Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Uber unable to curb taxi companies’ Lanham Act claims, (Jul 20, 2015)

By Greg Hammond, J.D.

Transportation network company Uber Technologies, Inc. could not steer clear of taxi companies’ claims that Uber violated the Lanham Act by falsely advertising the safety of its rides as compared to the taxi cab companies. In partially denying Uber’s motion to dismiss, the federal district court in San Francisco determined that Uber’s statements were not mere puffery, but could allow reasonable consumers to conclude that an Uber ride is objectively and measurably safer than a ride by a taxi (L.A. Taxi Cooperative, Inc. v. Uber Technologies, Inc., July 17, 2015, Tigar, J.).

A group of 19 taxi cab companies filed suit against Uber and its subsidiaries—Rasier, LLC and Rasier-CA, LLC—alleging that Uber made various statements about the safety of rides on Uber’s platform and disparaging the safety of rides offered by taxi companies. Uber’s website makes statements such as, “SAFEST RIDES ON THE ROAD” and that Uber is “GOING THE DISTANCE TO PUT PEOPLE FIRST.” Safety information also appears on emails after consumers finish an Uber ride, itemizing a $1.00 “Safe Rides Fee.” Uber’s advertising campaign also makes statements concerning its “industry-leading” background check process.

The taxi companies claim that Uber’s representations concerning safety are false and misleading because the plaintiffs offer safer transportation than Uber. They brought claims under the Lanham Act and California’s False Advertising Law (FAL) and Unfair Competition Law (UCL). Uber moved to dismiss for failure to state a claim.

Actionable statement. In support of its motion to dismiss, Uber first argued that the taxi companies failed to plead an actionable statement, asserting that the challenged statements are: (1) not quantifiable and specific; (2) couched in terms of aspiration or optimism; (3) taken out of context; and/or (4) not commercial advertising.

The court rejected the argument that the challenged statements are non-actionable puffery. While it noted that some statements—such as “BACKGROUND CHECKS YOU CAN TRUST” and “GOING THE DISTANCE TO PUT PEOPLE FIRST”—are subjective statements that make no specific claim about Uber’s services and are therefore non-actionable puffery, other statements—such as describing its background check procedures as “industry-leading” and that its safety is “already best in class”—could allow reasonable consumers to conclude that an Uber ride is objectively and measurably safer than a ride by a taxi.

Uber’s argument that certain advertising statements are merely “aspirational” and are non-actionable puffery was also rejected. The court determined that while the challenged statements assert Uber places a high priority on safety, they also incorporate assertions that a reasonable consumer might rely on as based in fact, citing as an example Uber’s claim that, “We are committed to improving the already best in class safety and accountability of the Uber platform, for both riders and drivers.”

Finally, Uber claimed that certain statements were not commercial advertising, including media statements and the “Safe Rides Fee” on its receipts. The court agreed that challenged statements made to the media by Uber representatives are not commercial speech and granted the motion to dismiss with regard to those statements. The motion was denied, however, with regard to the receipts, because the complaint adequately alleges that the statements concerning the “Safe Rides Fee” are made for the purpose of influencing consumers to use Uber’s services again.

UCL, FAL claims. The court agreed with Uber’s argument that the taxi companies lack standing to seek relief under the UCL’s fraud prong because they failed to assert that they relied on Uber’s allegedly false or misleading advertising. Because the taxi companies’ claims under the UCL’s unfair and unlawful prongs were predicated on the same misrepresentation theory, they similarly lacked standing to seek relief under those prongs. The taxi companies were also precluded from seeking restitution and restitutionary disgorgement because they failed to allege an ownership interest in any of Uber’s profits or a “confirmed” contractual relationship with any of Uber’s customers.

The case number is 15-cv-01257-JST.

Attorneys: Benjamin Ernest Shiftan (Pearson Simon & Warshaw, LLP) and Christopher B. Dolan (The Dolan Law Firm) for Plaintiffs. Alvin Matthew Ashley (Irell & Manella LLP) for Defendants.

Companies: L.A. Taxi Cooperative, Inc.; Uber Technologies, Inc.; Rasier, LLC; Rasier-CA, LLC

Cases: Advertising StateUnfairTradePractices CaliforniaNews