old saying goes that more money brings more problems. In the case of Uber, that's certainly true.
The company, which makes an app to connect drivers with taxi passengers, is closing out 2014 as one of the nation's most valuable companies. It's also ending the year as one of the most controversial businesses in the U.S. and abroad, with many of its problems self-inflicted.
Take, for instance, Uber's disclosure of its "God View" tracking ability, which executives had used to keep tabs on reporters' whereabouts. On top of that, the company has come under fire after several sexual assault cases involving its drivers, with critics asking whether the service can be trusted and whether it does enough to screen out drivers with red flags.
Thanks to a $1.2 billion investment infusion earlier this month, Uber has an estimated valuation of $40 billion. That makes the company more valuable than U.S. corporate stalwarts such as Alcoa (AA), Chubb (CB) or General Mills (GIS). For investors, the company's rapid growth and disruptive technology has created a rising star that could overtake the massive, slow-to-change taxi industry.
That venture capital infusion has fueled Uber's rapid expansion into new U.S. cities and other countries, although that, in turn, has brought about lawsuits and protests from rivals and municipalities. Some critics aren't mincing words.
"Not since the days of bootlegging has there been a criminal enterprise so brazen and open as to attract hundreds of millions of dollars in investment from investment bankers and to operate in blatant violation of federal and state law as the Uber enterprise," Checker Cab Philadelphia alleged in a federal court complaint on Tuesday, according to Bloomberg News.
Whether Uber can speed past the road blocks isn't clear, as well as whether consumers will shy away from the service amid the growing controversies facing the business.
Uber has its hands full. In Madrid, a judge recently ordered that Uber shut down its website and app immediately, a decision that came after an earlier Spanish court ruled that Uber wasn't legal.
South Korea, meanwhile, has indicted Uber chief executive Travis Kalanick with running an illegal taxi service. The company told CBS MoneyWatch earlier this week that it "will provide its full cooperation" in the case.
The litany of woes continues: Uber has been banned in New Delhi, sued in Philadelphia and criticized for price gouging. Several customers have alleged sexual assaults by drivers, and one driver struck and killed a 6-year-old on New Year's Eve 2013. The Daily Beast has even compiled a list of the "ten worst Uber horror stories."
The company isn't unaware of the issues, of course. CEO Kalanick wrote in a Dec. 4 blog post that its growth "has also come with significant growing pains." He added, " The events of the recent weeks have shown us that we also need to invest in internal growth and change. Acknowledging mistakes and learning from them are the first steps."
Changes will come in the next few months, Kalanick vowed.
Until then, given the issues raised by critics, why would anyone use Uber instead of a regular taxi? To be sure, for every nightmare Uber ride, there's likely dozens or hundreds that are perfectly fine. Its app allows customers to hail a driver from their smartphones, basically making cabs into an "on demand" service, which has gained legions of fans.
But despite the obvious enthusiasm from investors and many consumers, customers may want to take a critical look at what they are agreeing to before stepping into an Uber car. First off, its terms of service state that customers "may be exposed to situations involving third party providers that are potentially unsafe, offensive, harmful to minors, or otherwise objectionable."
It also notes, "Uber does not guarantee the suitability, safety or ability of third-party providers," by which it means the drivers behind the wheels of Uber cars. Uber also does not have "any liability arising from or in any way related to your transactions" with drivers, according to its terms of service.
That's not exactly reassuring. It also doesn't help that taxi regulations in the U.S. are based on byzantine state laws, which can make it difficult for consumers to judge which service will provide the best, and most secure, ride.
While it's unclear at the moment how this will play out for Uber, it's clear that the upstart will face more red lights as it enters 2015.
More details on: cbsnews.com