On June 21, the Harvard Business Review featured an interesting article on the downfall of Uber; an article which highlights the importance of companies ensuring that they work with the right corporate law counsel in order to ensure that their entire business model isn’t predicated on lawbreaking.
Uber set an important precedent for the business of transportation, a model that made vast improvements to the entire concept of taxicab transportation in general. Its major advantages didn’t involve the use of modern dispatch with GPS or Smartphone apps—as incumbents were already headed in that direction—but rather in using regular, everyday vehicles minus the special licensing and formalities. However, in using everyday noncommercial vehicles, Uber avoided the many costs that the taxicab companies couldn’t when it came to having to purchase commercial registration, insurance, inspections, and plates, specific driver’s licenses, background checks, and the many other costs of doing business and following the law.
Blatant Violation of the Laws
Instead of focusing on developing a business model that could both offer customers a new, unique service, while also complying with the law, the company, instead, focused on “defending its illegality”: employing staff to lobby legislators and regulators, and portraying those who disputed its setups as has-beens stuck in the past.
While some jurisdictions bent and new law was created in order to accommodate this business model, in general, the model simply remained illegal. And in doing so, Uber’s employees took risks; risks that even got some of them indicted and arrested under some circumstances.
The Role of In-House Counsel
So who, specifically, was responsible? A company’s attorneys are supposed to advise them on how to run their business in accordance with the law. At Uber, however, in-house and corporate counsel was, arguably, complicit in fostering a culture of illegality in this case.
Uber then began attacking the competition, making public statements to what extent the competition (companies like Lyft) were breaking the law; pointing out their failure to comply with the law when it came to lacking commercial insurance and licenses; all the while adopting Lyft’s approach and normalizing a model based on regular legal violations. This practice may ultimately lead to the company’s downfall; a downfall that could have easily been prevented had it been advised–by in-house counsel–about how to retain what was great about the business while also operating within the confines of the law.
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