Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS—$20M: Cost of Uber’s purported exaggerations about driver earnings, financing options, (Jan 20, 2017)

By Pamela Wolf, J.D.

In a proposed stipulated order, ride-share giant Uber Technologies, Inc., would pay $20 million to resolve FTC allegations that the San Francisco-based company misled prospective drivers with exaggerated claims about both earnings and financing through its vehicle solutions program. The $20 million settlement would provide refunds to affected drivers throughout the United States, the FTC said in a release (FTC v. Uber Technologies Inc., FTC File No. 152 3082, Civil Action No. 3:17-cv-00261).

In a complaint filed the same day as the proposed deal, the FTC asserted that Uber, in its efforts to attract prospective drivers, exaggerated the yearly and hourly income drivers could make in certain cities and misled prospective drivers about the terms of its vehicle financing options.

Earnings exaggerated. Uber purportedly claimed on its website that "uberX" drivers’ annual median income was $90,000-plus in New York and $74,000-plus in San Francisco. Drivers’ annual median income was actually $61,000 in New York and $53,000 in San Francisco, according to the FTC. Allegedly, less than 10 percent of all drivers in those cities earned the yearly income Uber touted. The ride-share company also made high hourly earnings claims in job listings, including on Craigslist, but the typical Uber driver failed to earn those advertised hourly amounts in various cities, the FTC said.

Financing options misleading. Uber claimed its vehicle solutions program would provide drivers with the "best financing options available," regardless of the driver’s credit history, and told consumers they could "own a car for as little as $20/day" ($140/week) or lease a car with "payments as low as $17 per day" ($119/week), and "starting at $119/week," according to the complaint. But those claims did not pan out, according to the FTC, which found that from at least late 2013 through April 2015, the median weekly purchase and lease payments exceeded $160 and $200, respectively. Moreover, Uber neglected to control or monitor the terms and conditions of the auto financing agreements through its program—drivers allegedly received worse rates on average than consumers with similar credit scores typically would obtain. The ride-share company also claimed that its drivers could receive leases with unlimited mileage through its program, but in fact, the leases came with mileage limits, the FTC alleged.

Proposed deal. In addition to the $20 million judgment it would impose against Uber, the stipulated order would bar the company from misrepresenting drivers’ earnings and auto finance and lease terms. Uber would also be prohibited from making false, misleading, or unsubstantiated representations about drivers’ income, programs offering or advertising vehicles or vehicle financing or leasing, and the terms and conditions of any vehicle financing or leasing.

"Many consumers sign up to drive for Uber, but they shouldn’t be taken for a ride about their earnings potential or the cost of financing a car through Uber," said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. "This settlement will put millions of dollars back in Uber drivers’ pockets."

Dissent. The Commission voted 2-1 to file the complaint and proposed stipulated order. Commissioner Maureen K. Ohlhausen dissented "because the monetary settlement of $20 million is not tied to an estimate of consumer harm," according to her statement.

The FTC filed its complaint and proposed stipulated order in the Northern District of California, San Francisco Division; the case is No. 3:17-cv-00261.

Companies: Uber Technologies, Inc.

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