Unfare Tactics: Uber’s Innovative Exercise of Market and Economic Influence to Force Deregulation in the Austin, Texas Ridesharing Market

Abstract

In this thesis, I analyze a case study of regulation and deregulation of Austin, Texas’ ridesharing market at the local and state-levels of government in Texas. I suggest and evaluate that Uber acted as the primary and dominant player in the political economy of ridesharing regulation in Austin and more broadly in Texas, with smaller competitors such as Lyft ‘free riding’ on Uber’s efforts and strategy. I begin with four research questions. First, what was Uber’s strategy, as the primary provider of ridesharing services in Austin, Texas prior to leaving the city in 2016, in using its financial might to maximize its utility in the Texas ridesharing market through economic, social, and/or political means? Second, what effects did regulation and deregulation have on various stakeholders in the Austin car-for-hire market and their interests? Third, how did the ideologies and politics of politicians and the various political and incentive structures in which they operate at the local and state-levels shape the process of regulation at the local-level and deregulation at the state-level, and how did Uber and other stakeholders influence the political process? Finally, how can public policy reduce the outsized influence of certain stakeholders, particularly corporations (capital), in the political economy of regulation, and encourage the adoption of regulations that benefit commonly underrepresented stakeholders, particularly riders and drivers (consumers and labor) based on the observed effects of regulation on these stakeholders in this case study? I hypothesize that Uber utilized its significant market share and economic power in the ridesharing market in Texas to attempt to prevent regulation locally in Austin so as to deter other cities from following suit. It then economically punished the city when this attempt proved unsuccessful, in order to pressure other cities not to follow suit. Further, I hypothesize that Uber adopted this process as a new strategy to prevent further attempts at local-level regulation in Texas. It then escalated the process to the state-level, utilizing its financial might to override local regulation at the state-level. To evaluate my hypothesis, I engage with existing theories of political economy and employ literature reviews, driver interviews, data analysis, and various other quantitative and qualitative methods in order to construct an understanding of the political economy of ridesharing regulations in Austin and Texas more broadly. To build this understanding, I analyze the background of the case and the processes of regulation and deregulation, evaluate the interests of and impacts on the various stakeholders involved, establish the political dynamics at each level of government and between the two, and finally, use these observations and conclusions to explain Uber’s behavior and hypothesize its potential strategies and tactics. I then establish a framework for a ‘political chain store game,’ and propose that Uber employed a ‘political deterrence model’ to maximize its total benefit by limiting regulation among local markets. I additionally establish a number of tactics that I hypothesize Uber utilized to escalate regulatory conflicts between itself and local governments to the state-level and to influence state legislation in its favor in order to preempt and override local regulations. Lastly, I propose a policy of information sharing channels to allow local governments to communicate regulatory and lobbying developments to peer cities, and make decisions with a more comprehensive understanding of the political-economic conditions.