Uber's aggressive lobbying of state, local officials pays off
On a Thursday in June, bureaucrats from Virginia's Department of Motor Vehicles made their move against Uber Technologies. The fast-growing ride-for-hire company was told that its popular service was, in fact, illegal and that the firm needed to immediately cease all operations in the state.
Far from being intimidated, Uber was ready to fight back. The company immediately called on one of its most potent weapons - its ever-growing list of smartphone-wielding customers. A notice sent to Uber users in Virginia included the email address and phone number of the ordinarily low-profile official in charge of the decision. The notice instructed the company's supporters to demand that the DMV "stand up for you."
Hundreds of them did and, by Sunday, Commissioner Richard Holcomb's inbox was flooded. Holcomb did his best to respond - working through the weekend, even crafting emails to irate Uber customers as he lay in bed at home.
"OK, after staying at the office until 9:00 Friday and working for several hours yesterday, last night and today, I am caught up responding to all the incoming emails," he wrote in an email to his staff that Sunday afternoon.
While Uber pushed its riders to lobby Holcomb, the company also moved quickly to mobilize its newly hired team of high-powered lobbyists in the state capital.
After the lobbyists agreed to meet in the ensuing days with aides to Gov. Terry McAuliffe, the state's transportation secretary instructed the DMV not to interfere with Uber drivers, according to documents obtained through a public records request.
Within 48 hours of the order, Uber had, in effect, won a reprieve.
Then, seeking a longer-term fix, Uber lobbyists submitted a draft of a proposed temporary operating permit. State officials granted a revised version several weeks later, permitting Uber as well as Lyft, a smaller company, to continue normal operations for the time being.
In an era of government dysfunction, the Virginia example shows how San Francisco-based Uber has pioneered not just a new sort of taxi service but also a new way to change long-standing local ordinances.
Uber's approach is brash and, so far, highly effective: It launches in local markets regardless of existing laws or regulations. It aims to build a large customer base as quickly as possible. When challenged, Uber rallies its users to pressure government officials, while unleashing its well-connected lobbyists to influence lawmakers.
The company - which says its goal is to work with officials to change old laws that its executives argue don't apply to a phone-app-based service - has carried out this approach repeatedly in cities and states across the country over the past year. It has upended long-entrenched taxi regulations while building itself into a technology giant valued at more than $40 billion. (Washington Post owner Jeffrey Bezos is an Uber investor.)
In the past eight months, officials in 17 cities and states have approved measures allowing Uber to operate - seven of them since the start of October. Uber has expanded from 28 U.S. cities a year ago to 138 now, according to the company.
In the District of Columbia, the D.C. Council approved rules for app-based services in late October on 12-to-1 vote despite a mass protest by cabdrivers. Oklahoma City approved such regulations also in late October, while Dallas did so Wednesday; Anchorage, Alaska is weighing them now.
The company has, with some exceptions, steamrollered government opponents. Critics, led by traditional cabdrivers and insurance companies, argue that Uber drivers are underinsured and dangerous.
Uber, founded five years ago, has asserted its strength in recent months through a combination of new-age tacticsthat portray the company as a social movement to be embraced by its faithful and old-school lobbying more typical for a business seeking to avoid government interference.
Riders, for instance, have been sent alerts on their phones to sign petitions when a key decision point is imminent. More than 450,000 Uber riders have signed petitions, the company says, and when an alert goes out, people respond quickly - sometimes at a rate of seven electronic signatures per second.
In California, where state lawmakers sought to stiffen regulations after an Uber driver fatally struck a girl, celebrities such as company investor Ashton Kutcher have taken to Twitter to rally public support around #CAlovesUber.
In Illinois, as Uber fought legislators' efforts to impose new restrictions, the company sent its riders an interactive map, allowing them to email an Uber testimonial to their state representative with a single click.
At the same time, the company has assembled a lobbying empire with traditional ties to both major parties, bringing onto its payroll with startling speed a sprawling team of former gubernatorial aides, former state legislators, high-level political operatives and other well-connected advocates.
In the past two years, the company has hired private lobbyists in at least 50 U.S. cities and states, employing multiple firms in some places, according to a Washington Post review of local lobbyist registration records. The records show that the company has hired at least 161 individuals to lobby on its behalf, on top of its own rapidly expanding policy office. In Sacramento, California's state capital, the company spent $475,000 from July to November to lobby lawmakers.
The total number of Uber's registered lobbyists nationally is probably higher than The Washington Post's review found; Uber officials declined to release a complete lobbyist list.
To lead the effort, the company brought on former White House adviser David Plouffe this fall. In addition to his deep connections to President Barack Obama and other national Democrats, Plouffe is the architect of the 2008 campaign that helped transform Obama into a winning political brand - a trajectory, from upstart to victor, that Uber executives envision for their company.
Announcing Plouffe's appointment, Uber chief executive Travis Kalanick declared on his blog that the company was in "the middle of a political campaign and it turns out the candidate is Uber." The opponent, he said, is "the Big Taxi cartel," which he said had "used decades of political contributions and influence to restrict competition." Plouffe, who started with the company in September, added a message of his own to Kalanick's blog, decrying taxis and their backers as "those who want to maintain a monopoly and play the inside game to deny opportunity to those on the outside."
In many ways, 2014 has been the year that Uber established itself as a seemingly permanent force in technology and transportation.
With that success has come some stumbles.
Kalanick apologized last month after a top executive mused at a private dinner in New York about the possibility of investigating unfriendly journalists. Uber has also faced questions about the privacy of customer data, its sometimes unpredictable surge pricing, and aggressive tactics it has employed against rival Lyft.
Overseas, officials are starting to contend with some of the questions that have faced U.S. regulators over the past few years. The company suspended operations Thursday in New Delhi amid questions about background checks after a female passenger accused an Uber driver of rape. Also in the past week, a judge in Spain ordered the company to halt operations after finding it guilty of unfair competition.
And the company has suffered setbacks in some domestic markets - failing to win support from Arizona Gov. Jan Brewer, who vetoed an Uber-backed measure. The company was sued this month by city officials in San Francisco, Los Angeles and Portland, Oregon, and the company recently halted operations in Nevada because of a court ruling.
In some cases, the company's lobbying efforts have left a sour taste.
A Brewer aide described how the company's lobbyists lectured policy advisers on Uber's contributions to society.
In California, a mass mailing by Uber to constituents of a legislator who sponsored a measure that would impose stronger insurance requirements on the company was seen by critics as an intimidation tactic.
"They wanted to get themselves established very quickly as the bully you didn't want to mess with," said State Assembly member Adrin Nazarian, who was sponsoring a different measure to regulate Uber.
Plouffe, in a recent interview at Uber's headquarters, said there is a "misnomer that Uber just wanted to operate in a wild-west way" and have no regulations governing it.
"That's clearly not the case," he said. "We're eager for smart and modern regulations."
He said the company has aimed to "work with regulators, work with elected officials, to find a way forward" in dealing with laws that in many cases "never anticipated" a service such as Uber.
As for some of the company's recent controversies, particularly the New York dinner for which Uber apologized, Plouffe acknowledged that they have caused "reputational angst."
"We have to correct it. Part of this is just when you're maturing and growing, you're going to make mistakes," he said. "The growth is great. But catching up to the growth is hard."
Plouffe, 47, has been splitting time between Washington and the San Francisco headquarters. But he said he has fully made the transition from election politics to his new life as a business executive - and he said he is planning to move his family to California.
Still, Plouffe drew parallels between Uber and the 2008 Obama campaign, in which a broad, multiethnic coalition of voters was energized by a young candidate who appeared to offer something special and different from the norm.
Uber, Plouffe said, has the unusual ability to inspire its base. The company has succeeded in shaping new regulations, he said, in part because politicians could not ignore the voices of constituents asking to make the service legal.
"People always say, everyone should run the campaign that Barack Obama did. Well, you can't. Because you can't manufacture it," Plouffe said. "It's a really important thing to understand. It either exists or it doesn't."
"There may be many companies that want to do what Uber does, but if they don't have it, they won't be successful," he said.
Plouffe pointed to the growing number of state and local governments adopting new pro-Uber laws as evidence that the company has gained acceptance.
"What's changed is reality's set in," he said. "The discussion has fundamentally changed to how do we regulate ride sharing. And not whether Uber and Lyft and others should be in existence."
Regulations across U.S.
As Uber has rapidly remade regulations from coast to coast, it has also scrambled traditional partisan alliances.
Even as taxi unions and other pro-Democratic labor advocates have blasted Uber as anti-consumer and a drag on driver wages, many Democrats have backed the company, which caters to young urban dwellers and tech investors, who tend to lean left.
Democratic Party figures such as Colorado Gov. John Hickenlooper, Massachusetts Gov. Deval Patrick and Chicago Mayor Rahm Emanuel have been vocal supporters.
After Virginia officials overturned the DMV's cease-and-desist order against Uber this year, McAuliffe, a former Democratic National Committee chairman, hailed the new arrangement as a symbol of his state's embrace of innovation.
Virginia Attorney General Mark Herring, whose office had given the DMV key legal guidance allowing a new permit to be offered, even cited the decision in a fundraising appeal to supporters.
In an email to his PAC with the subject line "Uber upLyfting news," playing off the name of the company and its rival, Herring wrote, "For the moment, we've found a way to keep Virginians safe, preserve a service they want, and support innovative businesses." In an interview, Herring said the point of the email was to update supporters about an important compromise.
Republicans, too, have embraced the company as a celebration of the free market and as a challenge to big-city unions that are aligned with the taxi industry. The Republican National Committee circulated an email in August asking for supporters to sign a petition to show "support for free market companies like Uber."
One of the company's most vigorous defenders is Sen. Rand Paul of Kentucky, a possible 2016 GOP presidential candidate, who regularly tweets his support. When Virginia issued its initial cease-and-desist order, Paul declared on Twitter, "The Nanny state strikes again."
In July, Grover Norquist, president of conservative political advocacy group Americans for Tax Reform, drew attention to the culture-war aspect of the Uber debate, writing an opinion piece for Reuters in which he argued that embracing Uber could help Republicans "make a comeback" in Democratic cities. The urbanites who favor the ride-sharing service and other similar applications, he wrote, are "leading Democratic constituencies - including educated professionals, gays, minorities, single women and working mothers."
"By championing the often disruptive share-economy businesses, defending them against the status quo and focusing their political campaigns on these issues, the GOP can show it is the party that embraces companies that improve the quality of life in cities," he wrote.
Foreshadowing more fights ahead, the conservative, corporate-backed American Legislative Exchange Council began this month drafting legislation that supportive lawmakers, mostly Republicans, can push in states across the country.
Doubling in value
Uber has built its lobbying empire out of necessity.
While plenty of other high-tech companies have experienced rapid growth, and many businesses of all sizes seek to alter regulations that affect them, there are few if any parallels to Uber - which has more than doubled in value since the summer and has engaged simultaneously with so many levels of governments in so many places.
The company says it is not a transport or taxi service; it is a technology company whose product is not car rides but the phone application used to arrange them. Its UberX service relies on partnerships with thousands of independent contractors who use their own vehicles. Drivers find passengers using Uber's phone app and then remit a percentage of the fare to the company.
Uber generally enters local markets without seeking prior approval from regulators - a brazen move that, almost immediately, draws complaints and regulation efforts.
Across the country over the past year, the company has been fined, sued and repeatedly issued cease-and-desist orders.
As Uber began to amass its lobbying army, the battles brewed in dozens of places at the same time.
In June, for example, the Illinois General Assembly passed a measure that would have applied strict new rules to Uber and other ride-sharing companies. Uber drivers who worked more than 36 hours for the company every two weeks would have to get a chauffeur's license, as if they were full-time taxi or limo drivers. Ride-share drivers would have been required to hold commercial auto insurance.
Backed by the taxi industry and insurance companies, the bill passed with an overwhelming bipartisan and veto-proof majority. Its sponsors were Democrats, but Republican leaders, whose constituents tended to be residents in more rural areas not served by Uber, backed it as well.
In the face of what seemed to be a dramatic setback - particularly given the lucrative Chicago market where Uber was catching on - the company fought back.
It blast emailed all Uber account holders in the state and urged them to sign a digital petition asking Democratic Gov. Pat Quinn to veto the measure. It inserted a splash screen when users opened the smartphone app to hire a ride in Chicago, also urging them to get involved. Uber representatives said the petition was signed by 25,000 supporters in its first hour - and ultimately more than 80,000 people signed.
Uber also successfully interjected itself into Illinois' fierce gubernatorial campaign, with GOP challenger (and eventual winner) Bruce Rauner issuing a statement in July urging Quinn to veto the measure. "I love Uber," Rauner's statement said.
The company assembled a powerhouse Springfield, Illinois lobbying team - including Mike Kasper, a lawyer who has represented Emanuel and top legislative Democrats; Jack Dorgan, a former state Republican chairman; and Jack Lavin, who took on the company as a client in May, eight months after leaving his job as Quinn's chief of staff.
The company scored a victory in August, when Quinn vetoed the bill.
Legislative leaders, noting the bill's broad support, said they would simply override the veto and allow the law to go into effect anyway.
But Uber's lobbyists showered attention on lawmakers who had backed the bill but seemed to be growing tepid. For example, they took Rep. Elaine Nekritz, a Democrat from the Chicago suburbs, on a tour of the company's Chicago offices. Nekritz said in a recent interview that she learned a lot from the Uber officials, adding that she "didn't have a solid grasp on what the bill said" when she had voted for it.
The company mailed 60,000 glossy fliers to voters in about 20 targeted legislative districts. "Don't let special interests leave you sitting on the curb," it said, a reference to the taxi industry's vigorous support of a veto override.
By the November session, Nekritz and others were either undecided on or opposed to the bill they had once backed.
The issue was resolved between Uber lobbyists and lawmakers in late November in a private meeting room in the state Capitol. There, the bill's sponsor agreed to abandon his veto override effort and company executives said they would sign off on a less onerous measure, which passed this month and is awaiting the governor's signature.
"We came really close here - we got to the precipice of putting uncomfortable restrictions on Uber," said Democratic Rep. Michael Zalewski, the measure's sponsor.
Uber's tactics in Illinois mirrored those it had successfully used in a similar legislative battle in California.
The company moved aggressively to fend off legislation that would have required it to use a government agency to conduct criminal background checks as well as impose drug tests for drivers.
Uber summoned hundreds of its drivers and riders to Sacramento to rally on the company's behalf. It produced a campaign-style video featuring personal testimonials, including from a blind man who talked about how the service helps him get from place to place.
State Assembly member Susan Bonilla, a Democrat who sponsored a bill to tighten insurance requirements, said she felt the pressure from Uber intensify over the summer as she and other lawmakers held talks with the company's lobbyists. Emails poured in from constituents, who she said had been egged on by appeals from pro-Uber leaders in both parties.
"It seemed like even as I moved toward what I considered to be a negotiated compromise, the opposition actually increased," Bonilla said.
In the end, the background screening measure failed. Bonilla's insurance bill passed - but Uber secured enough concessions that the company wound up supporting the bill and citing it as a success.
Virginia officials, meanwhile, say they succeeded in imposing new rules on the company in exchange for the state's reversal over the summer that permitted Uber to continue operating. The company, for instance, paid $26,000 in civil penalties.
"What we said was, 'If you want to sit down in good faith, we'll bargain in good faith,' " said state Transportation Secretary Aubrey Layne, who said he met twice with company representatives in the weeks following the June cease-and-desist order.
Internal documents suggest that negotiations were aimed from the start at finding a way to allow the company to operate.
At a meeting between state officials and Uber lobbyists two weeks after Uber and Lyft were told to stop operating, Layne said the administration "wants Uber to be able to operate legally in Virginia," provided it complied with certain conditions, according to meeting notes. One was that the company submit evidence that would establish an "immediate and urgent need" for its service, a legal requirement of a temporary permit. The DMV had earlier determined that Uber and Lyft could not meet the standard.
Documents show that a first draft of the temporary permit was forwarded to a state official by a lobbyist for Uber seven days later, several days before the company formally applied for it and six weeks before it was granted.
Asked about the company's role in crafting the agreement, Holcomb, the DMV commissioner, said it "would be a stretch" to say the company wrote it.
Uber Eastern region spokesman Taylor Bennett said the company "worked very closely" with the state throughout the process. He said that the cease-and-desist order was a surprise and that the company has "demonstrated an eagerness to collaborate on building sensible regulations."
The DMV will propose permanent legislation to regulate the industry when Virginia lawmakers gather January in Richmond, the state capital. Vigorous negotiations are underway on that proposal. It is not yet clear whether the company will support the legislation.