To settle allegations of deceptive advertising and unlawful business practices in violation of California's consumer protection laws, Uber has agreed to pay $25 million to the counties of Los Angeles and San Francisco.
In December 2014, the DA Offices in Los Angeles County and San Francisco commenced enforcement action against Uber, challenging advertising that touted the ride-sharing company's method of background checks. Uber used a private, outside entity to screen prospective drivers in a process that it characterized as the "best" in the industry.
The DAs took issue with the claim, alleging that the company did not go above and beyond state and local requirements in the jurisdictions in which it operated. For example, Uber did not require drivers to submit their fingerprints for a background check. "You are not using an industry-leading background process if you are not fingerprinting your drivers," said San Francisco DA George Gascón at a press conference when the suits were announced.
Uber also allegedly violated California's consumer protection law by operating at airports without authorization and charging customers fees for nonexistent airport "tolls" and fees that in part covered the background-check process, according to the District Attorneys.
To settle the suit, Uber agreed not to operate at California airports without permission from the airport authority and to pay $1.8 million in restitution to settle the charges over airport toll fees. In addition, the stipulated judgment filed in state court subjects the company to a permanent injunction prohibiting misleading statements regarding the safety of its transportation services or the background checks of its drivers.
The $25 million civil penalty may be reduced upon good behavior. The two counties accepted $10 million from Uber (divided evenly) and said payment of the remaining $15 million will be waived at the end of two years if the company complies with all of the terms of the permanent injunction.
To read the Los Angeles County DA's press release about the deal, click here.
To read the San Francisco DA's press release, click here.
Why it matters: "The result we achieved today goes well beyond its impact on Uber," San Francisco District Attorney George Gascón said in a press release about the agreement. "It sends a clear message to all businesses and to startups in particular, that in the quest to quickly obtain market share, laws designed to protect consumers cannot be ignored. If a business acts like it is above the law, it will pay a heavy price." His comment is certainly true in the case of Uber, which also faces consumer class actions involving similar allegations of exaggerated claims regarding background checks. Uber reached a deal with the nationwide class totaling $28.5 million, but a federal court judge has yet to sign off on the agreement.