Corporate America's Second War With the Rule of Law

Last month, after a fierce lobbying battle, California passed a law that will likely end up mandating that companies in the “gig economy,” such as Uber, treat gig workers as employees . After losing the battle to carve out an exception for Uber drivers, Uber’s general counsel, former Obama official Tony West, announced the company simply did not believe the law applied to it. Disrespect toward law is not a surprise at Uber. From the very beginning, leaders there have often seen laws as something to be tested, not followed; at one point in 2017, the company was under five separate criminal investigations.

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Matt Stoller (@matthewstoller) is the author of Goliath: The Hundred Year War Between Monopoly Power and Democracy (2019) and a fellow at the Open Markets Institute.West’s announcement reflects an important ethos at Uber, and in corporate America in general. On the verge of the 2020s, we’re reverting to the 1920s: The rule of law, if you are powerful in either business or government, increasingly seems optional.
Elite disrespect for law is prompting a political backlash, often framed as a “techlash.” The gig economy law exists largely to address Uber’s history of a two-tiered system of worker treatment. There are the drivers who do the work, and there are the executives who control strategy and structure. Earlier this year, Uber unilaterally slashed pay for its drivers in Los Angeles by 25 percent, prompting a strike. Meanwhile, former CEO Travis Kalanick—who was removed from a leadership role after overseeing a corporate culture of alleged sexual harassment within the company and an expansion strategy of disrespecting laws set by elected leaders—remains a billionaire. The new gig economy law passed by California’s legislature is the democratic response to this unfair situation.West’s statement is remarkable for what it implies about democratic institutions. Uber lobbied against the law, will go to court to fight the law while refusing to apply it to its drivers, and, even after the law passed the assembly, is trying to negotiate with the governor. More importantly, West says that Uber and Lyft “have already transferred $60 million into a campaign committee account” to run a ballot initiative against the new California labor law. Uber and Lyft are imposing a “money veto” over the will of elected leaders.
Silicon Valley leaders choosing to dispute the law is not unusual. Both Google and Facebook signed consent decrees with the Federal Trade Commission in 2011 over violations of privacy. Facebook, aside from its $5 billion fine from the FTC, was also charged with misleading European regulators during its purchase of WhatsApp, receiving a modest fine from the Europeans as well. Enforcers are investigating the company to see if its acquisitions of competitors like Instagram and WhatsApp over the past decade were legal. Google, no slouch to controversy, just paid a $170 million fine over alleged manipulation and tracking of children.Silicon Valley giants are the pacesetters of society. When Uber can threaten legislatures, or Facebook or Google are fined without any consequence to their stock prices or business models, it threatens the legitimacy of our democracy. This is a crisis. It is not, however, the first time America has faced such a crisis.
In the 1920s technologically advanced financial empires—Rockefeller, JP Morgan, Dupont, and Mellon—dominated American business and politics. These were the high tech darlings of their day; Mellon’s Alcoa monopoly produced aluminum, key to the then-fantastical aerospace industry. Morgan bankers organized the electricity industry, which, like Uber or Google, seemed to most people like magic.In some ways, elite disrespect for reasonable ethical norms was worse then. The third-richest man in the country, Andrew Mellon, wasn’t just a baron of industry, he also served as secretary of the Treasury from 1921 to 1932, under Warren Harding, Calvin Coolidge, and Herbert Hoover. (Citizens joked that three presidents served under him.) In that role, he handed out tax cuts to himself and used his position to seemingly leverage the Colombian president into giving his own oil company, Gulf Oil, lucrative drilling concessions.
Americans responded to this two-tiered system of justice with a series of popular protests and elections. In 1932, a former cotton farmer named Wright Patman filed articles of impeachment against Mellon, backed by tens of thousands of protesters in Washington, DC, and his close ally, Congressman Fiorello LaGuardia. Even before Franklin Roosevelt took office, the Senate embarrassed oligarchs through high-profile hearings and investigations known as the Pecora Commission. Roosevelt used evidence from these hearings to bring tax evasion suits against high-profile bankers like Thomas Lamont of JP Morgan and Charles Mitchell of Citibank (then National City). Mellon faced a civil trial for tax avoidance. FDR did this as he helped to patch the banking system back together, restoring Americans’ confidence that they could in fact govern themselves.