Uber-Problematic
Uber, a wildly popular “ridesharing” service, offers its customers fast and cheap taxi-like car rides, which they request, pay for, and rate in Uber’s smartphone app. Consumers love Uber because it’s easy to use. It has become ubiquitous: Uber currently services over 200 cities in 53 different countries. Nonetheless, Uber’s popularity is not without controversy.
Uber has come under attack from several long-standing and licensed taxi companies who allege Uber unfairly and illegally operates taxis. Taxicab licenses are known as medallions and grant their operators limited competition in the taxicab market; only other medallioned cabs can compete with them. Thus, medallions have been a terrific investment until Uber.
Throughout the nation, taxi companies are suing Uber hoping to protect their investment. In December 2014, 45 Philadelphia taxi companies filed suit in the Eastern District of Pennsylvania, alleging that Uber drivers in Philadelphia are operating an illegal enterprise under the federal Racketeer Influenced and Corrupt Organizations (RICO) Act. thereby damaging the value of taxi medallions and unfairly competing with medallion owners who, because they display these medallions, are subject to additional licensing regulations and other state laws. Taxi companies in California have also sued Uber for unfair competition and false advertising. This suit alleges Uber’s advertisements inaccurately claim it offers “the safest rides on the road,” which the California taxi companies maintain is untrue because, among other reasons, taxi drivers in California are subject to criminal background checks, while Uber drivers are not.
Uber is not just an American problem for these complaints are echoed abroad; on January 13, 2014, cab drivers in Paris protested Uber coming into the Paris market and allegedly attacked an Uber driver’s car. On June 11, 2014, taxi drivers blocked traffic simultaneously in several European cities, lamenting that Uber and similar smartphone ridesharing apps are engaging in unfair competition because they are not subject to the same fees and regulations as taxis.
Uber’s competitors also complain of another type of unfair competition: Uber allegedly spams its competitors with fake ride requests to slow down their service. This makes Uber more appealing to consumers while simultaneously depressing demand for other cab services. Uber denies these allegations and suggested the spam requests may have been the work of independent parties, such as drivers. Because drivers are not employees but independent contractors, Uber is not liable for such actions by their drivers.
Indeed, even the safety of Uber rides has come under scrutiny recently. A woman claiming an Uber driver in Delhi raped her is suing the company in a US court. Uber is also the subject of a wrongful death lawsuit brought by the parents of a six-year-old girl who was allegedly struck and killed by an Uber driver’s car while he was using the app.
It is not just customers or competitors who are suing Uber. Their drivers are trying to get in on the action too. Drivers allege that Uber has exploited it’s drivers, who under the law should not have to pay for certain continuing business expenses. The money saved would seriously impact driver’s pay and it could make a serious dent in Uber’s business model.
These lawsuits also raise an important insurance coverage question: who pays when someone is injured or killed in or by an Uber car? State legislatures are currently grappling with this question. Lawmakers in Florida, Ohio, and Minnesota have proposed more stringent insurance requirements, above that which is required for private drivers, for Uber and other ridesharing app service providers. Uber’s response may just be to leave the market of states that adopt these regulations. This would disappoint customers in those states while leaving customers in other states and countries unprotected. Additionally, other jurisdictions would be disincentivized to regulate Uber.
On August 31, 2014, the Salon published a critique of the company titled “Why Uber must be stopped,” describing the company as “the closest thing we’ve got today to the living, breathing essence of unrestrained capitalism.” This description may seem harsh, surely, but the plaintiffs in those above lawsuits might agree with it. Given the widespread reach of the company and its domination of the rideshare smartphone app market, if not also the taxi service market, it is food for thought as we increasingly depend on Uber, and other rideshare apps, for transportation at home and abroad.