Uber to pay $20M to settle U.S. claims it misled drivers | Hacker News Reader

Uber to pay $20M to settle U.S. claims it misled drivers

reuters.com

109 points_cv7i57 comments

I suspect there's some legal strategy here, but this fine seems pretty meh. The real punishment should be paying them what they advertised: 600,000 * 0.10 (at least 10 percent of all drivers were paid less) * 15/hr (average advertised wage) * 40 hours = 36M minimum. More if you do a more granular analysis. Keep in mind, this is just paying them what they advertised. There should also be a large consequence for lying to begin with.

Without severe punishment for doing this, there's little reason to not do it. You and your team can just do a cost-benefit analysis and see if it's worth lying. Why not have a super severe punishment to discourage this type of behavior forever? Say 10% of all revenue since this was in place? This is just another practice that supports big-business. Large firms can easily absorb these kind of minimal fines. To pay they'll layoff the people who had nothing to do with this. Leadership isn't going to be affected by this.

All companies with revenue in the billions should be fined in the billions at minimum. As a society, are we going to allow companies to lie and deceive in the name of "disruption"? We already know how that went once during 2008 (of course it's not the same thing here).

EDIT:

I realize that I used the word 'fine', when really this is a settlement. They're not the same, but I hope the point I'm making still gets across.

For a long time in Spain fines for polluting were lower than the cost of actually fixing the issue. As you can expect factories continued polluting. Then that changes to bigger fines or even to stop the factory until the problems were fixed. In no time factories hired people to fix the problems and to make sure that it didn't happen again.

If a company is allowed to break an agreement with no consequences. How do we expect it to abide to the rules?

> As a society, are we going to allow companies to lie and deceive in the name of "disruption"?

I dont' see any disruption in Uber business model. They just offer a service without paying the proper taxes that other companies (taxi) have to pay, and without paying minimum wage or having other guarantees for the employees. That is as old as the rule of law and taxes have existed, the only novelty is that they use an app to do so. And apps have been already out for a while.

The disruption is that it surfaces all those problems which already exist for taxi drivers in the current system. They often work insane shifts, lose money if it's a slow day, etc. They have to enter into long exploitive contracts just to rent a medallion from the politically-connected rent-seeking monopolist who owns it.

Also, I often see drivers who don't resemble the photo ID in the cab at all. Likely they're unlicensed friends of the medallion renter, who help cover the insane shifts they rent the medallion for. But it negates much or all of the supposed value of taxis.

By giving those drivers an identical (somewhat crappy, as you point out) choice which doesn't lock them in, it's shaking up the taxi industry. And by reducing the value of the medallion it's hurting the monopolists who lobby to keep the number of medallions low, etc, which helps us in the long run with healthier markets.

As for Uber specifically, their value is surge pricing. And I say this as a customer, not a shareholder. I routinely wait for taxis that never come when I'm in cities that have banned Uber. But I never wait for an Uber where it exists - I can choose to pay if I want it. If I'm late for a meeting, I'll pay. It's a service that was unavailable before at any price.

IANAL (obviously), but how would the government levy a fine? This is a settlement, so there's no legal wrongdoing, correct? I assume all the charges were dropped?

Settlements often frustrate me. They seem like a "get out of jail free" card (I know no one is literally going to jail). Especially in Class Action suits. I'm afraid that most large companies just see it as a cost of doing business and prepare accordingly.

There is insurance for that kind of stuff I think...

The majority of corporate "settlements" in the U.S. are infuriating and they almost make the whole exercise in charging these companies pointless. If you're going to accuse a company of doing something illegal, make it count. Don't do it just so your lawyers/agency can score another "win".

Uber has such a history of simply ignoring any and all regulation until governments start fining them and dumping resources into enforcing laws.

People with strong libertarian values saw this as disruptive and helping break the Taxi monopolies. This may have been true initially, at least in some regions. (Uber drivers in NZ would tell me they use to work for Taxi services, and most of them made more when they switched to Uber. That was 2 years ago -- wonder if it's still true there).

I remember in Berlin, the laws changed and were enforced in such a way as Uber was just a call service for all the standard taxi companies, so it's the same price whether you use Uber or just flag one down.

The fact is that Uber is just another company and they use their money and position to just ignore laws. In the case of their self driving vehicles, the laws in California aren't even all that insane. They're basic laws around safety and liability for all self driving pilot programs, which other companies have applied for and gotten.

I realize people want cheaper taxis, but drivers need to be able to make a living. Yes, many of them are exploited by their taxi companies that take way too much off the top, but now we see Uber doing the exact same thing -- a bait and switch. It's a thankless job and companies like Uber really exploit the vast majority of them, except in markets where governments have really stepped in to put a stop to it.

There's a reason labour regulation and unions exists. Some of it may slow some business development or keep corrupt people in positions of power, but a lot of it originally started with the idea of stopping things like child labour, unsafe factory conditions and slave wages.

> I remember in Berlin, the laws changed and were enforced in such a way as Uber was just a call service for all the standard taxi companies, so it's the same price whether you use Uber or just flag one down.

Which defeats the whole purpose. Without the ability to pay more we don't encourage drivers to cover demand. Demand-based surge pricing is a feature.

> I realize people want cheaper taxis, but drivers need to be able to make a living.

That's silly. Landscapers need to make a living, which they ensure by not taking jobs at below cost. Ditto, everyone else except those in protected industries.

> There's a reason labour regulation and unions exists. Some of it may slow some business development or keep corrupt people in positions of power, but a lot of it originally started with the idea of stopping things like child labour, unsafe factory conditions and slave wages.

But few or none of these rules apply to taxi drivers because they're usually forced to work as independent contractors despite being like employees in all ways; we know that's not actually the issue cities have with Uber.

So why do we protect taxis? It's emphatically not to protect drivers (or we'd protect landscapers, etc...) but to protect the medallion-owners.

It doesn't cost a politician a penny to grant a monopoly. For them, it's just paper. And they claim the cash benefits ($x million raised on medallions) as an accomplishment despite that everyone suffers from then on. We didn't get here because some concerned and learned person did a study and decided it was best, we got it because some politically connected trolls got kickbacks (cash or favors) for making sure only the right people got the medallions. If medallions go away, so does that power.

I can't help myself but I really dislike Uber just for everything they do. Their model is entirely based on exploiting drivers at every corner just to provide users a little bit better service than what taxi companies already did for us. I think with technology we can do better than what Uber does.

> just to provide users a little bit better service than what taxi companies already did for us.

I'm not saying I'm a fan of all their business practices, but (at least in Boston) Uber has been a massive improvement over what taxi companies provided.

Same in the Netherlands. You can expect to pay ~€5 per KM on short drives, the drivers are all foreigners who purely taxi because they get a huge tax cut on the Mercedes they buy and they are always extremely rude. And if they notice you're in a pinch, they'll try to completely price gouge you. Drunk guys want to get home? That's 50 bucks (100/2) for 30km..

Where can you ride an Uber here? I thought it was illegal/outlawed, and have avoided using it.

You are correct, mostly. UberPOP (which directly competed with taxi's) has been outlawed. The more expensive UberX has not. There's also UberBLACK, but that's more for business people.

What's really sorely needed is Uber outside of the Randstand region though. Taxi's are even more of a monopoly there so for consumers it's either pay up or get fucked, which results in horrible customer experiences.

Depends where you are. Here in Friesland, the local public transportation company has made deals with taxis in the area to reduce/eliminate inaccessible places by offering cheap connections between (e.g. your house) to the nearest bus station. I use this service frequently if I don't want to drive, and it costs 1.50eu - the same trip if I were to just call a taxi would run 20eu.

In Denver the taxi's are horrible - half the time you smell puke or some horrible odor, the other half you have to wait an hour to just get a ride. I'm not saying I like Uber as a company, nor what they did to drivers, but they (as well as others like Lyft) have created a fresh fast way to get around and it costs the same as a taxi most of the time. It's hard to not flock to that.

The only reason for this better experience is because you're riding in a car that Uber doesn't have to maintain. There's a lot of Uber drivers who go out of their way to create a pleasant ride, which is what makes it great. If the drivers aren't getting compensated appropriately for this, then that's a huge problem in my opinion.

Then they will stop driving for Uber and find something else to do that pays them better.

I'm generally more concerned about the precedent Uber sets riding roughshod on legal regulations, but fairness of compensation is very much an emergent market phenomenon and people are free to not drive for Uber if they find themselves inadequately compensated.

The argument that people can just "not drive Uber" would be a fine one. Except that Uber has a history of drastically changing their compensation structure overnight.

This fall in Toronto, they reduced their UberEat compensation by half, overnight. People have rent, invoices, bills, and have car payment and comes to expect a certain amount of money to come in after week, and when you do those kind of changes overnight without warning people, this is just pure evil capitalism.

They use the same tactic when they open a new market, they advertise certain rate, people buy a car or rent a car to start working for Uber, and then few months down the line they reduce the price, and again, and again, and again, and then people are stuck with a car where they have to drive twice as much to bring back the same income.

I've talked to a number of drivers in India where Uber changes compensation structures every couple of months and everyone has got in knowing Uber can/will do these things - no one seems to be as credulous as you claim. They limit their risk exposures accordingly - many choose to drive for other car owners vs. invest in their own car.

I guess that's what I'm saying, these people should stop driving for Uber.

Uber created an incentive structure for drivers to give you a good experience.

There are still some taxis in my city that don't take a card. (Of course, they wait until after the ride to tell you that.) Uber or Lyft wins for me on convenience of booking and payment.

Just claim you don't have cash and would be unable to pay. A card reader will magically appear.

Bostonian here. Literally the only thing most cities need to do to get taxi service as good as Uber is to stop hard capping taxi numbers, or at least stop selling perpetual, tradable licenses and replace them with annual auctions. Uber might be greedy rent-seeking assholes, but they're far nicer than, say, Eddie Tuntunjian.

You also need a penalty for accepting a ride and never actually showing up. That's how useless the SF taxi system was when Uber started its more expensive offering.

>You also need a penalty for accepting a ride and never actually showing up.

A legitimately competitive market would solve that quickly.

It's zero sum, that's why Uber is able to do what they do. The drivers get shafted so you can have a cheap ride and Uber can be a billion dollar company.

Lol, you have cheap rides because Uber pays a part of it for you. If a ride is worth $10 to a driver then the driver still get $10 no matter if you pay $5 for the ride. Without Uber, a lot of people will be unemployed. Tell me how the drivers are getting shafted?

This is not any better. Burning investor money to undercut competition isn't a sustainable strategy - they'll eventually have to raise their prices, which I predict - given their history of integrity and high moral standards - will utterly fuck the taxi market up, to the levels unseen even in the old "taxi mafia" age.

Doesn't matter. If Uber doesn't work, Lyft will be happy to provide.

Really? Do any research whatsoever and you'll find that drivers are the ones footing the bill. Car purchasing and maintenance essentially equates to a sub minimum wage job.

I've been scammed by taxis on multiple occasions. Never been scammed by an Uber driver, and I know exactly what I'm paying before I get in.

If that's the case, it should theoretically easy for taxi companies to eat Uber's lunch by providing that same marginal benefit that consumers want and drivers will flock to them; that is, unless the taxi companies aren't treating their drivers any better.

I drove for them for a while. This is from an old email in 2014, they loved to ignore the costs drivers incur, and slyly referred to earnings instead of profit:

"NEW UBERX RATES

Uber’s goal is to ensure strong driver earnings and offer the best value to riders. Maintaining low prices will keep demand high into August and September, and help you do more trips during this time. From this promotion, we have learned that a 20% price cut will keep driver earnings higher than May peaks and keep demand at record levels. We have seen similar effects in other cities where lower rates increase trips and increase driver earnings.

In short:

- Average driver earnings will be higher than May levels - Uber’s 25% promotion to riders will end - Prices will be reduced by 20% for both riders and drivers"

> Prices will be reduced by 20% for both riders and drivers

Do they refer to their share of the fare as the driver's price? If so that's quite clever in that they can say the price you pay is going down when they give you a paycut..

They still took their commission off the top of any payout.

For the promotion they were subsidizing the rates at which drivers earned, to mask the % reduction to riders

Ugh, that's terrible. Since the highest fixed costs (fuel, car payment) are part of the driver's "earnings", it's clearly a more than 20% cut for the driver. Trying to act like both reductions are 20%, as if they should be the same is disingenuous.

"Since the highest fixed costs (fuel, car payment) are part of the driver's "earnings", it's clearly a more than 20% cut for the driver."

A couple of problems with your position:

- Fuel is not a fixed cost. It's a variable cost. More trips -> more miles driven -> higher fuel cost.

- The presence of large fixed costs (as you say 'car payments') means that increases in total revenue will have a tendency to increase overall profit

Let's say I have a business which has large fixed costs, but no variable costs. If my price per unit goes down by 20%, but I sell 25% more units, then my revenue is up. But, because my costs are fixed, my profits are also up by exactly the same amount.

If you had said that the drivers have large variable costs (fuel, maintenance) or that the opportunity cost of the drivers' own time was high, that would be more convincing.

You're right, wrong terminology. Was trying to express that the largest costs of the trip are the driver's fuel and car costs. By "fixed" meaning the driver has no obvious way to change those other than whatever car they bought in the first place. So, a 20% cut in revenue to the driver is significantly more than a 20% cut in earnings/profit.

"So, a 20% cut in revenue to the driver is significantly more than a 20% cut in earnings/profit."

I wasn't talking about the implication of a 20% reduction in revenue. I was talking about a reduction in 20% in per unit price, with a simultaneous increase of >=20% in unit volume. Together, these would create an increase in revenue.

Given that at least some costs (car payments) are fixed, we cannot know whether this 20% reduction in price will reduce driver profit, without knowing (i) the marginal cost per unit, and (ii) what the % increase in unit volume is.

For example, if fuel costs (and additional maintenance costs) are 25% of the price of a ride, then decreasing ride price by 20% whilst increasing # rides by >=27% would increase both revenue and driver profit.

Not on a per mile basis though. A pay cut combined with more hours isn't exciting to me.

"Not on a per mile basis though. A pay cut combined with more hours isn't exciting to me."

But this is highly dependent on your situation. If you're already working full time and/or have a comfortable and stable life style, this might be OK.

If someone has 20 hours available to work evenings during a week, but is only utilised for 10 hours per week, then an increase in hours (e.g. from 10->15), alongside a reduction in per-hour profit (e.g. $15->$12), might be welcome.

Small math quibble: a 20% reduction in per unit price requires a 25% increase in unit volume. 20% reduction = 0.8 times the price, 25% increase = 1/0.8 times the volume.

For a reducto ad absurdum that I use to help remember this thing: a 100% decrease in price isn't counterbalanced by a 100% increase in volume.

Oops. Yes, I stated 20% increase earlier in my answer. But I think the final number (27%) is correct. It's higher than your 25%, because I assumed non-zero fuel costs. So breaking even on revenue wouldn't be sufficient to break even on profit.

$33 / US driver... I'd say Uber came out on top here.

And much of the monies won't even go to the drivers.

I wonder if this opens ground for drivers to fill a class-action against Uber.

I would like to see where Uber's numbers came from. How did they overestimate wages by such a huge margin? (48% and 39%)

They probably faked the numbers to scam people into driving for them and entrench themselves in the market.

... or at least if it was anything different they completely failed to convince the FTC commission ...

Here's the actual FTC complaint: https://www.ftc.gov/system/files/documents/cases/1523082uber...

Seems to be a combination of overestimating the number of rides drivers could get, and underestimating the cost of vehicle ownership.

I wonder if those real numbers were based on a 40 hour week.

Marketing, obviously. They were technically correct, but the figures used were not "median income" (or whatever it is called).

TechCrunch has a table that shows the comparison between advertised and real earnings: https://techcrunch.com/2017/01/19/uber-settles-ftc-lawsuit-c...

Does it matter? They're liars. Whatever justification they used for their lie is irrelevant.

edit: I thought I commented on this story topic before and found this from over two years ago

https://news.ycombinator.com/item?id=8523104

Pennies for Uber... a $2Bn fine might make them pay attention.

Uber is burning a lot of money. We are talking about a few billions. As a user I find Uber and its likes useful because they enable me to travel around the city on-demand. But drivers aren't making enough and a just a single bad review can literally ban a driver from driving (lock your account and you'd have to explain to Uber rere).

Can Uber investors continue to be happy with the rate of money burning? Even if Uber does go to IPO, Uber can't continue to burn money forever. There's almost a burst I am selling...

It would be interesting to compel companies to publish exhausting anonymous data regarding their contractors. Without such datasets, it's hard to assess reasonably on whether these shemes are used legitimately, or merely to bypass labour regulation.

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