Uber will pay $20 million to settle with FTC after promising drivers unrealistic earnings
The Federal Trade Commission has settled a lawsuit against Uber for $20 million, the result of a federal complaint that says the ride-hailing startup inflated the amount of money potential drivers could make as drivers for the ride-hailing service.
The FTC investigation found that Uber advertised hourly UberX driver earnings rates of $15 to $29 an hour on Craigslist, and that in 17 large U.S. markets fewer than 30 percent of drivers earned those advertised rates. In Philadelphia, Minneapolis, and Boston, fewer than 10 percent of drivers made that hourly rate.
Uber CEO Travis Kalanick promised drivers in San Francisco and New York — two of Uber’s most competitive markets — earnings of $74,000 and $90,000 a year, respectively, but fewer than 10 percent made at least those figures.
Big news: Uber to pay $20 million to settle FTC allegations of deceptive practices. https://t.co/j3gjx3jlcz
— Will Evans (@willCIR) January 19, 2017
Additionally, the FTC charged that Uber’s car leasing program advertised affordable car loan payment rates for prospective drivers that didn’t line up with the reality.
“Uber has stated that consumers 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) … with the ability to purchase the vehicle for only $1 at the end of the lease period,” the FTC complaint said.
“Despite the claims that Drivers can make low weekly payments,” the complaint continues, “the median weekly payment for Uber Drivers who entered into a lease from late 2013 through at least April 2015 has been over $200.” For drivers who weren’t in Uber’s leasing program, the median weekly payment was over $160.
In a statement sent to VICE News, an Uber spokesperson said that the company is “pleased to have reached an agreement with the FTC. We’ve made many improvements to the driver experience over the last year and will continue to focus on ensuring that Uber is the best option for anyone looking to earn money on their own schedule.”
Kalanick serves on a business advisory council to President-elect Donald Trump; Trump has not yet named his pick to chair the FTC next.
In the past, the FTC has weighed in defend Uber and other ride-hailing services on fair competition issues, but it hadn’t brought a deceptive advertising case until now. Last year, Uber settled other such cases, including two class-actions and another from the Los Angeles district attorney’s office. In those cases, the company was fined $38.5 million in total.
“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 FTC Bureau of Consumer Protection chief Jessica Rich in a press release. The agency added that the money from the latest settlement will be used “to provide refunds to affected drivers across the country.”