9 ms·

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

109 points by lis 10y ago

CamelCaseName 10y ago
I would like to see where Uber's numbers came from. How did they overestimate wages by such a huge margin? (48% and 39%)
- RodericDay 10y ago
  They probably faked the numbers to scam people into driving for them and entrench themselves in the market.
  - jaclaz 10y ago
    ... or at least if it was anything different they completely failed to convince the FTC commission ...
- tyingq 10y ago
  Here's the actual FTC complaint: https://www.ftc.gov/system/files/documents/cases/1523082ubercmplt.pdf 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.
- drpgq 10y ago
  I wonder if those real numbers were based on a 40 hour week.
- CervezaPorFavor 10y ago
  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-claiming-it-misled-drivers-about-pay/ https://techcrunch.com/2017/01/19/uber-settles-ftc-lawsuit-c...
- parfe 10y ago
  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 https://news.ycombinator.com/item?id=8523104
kapilkale 10y ago
$33 / US driver... I'd say Uber came out on top here.
- wavefunction 10y ago
  And much of the monies won't even go to the drivers.
  - pyrale 10y ago
    I wonder if this opens ground for drivers to fill a class-action against Uber.
pyrale 10y ago
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.
tabeth 10y ago
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.
- kartan 10y ago
  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.
  - EdHominem 10y ago
    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.
gaius 10y ago
Pennies for Uber... a $2Bn fine might make them pay attention.
dustinmoris 10y ago
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.
- smeyer 10y ago
  > 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.
  - tornadoboy55 10y ago
    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..
    - cbcoutinho 10y ago
      Where can you ride an Uber here? I thought it was illegal/outlawed, and have avoided using it.
      - tornadoboy55 10y ago
        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.
kirykl 10y ago
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"
- mcintyre1994 10y ago
  > 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..
  - kirykl 10y ago
    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
  - tyingq 10y ago
    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.
    - rahimnathwani 10y ago
      "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.
deleted 10y ago
[deleted]
yeukhon 10y ago
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...

109 points by lis 10y ago

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

RodericDay 10y ago
They probably faked the numbers to scam people into driving for them and entrench themselves in the market.
- jaclaz 10y ago
  ... or at least if it was anything different they completely failed to convince the FTC commission ...
tyingq 10y ago
Here's the actual FTC complaint: https://www.ftc.gov/system/files/documents/cases/1523082ubercmplt.pdf 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.
drpgq 10y ago
I wonder if those real numbers were based on a 40 hour week.
CervezaPorFavor 10y ago
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-claiming-it-misled-drivers-about-pay/ https://techcrunch.com/2017/01/19/uber-settles-ftc-lawsuit-c...
parfe 10y ago
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 https://news.ycombinator.com/item?id=8523104

kapilkale 10y ago

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

wavefunction 10y ago
And much of the monies won't even go to the drivers.
- pyrale 10y ago
  I wonder if this opens ground for drivers to fill a class-action against Uber.

pyrale 10y ago

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.

tabeth 10y ago

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.

kartan 10y ago
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.
- EdHominem 10y ago
  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.

gaius 10y ago

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

dustinmoris 10y ago

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.

smeyer 10y ago
> 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.
- tornadoboy55 10y ago
  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..
  - cbcoutinho 10y ago
    Where can you ride an Uber here? I thought it was illegal/outlawed, and have avoided using it.
    - tornadoboy55 10y ago
      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.

kirykl 10y ago

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"

mcintyre1994 10y ago
> 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..
- kirykl 10y ago
  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
- tyingq 10y ago
  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.
  - rahimnathwani 10y ago
    "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.

deleted 10y ago

[deleted]

yeukhon 10y ago

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...