Uber has learned the hard way that consumer laws are strictly enforced in Australia, after the Federal Court ordered it pay a large fine of A$21 million, even though the misleading conduct caused little or no loss to consumers.

The Federal Court of Australia took this hard line when it ordered substantial penalties for contraventions of the Australian Consumer Law, in a proceeding brought by the Australian Competition and Consumer Commission (“ACCC”) -  Australian Competition and Consumer Commission v Uber B.V. [2022] FCA 1466 (7 December 2022) (O’Bryan J).

How did Uber mislead riders booking its services?

Uber B.V. (“UBV”) is a Netherlands company, and is part of the Uber Group which operates a global technology business. In Australia, UBV makes available the Uber platform to consumers (i.e. riders) via a mobile device application (Uber app) that enables independent providers of rideshare services (Uber drivers) to connect with passengers (riders) for trips. UBV collects the fare for the trip and pays the driver.

UBV was responsible for the displays on the Uber app and the website in Australia.

UBV agreed with the ACCC that the displays were misleading, and contravened the Australian Consumer Law (the “ACL”) in two ways: 

1. The fare range estimation

In the two-year period from 20 June 2018 to 31 August 2020, riders in Sydney looking to book the UberTaxi product via the Uber app and the Uber website saw an estimated fare range for their requested trip after they entered a destination address and confirmed the pickup location. The fare range estimation was inaccurate because it incorrectly inflated the likely fare. The actual fare was lower approximately 89% of the time. See image

Uber admitted that displaying the fare range estimation (the “UberTaxi Representation”) was misleading and deceptive conduct under section 18(1) of the ACL and was a misleading representation as to price under section 29(1)(i) of the ACL.

2. The cancellation fee warning

In the four-year period from 8 December 2017 to September 2021, if a rider selected the “Cancel Trip” option, the Uber app or the Uber website displayed a warning: “You may be charged a small fee since your driver is already on the way”. This warning appeared even if the rider cancelled the booking within the free cancellation period which was between 60 seconds and 5 minutes of being matched with a driver. The fee was between $6 to $10. See image

Uber admitted that the cancellation fee warning warning (the “Cancellation Representation”) was misleading and deceptive conduct under section 18(1) of the ACL and a misleading representation as to price under section 29(1)(i) of the ACL.

 

How were the penalties assessed?

 

Uber, having admitted the contraventions of the ACL, the Court was concerned only with assessing the penalties.

The Court took these matters into account:

Nature and extent of the contravening acts

There were a large number of contravening acts over a period of several years.

The UberTaxi Representation was displayed for approximately 114,679 trips where it exceeded the actual fare.

The Cancellation Representation was displayed 7.46 million times within the free cancellation period.

Loss or damage suffered

Riders who booked an UberTaxi service relying on the UberTaxi Representation (fare range), suffered no loss or damage most of the time because they paid a lower fare than they were quoted and were expecting to pay. Riders who decided not to book after viewing the inflated price estimate had numerous alternatives available, many at a lower price. There was no evidence that the high prices depressed demand and reduced their earnings, and so for UberTaxi drivers, there was no loss.

Despite the Cancellation Representation (the warning that a small fee will be payable), the vast majority of riders (more than 99%) who wanted to cancel, elected to proceed with the cancellation. For the less than 1% who did not cancel, assuming they did not cancel because of the warning, the Court estimated their loss to be approximately $700,000, which was a small loss in comparison with the revenue from the millions of bookings.  

Circumstances in which the contraventions took place

The Court said: “Consumer confidence is dependent upon consumers being given reliable, truthful and accurate information”. “Consumers do not have visibility over algorithm inputs [used to calculate the fare range] and therefore rely on Uber to provide fare estimates based on accurate pricing information … and … to provide truthful information regarding when a [cancellation] fee [is payable]”. [para 99, judgment]

Knowledge of Uber Group employees

What the Uber Group employees knew, and what they did was significant.

The UberTaxi Representation: The Court was told that: “The UberTaxi service was unique in respect of services offered through the Uber app in that it displayed an estimated fare range rather than an upfront price”. “It was not possible to move to an upfront pricing model because the technology to provide sufficient accuracy did not exist”. The Uber Group employees were aware of the limitations in calculating accurate UberTaxi fare estimates but did not monitor the level of functionality by testing it against actual fares. It fell short of a deliberate misrepresentation. The UberTaxi service was discontinued after the ACCC sent notices in 2020. [para 101, judgment]

The Cancellation Representation: The Court was told that from at least April 2019, Senior Managers of Uber Australia “were aware that more accurate cancellation warnings might give rise to more cancellations, which would have a negative financial impact on drivers and UBV”. The Court said that: “UBV and others should be deterred from conduct that might be carried out in the interests of maximising profits by deterring consumers from cancelling the provision of services that they no longer want.” [para 109, judgment]

The Court noted that while Uber employees undertook compliance training designed to make them “aware of Uber’s obligations under applicable competition and consumer protection laws, employees of UBV and Uber Tech did not receive training specifically in relation to Australian consumer protection laws”. [paras 117, 128 and 130 judgment]

Size and financial position

The Court noted that the applicable maximum penalty was 10% of the annual turnover of UBV.

The evidence was that “Uber is a large global organisation which generates very substantial revenue [which] exceeded $10 billion dollars annually worldwide from 2018 to 2021 … UBV’s revenue in Australia was in excess of $2b in 2018, $3b in 2019 and $1b in 2020”. 10% the Australian revenue would be between A$100 to A$300 million which was not appropriate in this case.

Another means of calculating the penalty was how many times the representations were viewed – which was approximately 7.46 million times in the case of the cancellation representation. This large number made it not appropriate in this case.

The Court therefore adopted loss to consumers as a helpful guide to the assessment of an appropriate penalty, coupled with deterrence.

Other matters

There were no previous contraventions; the contravening conduct is not ongoing; and UBV exhibited a high level of cooperation with the ACCC.

The penalties

Because there was little or no loss to consumers, the Court imposed substantial penalties for both specific and general deterrence: “which will signal both to UBV and other suppliers of services using digital technology the importance of compliance with the provisions of the Australian Consumer Law”. [para 131, judgment]

The UberTaxi Representation: The penalty was set at $3 million, which was lower than the penalty of $8 million agreed between the ACCC and UBV.  The Court’s reasoning was that this penalty was “many times the revenue and net income earned” from the 114,679 trips made where the fare range estimation was lower than the actual fare. There was no financial loss to consumers.

The Cancellation Representation: The penalty was set at $18 million, a significant factor being that the employees were aware that the cancellation warning was inaccurate and misleading in 2019 but did not take steps to change it because it “might give rise to more cancellations, which would have a negative financial impact on drivers and UBV”. The potential financial gain to UBV was small - it was the loss of a service fee from less than 1% of consumers.  The potential financial loss to consumers was “a very modest amount”.

In addition, the Court made declarations, an injunctive order, a corrective notice publication order and a compliance program order. Finally, the Court ordered UBV to pay $200,000 to the ACCC towards legal costs.  

Marketing Commentary by Michael Field from EvettField Partners

Uber Fails to put process in place to comply with the Australian Consumer Law

It should be obvious.

An international company such as UBV, which conducts business in Australia, should at the very least have a compulsory review and approval process in their business plans and go-to-market strategies to ensure compliance with local laws, including the Australian Consumer Law.

The Court noted that while Uber employees undertook compliance training designed to make them “aware of Uber’s obligations under applicable competition and consumer protection laws, employees of UBV and Uber Tech did not receive training specifically in relation to Australian consumer protection laws”.

The question should be asked of Uber management in Australia and at Uber Group level in the Netherlands “Why not?”.

Compliance with consumer laws is not a ‘nice to have’ or ‘we can deal with that if we run into trouble’. Consumer compliance is a non-negotiable requirement for all companies operating in Australia.

A comprehensive compliance process would include regular monitoring and reporting to alert management of any potential breaches and for management to act on them; and a thorough review and approval process for adjustments to the marketing message, or changes to customer-facing features on the app such as the fare range estimator and the cancellation fee warning.

It is a failure of process for the commercial or marketing teams to be able to display warnings and pricing structures on the app which fail to comply with the Australian Consumer Law, and may well invite attention from the consumer watchdog, the ACCC.