(Bloomberg) -- Uber Technologies Inc. agreed to pay $20 million to settle a U.S. Federal Trade Commission lawsuit over driver compensation claims and its auto leasing program.
|Misrepresentations
The FTC sued the San Francisco-based ride-hailing startup, saying Uber made false, misleading or unsubstantiated claims about how much drivers could earn on the service. The agency alleged Uber made similar misrepresentations about its vehicle financing program.
In its complaint, the FTC said Uber’s practices “have caused its drivers to suffer millions of dollars of injury.” Uber didn’t admit to or deny wrongdoing in its settlement.
“We’re pleased to have reached an agreement with the FTC,” Matt Kallman, an Uber spokesman, wrote in an emailed statement. “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.”
|Contractors vs. employees
With a valuation of $69 billion and a presence in almost every country, Uber has helped define what’s become known as the gig economy, in which smartphone owners work as contractors rather than full-time employees. Uber advocates for the flexibility of this arrangement, saying drivers can set their own hours and work for as much or as little as they’d like.
But governments and labor advocates around the world have challenged the company, saying it takes advantage of workers and doesn’t offer them the rights typically afforded to official employees.
The FTC complaint laid out several examples the agency said were false or misleading. In 2015, Uber’s website said the median annual income for a driver on its UberX service was $90,000 in New York City and $74,000 in San Francisco. The complaint alleged that the actual median income for drivers in New York was $29,000 less than Uber claimed and $21,000 less in San Francisco from May 2013 to May 2014.
The FTC also cited Craigslist ads that Uber used to recruit drivers, some of which said: “Make $20/hour.” In Boston, Minneapolis and Philadelphia, fewer than 10 percent of drivers earned the advertised hourly wage, the suit said, citing data Uber provided to the FTC.
“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,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a statement. “This settlement will put millions of dollars back in Uber drivers’ pockets.”
|Uber leasing program
Uber’s leasing program previously said drivers could “own a car for a little as $20/day,” or $140 a week. However, the median weekly payment for Uber drivers who entered into a lease from November 2013 to April 2015 was more than $200, according to the complaint. The FTC said more than 5,000 drivers entered into deals to finance cars through an Uber leasing program during that period.
The agency alleged that at the time Uber was making these claims, it knew they were false and acknowledged as much in communications with at least one auto company. The complaint said Uber advertised the leases as having unlimited mileage but that the agreements imposed annual limits and penalized drivers who ended their leases early.
The case is Federal Trade Commission v. Uber Technologies, 17-00261, U.S. District Court for the Northern District of California (San Francisco).
Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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