The New York City branch of the United States Federal Bureau of Investigation (FBI) is investigating Uber over claims that the San Francisco, California-based ride-hailing service provider used software to interfere with the operations of its main domestic competitor Lyft, people familiar with the agency’s efforts said on Friday. The probe is said to be focused on “Hell,” an internal program used by the company to track its drivers and identify which ones were practicing the so-called “double-apping,” i.e. working for both Uber and Lyft. The same software was already the subject of a lawsuit which Lyft driver Michael Gonzales filed against Uber, claiming that the firm violated the Electronic Communications Privacy Act of 1986 by tracking Lyft drivers and ordering fake rides. The case filed with a competent California court in April is currently seeking additional plaintiffs who would join it and help it grow into a class action lawsuit.
The Hell program was reportedly being used by Uber for around two years and was discontinued in 2016 due to the constantly increasing operational costs associated with it, industry sources reported this spring. FBI is said to be primarily interested in whether the software was used to access any computer in an unauthorized manner, thus breaking federal laws. Apart from the FBI’s New York City branch, the investigation is also being headed by the Manhattan U.S. attorney’s office, latest reports indicate. It’s currently unclear when the federal agency officially started its probe, though the thereof may have been related to the aforementioned lawsuit which drew additional attention to Hell earlier this year. In a hypothetical scenario in which the FBI finds Uber’s usage of the software to contain any illegal elements, such a turn of events would significantly strengthen Mr. Gonzales’s lawsuit.
According to previous reports, the program itself was designed to automatically generate fake Lyft rider accounts and order rides around any given area, allowing the company to glimpse at Lyft’s driver data and locate which one of its drivers were in the vicinity. Once it identified people who worked for both services, it would often present them with cash incentives to convince them to leave Lyft. Apart from driver locations and routes, the app was able to gather data on Lyft’s ride prices, insiders said. Uber previously confirmed the existence of the software but claimed it used it for other purposes, adding that the project has been discontinued since last year.
Reports of an FBI investigation into Uber’s practices is just the latest potential problem contributing to the largest corporate crisis in the history of the startup founded in 2009; the company just recently settled a major privacy case with the U.S. Federal Trade Commission (FTC) whose Acting Chairman Maureen Ohlhausen claimed Uber “failed consumers,” in addition to still being involved in a major legal battle with Alphabet’s Waymo over supposed trade secret theft which has yet to go to trial next month. The U.S. Department of Justice (DOJ) is also said to currently be leading a preliminary investigation into allegations that Uber bribed certain foreign government officials while still having to conclude its probe into the company’s supposed use “Greyball,” a software for evading city officials in areas where the firm used to operate illegally. A third federal investigation into the tech giant’s practices is unlikely to help its new Chief Executive Officer Dara Khosrowshahi stabilize the current situation at the company and reduce its losses with the goal of paving the way for an initial public offering that he’s planning for 2020 or sooner, especially as a number of the firm’s investors are currently said to be infighting over control of the troubled ride-hailing startup.
Mr. Khosrowshahi officially took over Uber on Tuesday, replacing ousted CEO and co-founder Travis Kalanick who resigned his position in late June following a request from several major investors in the company. Mr. Kalanick remains an influential member of Uber’s Board of Directors where he still holds a seat and controls several more of them, with this state of affairs being the cause of a recent lawsuit filed against him by Benchmark, an investment firm which presently holds a 13 percent share of the company. Benchmark accused Mr. Kalanick of fraudulently adding three more seats to Uber’s board last year and is seeking to legally cancel them, consequently completely ousting him from the startup, with the case now being moved to private arbitration and Uber’s former CEO describing it as a personal attack and smearing attempt.