Federal law enforcement officials are reportedly investigating an Uber software program that illegally interferes with its competitors.
Wall Street Journal reported: Federal law-enforcement authorities in New York are investigating whether Uber Technologies Inc. used software to interfere illegally with a competitor, according to people familiar with the investigation, adding to legal pressures facing the ride-hailing company and its new chief executive.
The investigation, led by the Federal Bureau of Investigation’s New York office and the U.S. attorney’s office in Manhattan, is focused on a defunct Uber program, known internally as “Hell,” that could track drivers working for rival service Lyft Inc., the people said.
“We are cooperating with the SDNY investigation,” said an Uber spokesman, referring to prosecutors in the Southern District of New York. He declined to offer additional details. Uber hasn’t publicly discussed the details of the program.
People familiar with the matter said “Hell” worked like this: Uber created fake Lyft customer accounts, tricking Lyft’s system into believing prospective customers were seeking rides in various locations around a city. That allowed Uber to see which Lyft drivers were nearby and what prices they were offering for various routes, similar to how such information appears when an authentic Lyft app is opened on a user’s smartphone, these people said.
The program was also used to glean data on drivers who worked for both companies, and whom Uber could target with cash incentives to get them to leave Lyft, said these people, who added that the program was discontinued last year.
The program was the subject of a federal class-action lawsuit filed in April by a Lyft driver in California, which was dismissed by a federal judge last month after Uber said the suit didn’t allege a crime or material loss.
One critical question for investigators is whether “Hell” constituted unauthorized access of a computer, a person briefed on the investigation said.
The battle to attract and retain drivers has been critical for Uber’s and Lyft’s growth, particularly as the two venture-backed firms now compete in every major U.S. metropolitan area and users can easily switch between the two apps to find a quicker pickup or cheaper ride.
Uber has taken pains of late to appease drivers’ concerns, adding a tipping option that it had long resisted and making other tweaks to its app.
The investigation of the “Hell” program is one of at least three federal investigations under way into Uber’s practices, adding to a laundry list of challenges facing Dara Khosrowshahi, who formally took over as CEO on Tuesday after a 12-year tenure at the helm of Expedia Inc.