erin mitchell, comment, uber's loophole in the regulatory system

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COMMENT

Uber’s Loophole in the Regulatory System

I. INTRODUCTION .................................................................. 76

II. SUITS BY CUSTOMERS AND UBER’S LIABILITY FOR ITS

DRIVERS ............................................................................. 78 A. Uber’s Avoidance of Liability for its Drivers ........... 78 B. Uncertainty About Insurance Coverage ................... 79 C. Surge Pricing Controversy ........................................ 80

III. SUITS BY DRIVERS AND UBER’S DUTY TOWARDS ITS

DRIVERS ............................................................................. 82 A. Violations of Wage and Hour Laws.......................... 83 B. Misrepresentation of Gratuity .................................. 84 C. Misclassifying Drivers in Order to Avoid Expenses 85

IV. SUITS BY COMPETITORS AND UBER’S DUTY TO THE

TRANSPORTATION INDUSTRY ............................................ 86 A. False Advertising.......................................................... 87

1. Lanham Act ........................................................ 87 2. Misleading Customers to an Association

Between Uber and Cab Companies................... 88 3. Misrepresenting Certain Features of Its

Service ................................................................. 89 B. Unfair Competition ................................................... 91

V. REGULATORY SPLIT ........................................................... 94 A. Regulatory Changes In Favor of Ride-Sharing

Companies ....................................................................... 94 B. Regulatory Action Against Ride-Sharing Companies 95

VI. CONCLUSION ...................................................................... 96

This Comment received the Akin Gump Strauss Hauer & Feld LLP Award for

Best Paper in Corporate, Securities, or Business Law. I would like to thank the editors of

the Houston Law Review for their diligent work in preparing this Comment for publication.

76 HLRe: OFF THE RECORD [6:1

I. INTRODUCTION

With the advent of GPS technology, smart phone applications

and zero-contact transactions, ride-sharing services have exploded

onto the scene, displacing traditional taxi and livery services

around the world.1 The draw of ride-sharing services is that they

offer choice and control that taxicab companies cannot at typically

lower rates and faster service times.2 The leading ride-sharing

company this Comment will focus on is Uber Technologies

(“Uber”), a company founded by eccentric tech entrepreneur Travis

Kalanick in 2010.3

Uber drivers often aren’t subject to municipal insurance

standards established for transportation companies.4 Many

cities, regulatory authorities, local cab and livery services, and

customers have fought back against the entry of ride-sharing

services and the legalization of their operation through lawsuits

and regulatory fines against both the companies and their

drivers.5

Uber attempts to avoid liability from these claims by claiming

to be a technology platform, rather than a transportation

company, because they connect people who need rides with

independent contractors who can provide them.6

1. See Boston Cab Dispatch, Inc. v. Uber Technologies, Inc., Civil Action No. 13–

10769–NMG, 2014 WL 1338148 (D. Mass. March 27, 2014) at *2 (discussing the differences

and similarities between Uber’s services and traditional taxicab services).

2. Nick Judd, A Recent History of Uber: Lobbying, Lawsuits and a ‘Scuffle’, VICE

(July 18, 2014), http://www.vice.com/read/a-recent-history-of-uber-lobbying-lawsuits-and-

a-scuffle-718.

3. Alyson Shontell, All Hail the Uber Man! How Sharp-Elbowed Salesman

Travis Kalanick Became Silicon Valley ’s Newest Star, BUSINESS INSIDER (Jan. 11,

2014), http://www.businessinsider.com/uber-travis-kalanick-bio-2014-1; Richard

Feloni, How Uber CEO Travis Kalanick Went From A Startup Failure To One Of The

Hottest Names In Silicon Valley , BUSINESS INSIDER (Sept. 24, 2014),

http://www.businessinsider.com/uber-ceo-travis-kalanicks-success-story-2014-

9#ixzz3HTlurMXY.

4. Dara Kerr, How risky is your Uber ride? Maybe more than you think, CNET (Oct. 8,

2014), http://www.cnet.com/news/how-risky-is-your-uber-ride-maybe-more-than-you-think/.

5. See Yellow Group LLC v. Uber Technologies Inc., No. 12 C 7967, 2014 WL

3396055, at *4 (N.D. Ill. July 10, 2014) (describing plaintiffs ’ arguments that Uber’s

false advertising practices are injuring local taxicab companies by harming their

reputation and sales); see also Manzo v. Uber Technologies, Inc., No. 13 C 2407, 2014

WL 3495401, at *2 (N.D. Ill. July 14, 2014) (describing plaintiffs ’ allegation that Uber

“misrepresents its rates, misidentifies itself as a transportation company, and illegally

operates in violation of Chicago Municipal Code provisions”).

6. Richard N. Velotta Uber fight with taxi regulators headed to court Wednesday,

LAS VEGAS REVIEW-JOURNAL (Oct. 27, 2014), http://www.reviewjournal.com/news/traffic-

transportation/uber-fight-taxi-regulators-headed-court-wednesday; Uber, The Company,

https://www.uber.com/about; Cassandra Angel, What’s Next in Uber Litigation, GORDON-

CREED KELLEY, HOLL & SUGERMAN (Jan. 13, 2014), http://www.gkhs.com/whatsnext-uber-

litigation/ (describing Uber’s assertion that its terms of service absolve it of liability for torts

committed by drivers).

2015] UBER’S LOOPHOLE 77

Uber should absorb the same liabilities and legal duties that

cab companies are subject to under state and federal law.7

Although some state authorities have chipped away at Uber’s

efforts to avoid liability, uncertainty remains for passengers hurt

by Uber drivers.8 Similarly, Uber has avoided many obligations

owed to its own drivers such as minimum wage, fair tipping

policies, and respondeat superior duties.9 Further, Uber has

enjoyed an unfair advantage in the transportation service industry

by ignoring certain industry regulations and practices, including

false advertising and unfair competition laws.10 Legislators must

take action to update outdated regulations and explicitly apply

them to Uber and other ride-sharing companies in order to protect

customers, drivers, competitors, and the future of tech innovation

in the transportation industry.11

This Comment proceeds in six parts. Part II will focus on suits

by customers and Uber’s liability for its drivers. Part III will

explore suits by drivers and Uber’s duty towards its drivers. Part

IV will discuss suits by competitors and Uber’s duty to the

transportation industry. Part V will analyze the jurisdictional

split in the regulatory action taken in response to Uber. Part VI

concludes with proposed legislative solutions to better control

Uber’s method of operations.

7. Sam Frizell, A Historical Argument Against Uber: Taxi Regulations Are There for

a Reason, TIME (Nov. 19, 2014), http://time.com/3592035/uber-taxi-history; Vauhini Vara,

Uber, Lyft, and Liability, THE NEW YORKER (Nov. 4, 2014),

http://www.newyorker.com/business/currency/uber-lyft-liability (identifying that

lawmakers are becoming aware of the “ambiguous state of affairs” regarding internet-based

companies and the need for regulation).

8. Mike Isaac & Natasha Singer, California Says Uber Driver Is Employee, Not a

Contractor, N.Y. TIMES (June 17, 2015), http://www.nytimes.com/2015/06/18/business/uber-

contests-california-labor-ruling-that-says-drivers-should-be-employees.html; Daniel

Fisher, The Big Question with Uber, Airbnb and the Rest of the ‘Sharing Economy’: Who to

Sue?, FORBES (March 25, 2015), http://www.forbes.com/sites/danielfisher/2015/03/25/the-

big-question-with-uber-airbnb-and-the-rest-of-the-sharing-economy-who-to-sue/

(describing the uncertain state of the law with respect to Uber’s liability for its drivers’

actions); Joe Fitzgerald Rodriguez, Uber Settles Wrongful Death Lawsuit of Sofia Liu, SAN

FRANCISCO EXAMINER (July 14, 2015), http://www.sfexaminer.com/uber-tentatively-settles-

wrongful-death-lawsuit-of-sofia-liu/ (describing California state regulations that have

arisen after the death of a pedestrian caused by an Uber driver); Kate Williams & Kurtis

Alexander, Uber sued over girl’s death in S.F., SAN FRANCISCO CHRONICLE (Jan. 28, 2014),

http://www.sfgate.com/bayarea/article/Uber-sued-over-girl-s-death-in-S-F-5178921.php;

Vara, supra note 7 (discussing Uber’s liability for its drivers).

9. Cotter v. Lyft, Inc., 60 F.Supp.3d 1059, 1061 (N.D. Cal. Aug. 7, 2014) (arguing

that wage hours and laws should apply to ride-sharing drivers just as they apply to taxicab

drivers); see infra Part III (discussing Uber’s duty towards its drivers).

10. See Yellow Group, 2014 WL 3396055, at *4 (describing plaintiffs’ false advertising

claims); see also Manzo, 2014 WL 3495401, at *2 (N.D. Ill. July 14, 2014) (recounting

plaintiffs’ unfair competition claims); see infra Part IV (discussing Uber’s duty to the

transportation industry).

11. Vara, supra note 7.


II. SUITS BY CUSTOMERS AND UBER’S LIABILITY FOR ITS DRIVERS

Operating as a technology company with “contractors” instead

of employees has given Uber an argument against application of

typical respondeat superior rules.12 Uber considers its drivers

“hired contractors,” when in actuality they operate exactly like

employees who provide services and reputational foundation for

the company in return for compensation — an arrangement that

should undoubtedly give rise to respondeat superior liability.13

This loophole has caused many difficulties in litigation against the

company and could result in under-compensation of harmed

customers.14 This Section discusses the negative consequences of

Uber’s business model for consumers, including the difficulty in

suing and collecting from Uber for its drivers’ negligence and

criminal activity, insufficient insurance coverage for accidents,

and price gouging caused by the company’s “Surge Pricing”

policy.15

A. Uber’s Avoidance of Liability for its Drivers

When the actions of Uber drivers cause harm to passengers,

Uber denies all liability for the harm.16 Without respondeat

superior liability, plaintiffs can be left without adequate recourse

in the inevitable event that one of the thousands of Uber drivers

commit a tort.17 In Oklahoma City, a driver allegedly verbally

assaulted a woman and punched a man during an Uber drive.18

12. Mazaheri v. Doe, 2014 WL 2155049 (W.D. Okla. May 22, 2014), appeal dismissed

(10th Cir. 14-5189) (Nov. 20, 2014) (acknowledging Uber’s argument that its driver is not

an employee, but declining to address the issue); Search v. Uber Technologies, Inc., 2015

WL 5297508 (D.D.C. Sept. 10, 2015) (citing Uber’s argument that it has no respondeat

superior liability); Judd, supra note 2; Julie Zauzmer & Lori Aratani, Man Visiting D.C.

Says Uber Driver Took him on Wild Ride, WASHINGTON POST (July 9, 2014),

http://www.washingtonpost.com/blogs/dr-gridlock/wp/2014/07/09/man-visiting-d-c-says-

uber-driver-took-him-on-wild-ride; Jordan Novet, Uber and its driver are sued after fatal

New Year’s Eve Accident, VENTURE BEAT (Jan. 27, 2014),

http://venturebeat.com/2014/01/27/uber-and-its-driver-are-sued-after-fatal-new-years-eve-

accident.

13. Judd, supra note 2.

14. Id.; Williams & Alexander, supra note 8; Fisher, supra note 8.

15. Compare Williams & Alexander, supra note 8 (discussing a lawsuit’s attack on

Uber’s distracted driving practices, state oversight in regulating Uber, and the gaps in

insurance coverage for ride-sharing services) with Vara, supra note 7 (scrutinizing Uber’s

current insurance policy coverage and illustrating the need for required expanded

insurance coverage for drivers); see Alana Horowitz, Uber Gets Failing Grade From Better

Business Bureau, HUFFINGTON POST (Oct. 11, 2014),

http://www.huffingtonpost.com/2014/10/11/uber-better-business-bureau-f-rating_n_59698

94.html (criticizing Uber’s surge pricing policy).

16. Williams & Alexander, supra note 8; Angel, supra note 6.

17. Fisher, supra note 8.

18. Doe, 2014 WL 2155049; Judd, supra note 2.


Another Uber driver took passengers along on a high-speed chase

in Washington DC.19 In Los Angeles, an Uber driver was arrested

on suspicion of kidnapping for purposes of sexual assault, and

there is currently an ongoing sexual assault investigation of an

Uber driver in Seattle.20 These lawsuits have illuminated Uber’s

efforts to find loopholes, such as classifying drivers as independent

contractors or classifying the company as a technology company,

to avoid liability for its drivers’ actions.21

It is important that legislators clarify that Uber and other

ride-sharing companies are in fact transportation companies and

will be held liable for the drivers that they choose to hire and allow

to operate under their name.22 Otherwise, Uber is being unjustly

enriched by benefitting from the asset of their drivers’ services

while not being burdened by their liabilities, and innocent victims

are undercompensated for damaging and traumatic events.23

B. Uncertainty About Insurance Coverage

The lack of clarity on Uber’s liability for its drivers also leads to

uncertainty about the reach and coverage of their insurance.24

California recently passed new rules requiring ride-sharing

companies to carry commercial liability insurance (a minimum of $1

million coverage per incident) regardless of whether the driver is

personally insured when in transit or during trips arranged by the

Uber app.25 It is unclear, however, whether the rule covers other job-

related activities in between rides, such as checking on fares.26

Therefore, Uber drivers are often backed by commercial insurance

only while carrying passengers.27 This situation presents a huge gap

in insurance coverage when drivers are actively using their wireless

devices but are not technically driving customers.28 For example, an

Uber driver involved in an accident resulting in a child fatality was

19. Id.; Zauzmer and Lori Aratani, supra note 12.


21. Colton Lochhead & Ricardo Torres, Nevada puts stop to ridesharing Uber for now,

LAS VEGAS REVIEW-JOURNAL (Oct. 24, 2014), http://www.reviewjournal.com/news/las-

vegas/nevada-puts-stop-ridesharing-uber-now.

22. See Lochhead & Torres, supra note 21; Laurie Segall, Uber CEO: Our Growth is

Unprecedented, CNN (June 12, 2014), http://money.cnn.com/2014/06/12/technology/

innovation/uber-ceo-travis-kalanick.

23. See Novet, supra note 12.

24. Vara, supra note 7; Williams & Alexander, supra note 8.


26. Id.; Williams & Alexander, supra note 8 (identifying California’s oversight in

passing the law and the need for a rule to sufficiently address the ambiguities).

27. Vara, supra note 7 (showing that Uber could provide up to a million dollars in

liability insurance if a driver is involved in an accident while there was a passenger in the

car, but denies any liability if there is no passenger in the car).

28. Id.


logged into the Uber app at the time of collision, but was between rides

and not driving customers.29 For this reason, Uber claims that

insurance won’t cover the accident.30 While this suit was settled out

of court for an undisclosed sum, it has motivated newly proposed

California legislation that would raise insurance requirements for

drivers in between fares.31 It is important that such requirements are

aggressively pursued in California and in other states. Such a gaping

loophole encourages Uber to avoid liability through technicalities and

turns relatively straightforward insurance claims for vehicle

accidents into legal nightmares.32

C. Surge Pricing Controversy

Finally, customers have repeatedly complained that Uber’s

“Surge Pricing” policy takes advantage of uninformed passengers.33

Under its Surge Pricing policy, Uber charges a higher rate during

busy hours such as storms, holidays, or weekends.34 The app notifies

the passenger of the surge price and asks them to accept that price

before accepting the ride.35 Uber defends this policy under the theory

that surge pricing gets more drivers on the road during the busiest

times, which eventually brings prices back to normal levels because

there is more supply to meet the increased demand.36

Consumers across the country have complained they were

told the final cost of the service through the app, the driver, and

the consumer’s receipt, and were then charged a substantially

29. Novet, supra note 12; Williams & Alexander, supra note 8.

30. Williams & Alexander, supra note 8 (alleging that Uber denied insurance

protection that would have covered Sophia’s family’s injuries and the driver).

31. See Rodriguez, supra note 8; Vara, supra note 7 (explaining that California

Governor Jerry Brown signed into law “new requirements requiring that ride -sharing

companies provide at least secondary insurance (which would supplement driver’s

primary coverage) from the moment the app is turned on, rather than only when the

drivers have accepted or are transporting passengers” in September 2014); see also

Josh Richman, New Uber, Lyft, Sidecar Insurance Rules Signed Into Law by Gov. Jerry

Brown, (Sept. 17, 2014), http://www.mercurynews.com/business/ci_26554062/new-

insurance-rules-uber-lyft-and-sidecar-into (stating “once again California is leading

the way in forging public policy to meet the needs of new innovations”).


33. Horowitz, supra note 15; Caroline Moss, 26-Year-Old Successfully Crowd Funds

to Pay for Her $362 Halloween Uber Ride, BUSINESS INSIDER (Nov. 2, 2014),

http://www.businessinsider.com/women-raises-362-to-pay-for-uber-ride-2014-11; Annie

Lowrey, Is Uber’s Surge-Pricing an Example of High-Tech Gouging?, N.Y. TIMES (Jan. 10,

2014), http://www.nytimes.com/2014/01/12/magazine/is-ubers-surge-pricing-an-example-

of-high-tech-gouging.html?_r=0.

34. Horowitz, supra note 15.

35. Id.

36. Id. (arguing that airlines and hotels use the exact same concept); What Is Surge

Pricing?, https://help.uber.com/h/6c8065cf-5535-4a8b-9940-d292ffdce119 (defining surge

pricing and explaining that the purpose is to “ensure reliability” during the busiest times).


larger amount.37 One customer was recently charged $362.57 (9x

surge price) for a 22 minute Uber ride on Halloween night, costing

her about 80% of the funds in her account.38 While the woman was

aware of the surge pricing policy, she was completely unaware of

the extreme level to which it would be taken, and felt that a ride

at this rate “should never be justified, even on Halloween.”39

Uber’s surge pricing policy has also come under fire following

significant price spikes during emergency situations. Uber charged

four times the usual rate during the recent Sydney hostage siege.40

In December 2014, a gunman took several hostages in downtown

Sydney, Australia.41 Uber charged customers a minimum of A$100

($82) for a ride out of the area as a result of their automatic surge

pricing policy.42 Similarly, Uber doubled prices following Hurricane

Sandy’s destruction of public transportation in New York and the

resulting high need for ride services.43 In response to these publicity

nightmares, Uber promised that it would cap surge prices in

northeastern cities during the impending blizzards of early 2015.44

Prices will still be extremely high during the storms, however, with

the ceiling fixed at 2.8 times the normal price in New York and 2.9

times in Boston.45

Many customers who have been subjected to the horrific

surprise of surge pricing after merely looking for a safe ride home

feel “taken advantage of and cheated by the Uber name.”46 Uber

users often have no other viable alternatives in such

circumstances, whether it be because they don’t have their wallet

on them or because they don’t feel safe waiting extended periods

37. Horowitz, supra note 15; contra Dan Kedmey, This is How Uber’s ‘Surge Pricing’

Works, TIME (Dec. 15, 2014), http://time.com/3633469/uber-surge-pricing/ (alleging that the

Uber app is very clear about the level of surge pricing, requiring users to agree to pay that

level and never charging any more than what the customer initially agreed to).

38. Moss, supra note 33.

39. Id.

40. Naina Bajekal, Uber Charged 4 Times Its Usual Rate During Sydney Hostage

Siege, TIME (Dec. 15, 2014), http://time.com/3633304/uber-sydney-hostage-surge-pricing.

41. Id.

42. Id.

43. Shara Tibken, Storm Surge: Uber just doubled car service pricing in NYC, CNET

(Nov. 1, 2012), http://www.cnet.com/news/storm-surge-uber-just-doubled-car-service-

pricing-in-nyc.

44. Ben Geier, Uber caps price hike during blizzard, FORTUNE (Jan 26, 2015),

http://fortune.com/2015/01/26/uber-cap-prices-storm.

45. Id.

46. Moss, supra note 33; Jason Knowles, Uber Ride to Airport Costs Rider $277 with

Surge Pricing, ABC 13 (Feb. 12, 2014), http://abc13.com/archive/9429903/; Dug Begley,

UPDATE: Almost $250 for 13 miles: Uber’s ‘surge pricing’, THE HOUSTON CHRONICLE (Dec.

30, 2014), http://blog.chron.com/thehighwayman/2014/12/almost-250-for-13-miles-ubers-

surge-pricing (quoting a disgruntled user’s opinion that Uber’s “price gouging needs to be

brought to people’s attention”).


for other transportation services.47 Uber hides under an image of

low prices and convenience and takes advantage of passengers

when they need ride services most.48 While it is the simplest

economic principle that prices rise when demand increases, no

company should be able to use that theory as an excuse to exploit

their own customers.49

In order to control such astronomical prices, legislators should

limit the amount of money Uber may charge at peak times.50 There

are similar regulations that limit the prices that taxi drivers may

charge, regardless of the date or level of demand.51 While the surge

pricing framework operates slightly differently from ordinary taxi

pricing policies by basing prices on current demand rather than

consistent profit models, legislation is still necessary to limit the

amount that may be charged per mile driven.52 After all, fares

increase substantially faster when automatically multiplied by a

certain factor than when adding a few more cents per mile.53

Therefore, it is even more necessary to regulate the prices charged

by ride-sharing companies, and Uber should be held to standards

equal to those that taxi companies are held to.54

III. SUITS BY DRIVERS AND UBER’S DUTY TOWARDS ITS DRIVERS

Uber’s policy of treating its drivers as independent

contractors instead of employees is not only detrimental to the

customers who interact with Uber drivers, it is also detrimental to

the drivers themselves.55 Drivers are deprived of employee

47. See Bajekal, supra note 40 (describing the Sydney hostage situation and

customers’ efforts to get out of the danger area); see also Tibken, supra note 43 (explaining

the increased need for transportation services during and after natural disasters).

48. Horowitz, supra note 15; Begley, supra note 46.

49. Lowrey, supra note 33 (suggesting that “[m]arket efficiency is not always the

same thing as consumer benefit” and that Uber’s surge pricing policy might “work in the

short term but alienate customers in the long term.”).

50. Horowitz, supra note 15; Eric Roper, Taxi Companies Want Limits on Lyft, UberX

Pricing, STAR TRIBUNE (July 2, 2014), http://www.startribune.com/local/

blogs/265440131.html (suggesting the “complete absence of the City’s knowledge about or

oversight on [transportation network company] fares raise serious concerns that the [Uber]

model is quite simply one where technology is used to sell rides to the highest bidders, and

to de facto refuse rides to lower-fare passengers”).

51. City of Chicago Business Affairs & Consumer Protection (BACP), Passenger

Information,

http://www.cityofchicago.org/city/en/depts/bacp/supp_info/2012_passenger_information.ht

ml (explaining that the BACP oversees taxicabs in Chicago and listing approved taxicab

fare amounts).

52. Roper, supra note 50.

53. Id. (explaining that “[u]nlike taxis, which are limited to charging the meter rate,

Lyft and UberX increase rates based on demand.”).

54. Id.

55. Cotter, 60 F.Supp.3d at 1061; Judd, supra note 2.


benefits and full gratuity.56 They are also forced to cover operating

expenses and to continuously update and improve their vehicles.57

The IRS identifies individuals as independent contractors if “the

payer has the right to control or direct only the result of the work

and not what will be done and how it will be done.”58 In other

words, workers are not independent contracts if the employer has

the “legal right to control the details of how the services are

performed.”59 Uber controls the details of its drivers’ services

through its company policies for driver and vehicle standards, its

defined payment structure, and its prescribed method of

operations for engaging and transporting customers.60 Therefore,

Uber drivers are clearly not independent contractors under the

IRS definition of such.61

By passing legislation that forces Uber to recognize its status

as a transportation company, drivers will have access to the

support and benefits that they deserve.62 This Section will

examine the detrimental effects that Uber’s wage and hour law

violations, gratuity policy misrepresentations, and efforts to avoid

paying expenses have on the company’s drivers.63

A. Violations of Wage and Hour Laws

Uber’s policy of treating its drivers as independent

contractors presents many employment law issues.64 Drivers are

deprived of minimum wage and other employee rights.65 Minimum



58. Independent Contractor Defined, IRS.GOV (last visited Sept. 9, 2015),

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-

Contractor-Defined.

59. Id. (clarifying that even if a worker is given freedom of action, they are not an

independent contractor if their services are controlled by an employer).

60. See Uber, Uber Background Checks, http://blog.uber.com/driverscreening

(detailing Uber’s screening process for drivers and vehicles); see also Boston Cab, 2014 WL

1338148, at *2 (describing Uber’s standardized method of operations); see also Judd, supra

note 2 (providing Uber’s payment structure of 80% of the fare going to the drivers while

Uber collects a 20% commission).

61. Independent Contractor Defined, supra note 58.


63. See id. (illustrating the burdens and costs that Uber passes on to its drivers); see

also Cotter, 60 F.Supp.3d at 1061 (reflecting plaintiffs’ allegation that Uber drivers are

deprived of minimum wage and hour laws).

64. See Velotta, supra note 6 (stating that Uber does not consider its drivers as

employees, but rather as independent contractors that the application connects with willing

customers).

65. Cotter, 60 F.Supp.3d at 1061; contra Ellen Huet, Uber’s Newest Tactic: Pay Drivers

More Than They Earn, FORBES (July 7, 2014),

http://www.forbes.com/sites/ellenhuet/2014/07/02/ubers-newest-tactic-pay-drivers-more-than-

they-earn (raising the idea that Uber drivers could potentially take home more than the revenue

collected on their fares due to a new pricing structure, which would result in very high wages).


wage and other employment laws are beneficial to the health and

success of society.66 Furthermore, the IRS requires independent

contractors to pay a Self-Employment Tax in order to receive

Social Security and Medicaid benefits.67 This tax can be quite

expensive and can quickly deplete drivers’ already unregulated

wages.68

For these reasons, drivers in California and other areas of the

country have filed class action suits to require Uber to classify all

drivers nationwide as employees and not independent

contractors.69 In one such case, Cotter v. Lyft, the court sidestepped

the issue, leaving room for further suits demanding a change in

classification and for regulatory action.70 If regulators took action

to force Uber to classify their drivers as employees, the drivers

would have access to the rights and benefits that they deserve and

avoid paying taxes they shouldn’t be responsible for.71

B. Misrepresentation of Gratuity

Due to the nature of Uber’s pricing policy, there is a common

misconception that Uber rides are gratuity-free.72 In actuality, the

fare that Uber charges has a 20% gratuity automatically included.73

This gratuity, however, does not belong solely to the driver but is split

between the company and the drivers.74 The vast majority of

customers are unaware of this split.75 Drivers argue that if customers

were informed that not all of the gratuity was going towards the

driver, they would be more likely to give an additional tip to the driver

66. Frances Coppola, Why We Need Minimum Wage, FORBES (Jan. 13, 2014)

http://www.forbes.com/sites/francescoppola/2014/01/13/why-we-need-a-minimum-wage

(discussing the benefits of minimum wage on workers, taxpayers, firms, and society as a

whole).

67. Independent Contractor Defined, supra note 58 (explaining that if an employer-

employee relationship exists, regardless of what the relationship is called, the employee’s

earnings are not subject to Self-Employment Tax).

68. Id.

69. Id.

70. Cotter, 60 F.Supp.3d at 1061 (holding that where the work at issue is performed

primarily outside of California, California’s wage and hour laws do not apply).

71. Id.

72. See Do I Have to Tip my Driver?, https://help.uber.com/h/1be144ab-609a-43c5-

82b5-b9c7de5ec073 (outlining Uber’s policy that “there’s no need to tip”); see also Maya

Kosoff, Uber’s Drivers Say They Don’t get Any Money From All-Inclusive Fares – And They’re

Furious, BUSINESS INSIDER (Sept. 17, 2014), http://www.businessinsider.com/ubers-

drivers-say-they-dont-get-any-tip-money-from-all-inclusive-fares-2014-9 (describing

customer’s’ confusion about Uber’s tipping policy and the lack of options for willing

customers to add a tip to their fare).

73. . See Yellow Group, 2014 WL 3396055, at *2 (discussing Uber’s gratuity policy);

see also Change UberTAXI Tip Amount, https://help.uber.com/h/8fafa355-c0cb-4fc4-b094-

b5894004ff33 (providing Uber’s explanation for the hidden gratuity).

74. Judd, supra note 2; Yellow Group, 2014 WL 3396055, at *2.

75. Yellow Group, 2014 WL 3396055, at *2.


for his performance.76 Thus, the pricing policy deprives the driver of

wages that rightfully belong to him as payment representing the

customer’s appreciation for the performance of a safe and efficient

job.77 Just as employees in the service industry are entitled to accept

the full gratuity that a customer is willing to offer, Uber drivers

should be able to receive the full amount of gratuity for their services,

and customers have a right to know what they’re paying for.78

C. Misclassifying Drivers in Order to Avoid Expenses

Because Uber drivers are classified as independent

contractors and not employees, they are responsible for paying

expenses that would normally be covered by an employer.79 These

expenses include gas and vehicle maintenance, which can become

very expensive.80 Uber is benefitting from the use of these vehicles

without compensating drivers for depreciation and other expenses

of vehicle use.81 Due to the lack of minimum wage restrictions, the

compensation drivers do receive for their services are hardly

enough to cover such expenses, let alone compensate them for their

time and efforts.82 Forcing Uber to consider drivers as employees

and the vehicles as company assets would cause the company to

take responsibility for the expenses it is entitled to and allow the

drivers to act as normal employees.83

Whether it’s hours, wages, gratuity, or expense coverage, the

treatment of Uber drivers comes down to their classification as

independent contractors instead of employees.84 By changing their

classification, regulation will change the rules on how they must

76. Manzo, 2014 WL 3495401, at *1.

77. Id.

78. Id.; Manzo, 2014 WL 3495401, at *1.


80. See Kate Rogers, Lawsuits Facing Uber, Lyft could Alter Sharing Economy, CNBC

(Feb. 20, 2015), http://www.cnbc.com/id/102435316# (describing two separate class-action

lawsuits faced by Uber and Lyft filed in San Francisco seeking a ruling on full employee

status for Uber and Lyft drivers and reimbursement for expenses including gasoline and

car maintenance costs, which they would normally receive if they had employee standing

in California).

81. See Judd, supra note 2 (describing how Uber’s frequent changes in policies put “a

strain on drivers’ wallets”).

82. Id.

83. Id.; see Frizell, supra note 7 (alleging that “a big reason Uber has “grown so

quickly” is that it’s not regulated the same way that traditional taxi services are.”); see

Rogers, supra note 80 (explaining the legal implications of drivers achieving full employee

status).

84. See Judd, supra note 2 (discussing an Illinois state bill that sets new rules

for Uber such as prohibiting drivers from working more than 10 hours a day); see also

Velotta, supra note 6 (explaining how Uber vows to provide legal support and financial

resources to drivers who have received citations from the City of Las Vegas yet still

refuses to recognize drivers as employees and offer support for other employment

purposes).


be treated, and consequentially force Uber to operate as a

standard transportation company.85

IV. SUITS BY COMPETITORS AND UBER’S DUTY TO THE

TRANSPORTATION INDUSTRY

The most active opposition to Uber’s method of operations has

come from other transportation companies that provide similar

taxi and livery services.86 The companies claim that Uber is

allowed to operate “above the law” and is given an unfair

advantage over other transportation services by operating under

basically no regulation.87 This allows Uber to misrepresent its

services, mislead its customers, and charge prices that other

transportation companies can’t compete with.88

Courts have been reluctant to find that taxi and livery

companies are directly and substantially injured by Uber’s

practices.89 Absent any current solution in the common law, it is

necessary to act through regulation in order to protect competition

in the transportation industry.90 This Section will analyze the false

advertising and unfair competition claims raised by competitor

transportation companies against Uber and the need for

standardized regulation.91

85. See Vara, supra note 7 (identifying a new trend of Web site companies that

consider their service providers to be contractors and lawmakers’ attempts to gain control

over their growth); see also Rogers supra note 80 (quoting a plaintiff’s attorney who said

that “[t]here are basic labor protections in place to ensure companies do not take advantage

of their workers” and that Uber should have to abide by such protections that “society [has]

deemed important”).

86. See Yellow Group, 2014 WL 3396055, at *2 (suing Uber for false advertising and

misrepresentation of services); see also Manzo, 2014 WL 3495401, at *1 (citing plaintiffs’

allegation that Uber misrepresents its rates, misidentifies itself as a transportation

company, and illegally operates in violation of local laws); see Boston Cab, 2014 WL

1338148, at *2 (citing plaintiff’s allegation of unfair competition and false association claims

against Uber).

87. Yellow Group, 2014 WL 3396055, at *2; see Boston Taxi Owners Association, Inc.

v. City of Boston, Civil Action No. 15–10100–NMG, 2015 WL 505397, at *1 (D. Mass. Feb.

5, 2015) (asserting that Boston and Massachusetts have arbitrarily violated drivers ’

constitutional rights to just compensation, equal protection, and due process by “applying

burdensome and costly taxi regulations to them, while allowing [Uber] to compete without

complying with those requirements or incurring the very large costs the City imposes on

plaintiffs”).

88. Yellow Group, 2014 WL 3396055, at *2; Manzo, 2014 WL 3495401, at *1.

89. See, e.g., Yellow Group, 2014 WL 3396055, at *2 (holding that plaintiffs did not

allege a direct injury from Uber’s actions); see also, e.g., Manzo, 2014 WL 3495401, at *5

(finding that Uber’s alleged misrepresentations were not substantially harming plaintiffs’

business).

90. Frizell, supra note 7; Vara, supra note 7.

91. See Yellow Group, 2014 WL 3396055, at *1 (raising false advertising claims by

competitor taxi companies); see also Boston Cab, 2014 WL 1338148, at *2 (addressing unfair

competition claims by competitor companies).


A. False Advertising

Competitors have raised federal trademark claims under the

Lanham Act as well as general claims against Uber for misleading

customers to an association between Uber and other companies and

misrepresenting certain features of Uber’s service.92 The following

Section will discuss the substance of such claims and the impact of

Uber’s false advertising methods on the transportation industry.

1. Lanham Act. Many taxi and cab companies have filed

false advertising claims against Uber under the Lanham Act.93

Congress used its Commerce Clause power to enact the Lanham

Act in 1946 in order to provide a national system of trademark

registration.94 The Act protects owners of federal trademarks from

the use of similar marks for advertising if that use will result in

customer confusion.95 Since its’ enactment, the Lanham Act has

produced conflicting court decisions that have resulted in an

unsettled and inconsistent body of law.96

Most courts recognize five elements of a Lanham Act false

advertising claim:

(1) The defendant made a false or misleading statement of fact in a commercial advertisement about a product; (2) the statement either deceived or had the capacity to deceive a substantial segment of potential consumers; (3) the deception is material, in that it is likely to influence the consumer’s purchasing decision; (4) the product is in interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the statement.97

92. See Yellow Group, 2014 WL 3396055, at *1 (citing plaintiffs’ allegation that Uber

competes unfairly by “misrepresenting certain features of its service, misleading customers

as to an association between Uber and Plaintiffs, and encouraging taxi drivers to breach

their agreements with Plaintiffs.”); see also Manzo, 2014 WL 3495401, at *1 (citing

plaintiffs’ argument that Uber “misrepresents its rates, misidentifies itself as a

transportation company, and illegally operates in violation of Chicago Municipal Code

provisions regulating the taxi and livery industries”).

93. 15 U.S.C. § 1051 (codification of the Lanham Act); see, e.g., Manzo, 2014 WL

3495401, at *2 (stating that the plaintiffs were suing under the Lanham Act); see also, e.g.,

Dial A Car, Inc. v. Transportation, Inc., 82 F.3d 484, 490 (D.C. Cir. 1996) (analyzing

antitrust and Lanham Act false advertising actions brought by a limousine service against

taxicab companies).

94. 15 U.S.C. § 1051; Lanham Act, LEGAL INFORMATION INSTITUTE,

http://www.law.cornell.edu/wex/lanham_act.

95. Lanham Act, supra note 100 (explaining that the purpose of the Lanham Act was

to establish a uniform system that would protect owners of federally registered

trademarks).

96. Courtland Reichman & M. Melissa Cannady, False Advertising Under the

Lanham Act, 21 AMERICAN BAR ASSOCIATION FRANCHISE L. J. 187, 187 (2002)(discussing

the inconsistent and often contradictory approaches taken by the circuit courts to construe

false advertising law under the Lanham Act absent an opinion by the Supreme Court).

97. Reichman & Cannady, supra note 96 at 187.


The Supreme Court has made it clear that a plaintiff suing for

false advertising under the Lanham Act must allege an injury to a

commercial interest in reputation or sales that flows directly from

the defendant’s deceitful advertising.98 Consequently, many of the

federal suits filed by taxicab companies alleging false advertising

practices by ride-sharing companies under the Lanham Act follow

two common legal theories.99 First, that Uber’s creation of a false

association between Uber and other cab companies have

encouraged customers to choose Uber’s services based on the cab

company’s reputation.100 Second, that Uber’s misrepresentation of

certain service features have caused consumers to refrain from

using their dispatch services.101 These suits will be discussed in

the following section.

2. Misleading Customers to an Association Between Uber

and Cab Companies. Courts are very hesitant to recognize an

injury sufficient to state a claim under the Lanham Act in

competitor false advertising suits against Uber.102 In many

circumstances, Uber drivers also work for other dispatch

services.103 In Boston Cab Dispatch, Inc. v. Uber Technologies, Inc.,

Boston Cab alleged that Uber’s use of Boston Cab’s colors and

markings could suffer damage to their reputation and goodwill

because Uber cars lacked the safety features required for taxicabs

under Boston law.104 Harm to goodwill or reputation is sufficient

to establish the injury element under section 43(a) of the Lanham

Act.105 The court held, however, that there was no reasonable

98. Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 U.S. 1377, 1391

(2014)(applying a “zone of interest” test to the Lanham Act’s statement of purposes codified

as 15 U.S.C. § 1127 in order to identify the interests protected by the Lanham Act and

concluding that the statute aimed to protect against injuries business reputation and

present and future sales).

99. Yellow Group LLC v. Uber Technologies Inc., No. 12 C 7967, 2014 WL 3396055,

at *2-5 (N.D. Ill. July 10, 2014).

100. Id.

101. Id.

102. See, e.g., Boston Cab Dispatch, Inc. v. Uber Technologies, Inc., Civil Action No.

13–10769–NMG, 2014 WL 1338148, at *4-5 (D. Mass. March 27, 2014) (holding that any

harm caused to plaintiffs lacks the “requisite causal connection” to Uber’s use of plaintiff’s

marks); see also, e.g., Manzo v. Uber Technologies, Inc., No. 13 C 2407, 2014 WL 3495401,

at *5 (N.D. Ill. July 14, 2014) (dismissing plaintiff’s claim that Uber misrepresents that its

livery rates are “priced at or below the market price for livery services” because he did not

allege that the statement harms his taxi business); see also, e.g., Yellow Group, 2014 WL

3396055, at *5 (rejecting that Uber’s illegal existence creates a claim under the local

equivalent of the Lanham Act because the Act does not allow federal judges to enforce

municipal regulations).

103. Boston Cab, 2014 WL 1338148, at *4.

104. Id.

105. Beacon Mut. Ins. Co. v. OneBeacon Ins. Grp., 376 F.3d 8, 15–16 (1st Cir.

2004)(explaining that commercial injury actionable under § 43(a) of the Lanham Act is not

restricted to loss of sales and includes harm to the trademark holder’s goodwill and


inference that a customer would hold the lack of safety features in

Uber vehicles against plaintiffs and, therefore, plaintiffs did not

adequately prove injury under the Lanham Act.106

Under a similar claim, approximately thirty plaintiffs

comprised of taxi medallion (license) owners, taxi affiliations, and

livery service providers in the Chicago area sued Uber for

deceptively associating itself with cab companies by referring to

them as “fleet partners,” using yellow-colored SUVs in

advertisements, and using vehicles that bore the taxi companies’

registered trademarks.107 In this case, the court found that only

the Taxi Affiliation plaintiffs successfully alleged the elements of

a claim because the “very nature of [Uber’s] service” would likely

confuse customers into an association between Uber and the cab

company and that confusion would harm the company’s dispatch

business.108 Conversely, the taxi medallion owners and livery

service providers failed to state a claim because they did not

adequately prove injury caused by Uber’s alleged

misrepresentations as required by state law and the Lanham

Act.109

3. Misrepresenting Certain Features of Its Service. The

plaintiffs in Yellow Group also alleged that Uber unfairly competes

under 15 U.S.C. § 1125(a)(1)(B) by misrepresenting certain

features of its service.110 Alleged misrepresentations include a

statement in an Uber blog that all Uber vehicles are “licensed by

the city of Chicago and driven by a licensed chauffeur” and

misrepresentation about the scope of the insurance coverage for

Uber drivers.111 Plaintiffs allege that Uber falsely represents that

its insurance coverage is $1 million when in fact Uber does not

provide any insurance coverage to drivers and passengers.112 Taxi

and livery drivers have also alleged that Uber misrepresents its

rates by stating that the company charges “standard taxi rates”

when riders are actually charged the meter fare plus an additional

reputation); 15 U.S.C § 1125(a).

106. Beacon, 376 F.3d at *15–16; see Cashmere & Camel Hair Mfrs. Inst. v. Saks Fifth

Ave., 284 F.3d 302, 318 (1st Cir. 2002)(requiring causal connection between alleged

violation and harm to prove false advertising claim under § 43(a) of Lanham Act).


108. Id.

109. Id.; See Bell Atlantic Corp. v. Twombly, 127 U.S. 554, 562 (2007)(stating that a

complaint “must contain either direct or inferential allegations respecting all the material

elements necessary to sustain recovery”).

110. Yellow Group, 2014 WL 3396055, at *2; 15 U.S.C. § 1125(a)(1)(B)(creating a civil

cause of action for any person who is damaged by misrepresentation “in commercial

advertising or promotion”).

111. Id.

112. Id.


20% “gratuity” split between the driver and the company.113

Competitors further claim they are injured by Uber’s

misidentification as a transportation service because if passengers

knew that Uber did not take control or responsibility for the

“suitability, safety and quality” of its drivers and passengers, they

would probably choose conventional taxis instead.114 While these

claims describe real and significant injuries to Uber’s competitors,

courts have not accepted them as enough to establish actual

injury.115

Along with their Lanham Act claims, taxicab companies have

also tried to bring misrepresentation claims under local laws and

regulations.116 Courts have barred these claims under the

precedent that a plaintiff cannot use a Lanham Act claim to

declare the defendant’s conduct unlawful under a local taxicab

regulation when the taxicab commission has not yet done so.117

The court in Dial A Car took the position that the plaintiff should

take its argument to the Taxicab Commission and lobby to crack

down on activities it deems unlawful rather than immediately

resorting to litigation.118

Clearly, the court system is not the best solution to controlling

Uber’s controversial advertising practices.119 Common law is often

slow to respond to new and changing practices.120 The more

efficient and practical means is to use regulatory power to require

Uber to comply with the same advertising practices as the rest of

the industry.121 Uber must then be held to these standards

through substantial penalties such as high fines or temporary

113. Id.; Manzo v. Uber Technologies, Inc., No. 13 C 2407, 2014 WL 3495401, at *2

(N.D. Ill. July 14, 2014) (presenting Manzo’s claim that he was injured by Uber’s

misrepresentation of its fares as “standard” because the statements drew customers away

from his taxi service).

114. Manzo, 2014 WL 3495401, at *3.

115. See Manzo, 2014 WL 3495401, at *4 (dismissing all claims premised on Uber’s

violation of local ordinances or Uber’s failure to inform customers of any violation).

116. See, e.g., id. at *3 (claiming that the use of a metering device to determine the

fare rather than a fixed rate was a violation of the Chicago Municipal Code).

117. Manzo, 2014 WL 3495401, at *3; see Dial A Car, Inc. v. Transportation, Inc., 82

F.3d 484, 490 (D.C. Cir. 1996) (holding that “it is not within the province of a federal court,

under the guise of the Lanham Act, to preempt the decision of local authorities by allowing

an action in federal court that local authorities decline to pursue”).

118. Dial A Car, 82 F.3d at 490.

119. See id. (barring plaintiff’s Lanham Act claim); see also Boston Cab Dispatch, Inc.

v. Uber Technologies, Inc., Civil Action No. 13–10769–NMG, 2014 WL 1338148, at *3 (D.

Mass. March 27, 2014) (holding that there is no reasonable inference that a consumer would

hold the lack of safety features in Uber against plaintiffs).

120. See Dial A Car, 82 F.3d at 490 (taking the stance that plaintiffs should be forced

to lobby to local legislature in order to crack down on unwanted activities before bringing

their claims in court).

121. Cf. Vara, supra note 7 (providing an example of proposed California legislation

that would hold car-sharing companies to the same requirements as taxi companies).


injunctions.122 Without enforcement of the regulations, Uber will

continue to mislead customers through deceptive advertising.123

B. Unfair Competition

Many competitors have also claimed that Uber enjoys an

unfair competitive advantage over traditional taxicab dispatch

services because it “avoids the costs and burdens of complying with

extensive regulations while reaping the benefits of others’

compliance with those regulations.”124 Courts have been more

willing to entertain these unfair competition claims than false

advertising claims.125

For example, the court in Boston Cab found that Uber was

illegally avoiding financial obligations by not complying with

Boston ordinances.126 Taxicab drivers in Boston are required to

possess a license known as a “taxicab medallion,” obtained through

satisfying certain driving and criminal history criteria as well as

paying for the medallion itself.127 Further, Boston Police

Department Rule 403 requires that all taxicab operators belong to

an approved dispatch service or “radio association.”128 At the time

the plaintiffs filed the suit, Uber was not complying with either of

these rules.129 By avoiding the medallion and dispatch service

122. See Yazhou Sun, Uber and Lyft Face First-Ever Fines in the United States,

ABCNEWS (June 11, 2014), http://abcnews.go.com/US/uber-lyft-face-fines-united-

states/story?id=24089617 (illustrating potential fines faced by Lyft ($130,000) and Uber

($95,000 or $1,000 per day) levied by the Pennsylvania Utility Commission for operating

illegally in Pittsburgh).

123. See Boston Cab, 2014 WL 1338148, at *2 (describing Uber’s use of competitor cab

companies’ colors and markings in order to attract customers); see also Yellow Group LLC v.

Uber Technologies Inc., No. 12 C 7967, 2014 WL 3396055, at *3 (N.D. Ill. July 10, 2014)

(discussing Uber’s use of taxi or livery vehicles that bear the use of competitor cab companies’

trademarks and Uber’s misrepresentation in advertising of its rates and gratuity).

124. See Boston Cab, 2014 WL 1338148, at *1 (alleging that Uber “unfairly

competes by operating its service without the expense of compliance with

Massachusetts law” and by keeping revenue for credit card processing that plaintiffs

contractually have to pay to the credit card processor); see also Yellow Group, 2014

WL 3396055, at *6 (arguing that Uber should have to comply with the same

regulations as taxicab companies in order to achieve fair competition in the

transportation industry).

125. See Boston Cab, 2014 WL 1338148, at *6–7 (agreeing with the magistrate judge

that plaintiffs have sufficiently stated a claim for unfair competition); see also Yellow

Group, 2014 WL 3396055, at *6 (holding that plaintiffs “plausibly allege that losing

customers from their dispatch service to Uber causes . . . economic and reputational

damage” and there is a valid cause of action); see also Manzo v. Uber Technologies, Inc., No.

13 C 2407, 2014 WL 3495401, at *7 (N.D. Ill. July 14, 2014) (stating that Taxi Affiliation

and Limousine Plaintiffs have valid statutory claims for unfair competition).

126. Boston Cab, 2014 WL 1338148, at *1.

127. Id.

128. Id. at *1-2; Boston Police Dept. Rule 403(3)(c)(5) (describing the requirements to

register a specific vehicle as a Hackney Carriage in the City of Boston).

129. Boston Cab, 2014 WL 1338148, at *2


obligations, Uber avoided legal and financial burdens that the rest

of the Boston transportation industry was held to.130

Uber argued that it should not be held liable under the Boston

ordinances because it does not own any cars or medallions and

does not employ drivers, so any unlawful conduct is attributable

only to the drivers and not to Uber.131 This argument is consistent

with Uber’s continuous efforts to avoid liability by distancing itself

from its drivers.132

Applying a broad conception of the term “operating,” the court

found that Uber exercises control over vehicles-for-hire that

compete with plaintiffs and sets policies for its drivers that go

against the local regulations, including the use of mobile

telephones while driving.133 This benefit—without—the—burden

argument is prevalent in almost every city that Uber operates in

and Boston Cab provides precedent in favor of asserting such a

claim in the future.134 The decision provides a foundation for

passing concrete legislation that requires Uber to comply with all

existing and future ordinances regulating the transportation

industry.135

Uber has also been accused of encouraging taxi drivers to

breach their agreements with taxicab, livery, and other ride—

sharing companies.136 Breaches include violating trademark

clauses in driver’s contracts by presenting Uber hangtags in

rearview mirrors, using cell phones while driving against contract

clauses, and violating agreements to not work for competing

dispatch services.137 Ride-sharing competitor, Lyft, has actively

accused Uber of poaching drivers by compensating Uber drivers

for recruiting a Lyft driver to the Uber service and intentionally

130. Id. at *1-3.

131. Id. at *6-7.

132. See Lochhead & Torres, supra note 21 (asserting that Uber management claims

not to be a “transportation company” and that their drivers “are independent contractors

who sign an agreement that enable them to use the company’s app.”); see also Williams &

Alexander, supra note 8 (explaining that Uber denied insurance coverage for an accident

caused by an Uber driver because he was between fares).

133. Boston Cab, 2014 WL 1338148, at *6-7.

134. Id.

135. See id. at *5 (reasoning that plaintiffs could be harmed because “Rule 403 forbids

mobile phone use by taxi drivers and yet drivers who contract with Uber, including those

who use the Boston Cab colors and markings, are required to use mobile telephones to

communicate with Uber and Uber customers”).

136. See Yellow Group LLC v. Uber Technologies Inc., No. 12 C 7967, 2014 WL 3396055, at

*6 (N.D. Ill. July 10, 2014) (entertaining a cause of action by Taxi Affiliation Plaintiffs for tortious

interference with contractual relations); see also Douglas MacMillan, Tech’s Fiercest Rivalry: Uber

v. Lyft, WALL ST. J., Aug. 11, 2014, http://www.wsj.com/articles/two-tech-upstarts-plot-each-

others-demise-1407800744 (discussing the rivalry between the ride-sharing market leaders Uber

and Lyft and the actions taken by each to gain market share).



slowing Lyft’s system by repeatedly ordering Lyft drivers to drive

passengers aimlessly for a couple of blocks.138

While it is customary for industry rivals to borrow best practices

and ideas from each other, purposeful sabotage opens the door to

increased litigation and a potential loss of reputation and goodwill.139

Allowing Uber to pursue these kinds of competitive practices

encourages the belief that it can walk over whoever gets in its way.140

It is necessary to protect the integrity of competition in the

transportation industry in order to promote fair prices and ethical

practices.141 Without holding Uber to the same standards as the rest

of the industry, Uber could eventually gain enough market share to

control prices and exploit customers.142 It is equally important to

protect existing transportation companies because they benefit

society by providing jobs, stability, and customer choice.143 Forcing

Uber to comply with transportation regulations maintains order

within the industry and promotes positive competition.144 The most

effective way to achieve this compliance is by explicitly defining Uber

as a transportation company that is governed by these regulations

and by diligently enforcing the regulations.145

138. MacMillan, supra note 136.

139. See id. (describing how Lyft borrowed the real-time map concept from the Uber

app as well as “prime time” prices as a variation of Uber’s surge pricing while Uber followed

Lyft’s carpooling model where strangers can share rides and split the costs).

140. See id. (illustrating how Uber and Lyft are ignoring the rules and

“undercutting . . . prices, poaching drivers and co-opting innovations” in order to get ahead).

141. See Federal Trade Commission, Guide to Antitrust Laws, FTC.GOV (last accessed

Sept. 9, 2015), https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws

(stating that a main mission of FTC anti-competitive legislation is to stop and prevent

unfair business practices that are likely to reduce competition and lead to higher prices,

reduced quality of service, or less innovation).

142. See MacMillan, supra note 136 (alleging that with all the money that Uber has

raised, it could afford to buy largest rival Lyft and any other ride-sharing startup that joins

the market).

143. See Frizell, supra note 7 (asserting that “taxis are

pretty much a public utility. Like subway and bus systems, the electric grid or the sewage

system, taxis provide an invaluable service to cities like New York, and the government

should play an important role in regulating them”).

144. See id. (stating that transportation service regulations are a “necessary part of

urban transportation” and ensure that drivers can make a decent living, customers know

that they are getting in a safe vehicle, and riders are assured that drivers have had a

background check).

145. Daniel Terdiman, Uber and Lyft Slam California Ruling that Drivers must have

Commercial Plates, VENTURE BEAT (Jan, 23, 2015, 9:48 AM),

http://venturebeat.com/2015/01/23/uber-and-lyft-shun-california-ruling-that-drivers-must-

have-commercial-plates/ (providing that California law defines services like Uber and Lyft

as a “transportation network company,” stating that they are an “organization, including,

but not limited to, a corporation, limited liability company, partnership, sole proprietor, or

any other entity, operating in California that provides prearranged transportation services

for compensation using an online-enabled application or platform to connect passengers

with drivers using a personal vehicle”).


V. REGULATORY SPLIT

While regulatory mobilization has been somewhat slow in

addressing the problems presented by Uber, some cities have

taken action.146 A few cities have responded favorably to Uber’s

lobbying tactics, while the majority of cities have taken action

against Uber.147 This Section discusses jurisdictions that have

taken actions to expand the reach of Uber, jurisdictions which

have taken actions to restrict Uber and the need for more uniform

regulation.148

A. Regulatory Changes In Favor of Ride-Sharing Companies

One example of a jurisdiction that is making changes to expand

the reach of Uber is Milwaukee, which is currently working on a bill

to allow ride-sharing companies to operate within city limits.149 In

allowing such operations, the city still wants some control over

background checks, vehicle inspections, and insurance provisions.150

The city also wants suitable third parties to handle things like vehicle

inspections, rather than simply relying on the company’s reports.151

Similarly, Seattle, which was on the verge of issuing a cease and

desist letter to Uber, brokered a deal earlier this year to revise

previous legislation that set a cap on the number of drivers each

company could have on the road.152 In 2014, California fined Lyft,

SideCar, and Uber $20,000 each for illegal operations, and it recently

issued regulations allowing ride-sharing companies to operate.153

The purpose of regulatory action is not to stop ride—sharing

companies such as Uber from existing.154 The companies’ services are

146. See Velotta, supra note 6 (detailing a Las Vegas court battle between Uber and

taxi regulators); see also Judd, supra note 2 (offering examples of new regulation such as

Illinois state legislature setting new rules for ridesharing services and Milwaukee officials

proposing regulations for safety standards).

147. See Velotta, supra note 6 (exemplifying some cities’ resistance to Uber); see also

Lochhead & Torres, supra note 21 (providing an example of a district judge taking action

against Uber’s operations).

148. See Judd, supra note 2 (discussing various jurisdictions that have acted in favor

and against Uber’s operations); see also Donne Tam, Uber launches in Beijing, eye more

growth overseas (Q&A), CNET (Apr. 23, 2014, 6:00 PM), http://www.cnet.com/news/uber-

launches-in-beijing-eyes-more-growth-overseas-q-a/ (describing Uber’s recent international

growth and its plans for further expansion in the future).


150. Id.

151. Id.

152. Id.

153. Id.

154. See id. (explaining that the legislative process is used to create a “thoughtful and

collaborative discussion” where businesses can work with local leaders to create “new rules

for peer-to-peer transportation”).


an established and valued part of society.155 The purpose of taking

action is to ensure that Uber plays by the rules established for taxi

companies and the rest of the service industry in order to protect

customers, drivers, and competitors.156 Therefore, it is not a bad thing

that some cities are passing legislation favorable to Uber.157 It is

necessary, however, to do so with parameters in mind such as those

set by Milwaukee.158

B. Regulatory Action Against Ride-Sharing Companies

In contrast to efforts in Milwaukee and California to allow Uber

to operate, states such as Virginia, Pennsylvania, Illinois and Nevada

have taken regulatory action against Uber.159 In Virginia, Uber has

been fined a total of $26,000 and Lyft a total of $9,000 for

operations.160 Regulators in Pennsylvania filed complaints seeking

more than $110,000 from Lyft and $95,000 from Uber.161 Illinois

regulators proposed a bill in July 2014 that sets specific rules for

“ridesharing” such as prohibiting drives from working more than 10

hours a day, preventing drivers from charging more than the most

expensive cab ride in the area, and requiring drivers to obtain a

chauffeur’s license.162 Further, cars must conform to some of the

same insurance and safety requirements as taxis and livery cabs, five

percent of vehicles available through ride-sharing must be able to

accommodate wheelchairs, and services such as UberX are banned

from airport cab stands.163

In keeping with its usual tactics, Uber called on customers to

urge a veto of the bill and a public suggestion that it would add more

jobs to its Chicago office if the provisions are prevented from becoming

law.164 Uber also hired lobbyists to advocate on its behalf, including

155. See Danny Huizinga, Uber Competition is Good for Society, INTERCOLLEGIATE REVIEW

(Oct. 1, 2014), http://www.intercollegiatereview.com/index.php/2014/10/01/uber-competition-is-

good-for-society/ (discussing the benefits Uber brings to society such as innovative safety

features, lower fares, increased visibility, and shorter wait times).

156. See Judd, supra note 2. (providing an Uber’s spokesman’s statement that “Uber

works with leaders across the country to develop regulations that protect driver economic

opportunity and rider access to safe, affordable and reliable transportation alternatives”).

157. See Erika D. Smith, Don’t Overload Uber, Lyft with New Regulations, INDYSTAR

(Feb. 7, 2015, 10:33 PM), http://www.indystar.com/story/opinion/columnists/erika-

smith/2015/02/07/smith-overload-uber-lyft-new-regulations/22994495 (asserting that cities

“can’t afford to run [Uber] out of town” because Uber is critical to the transportation

networks and urban atmospheres of cities).


159. Id.

160. Id.

161. Id.

162. Id.

163. Id.

164. Id. (providing Uber’s argument that the bill’s rules “threaten consumers” and that

insurance provisions are a maneuver to “protect the taxi monopoly”).


Governor Quinn’s former chief of staff Jack Lavin.165 Uber CEO

Kalanick criticized the “corruption and . . . cronyism in the taxi

industry and . . . regulatory capture” for the numerous and

enthusiastic regulatory measures taken against Uber.166

Nevada has also been strong in its opposition to Uber’s

method of operations.167 Uber launched in Nevada on October 24,

2014 with no certificate of conveyance, meaning the company can’t

currently operate legally in Nevada.168 Regulatory enforcement

officers with the Nevada Transportation Authority and the

Nevada Taxicab Authority have continued to cite Uber drivers and

impound their vehicles since the beginning of operations.169 In

response, Uber offers legal support, financial resources, and

rented cars for drivers whose cars have been confiscated.170 In

Carson City, the Attorney General sought a temporary restraining

order just hours after Uber was launched.171 District Judge James

Russell blocked Uber from offering rides for two weeks pending a

hearing scheduled to determine whether Uber could continue to

operate.172 While the company was allowed to operate again

following the suspension, such an order shows Uber that courts in

the jurisdiction are serious about compliance with the law.173

VI. CONCLUSION

Uber has established a place in society that it won’t be

abandoning anytime soon.174 It offers a unique service that is

valued and beneficial to society.175 It also has a business strategy

that is becoming increasingly harmful to society.176 Uber’s self-

declared status as a “tech company” operated by independent

165. Id. (adding that Uber made a similar move by hiring former NYC Taxi and

Limousine Commission official, Ashwini Chhabra, in order to assert more political

influence and shape legislation in its favor).

166. Id.

167. Velotta, supra note 6; see Lochhead & Torres, supra note 21 (discussing how

Uber’s service was halted by a court order just hours after it launched in Nevada).

168. Velotta, supra note 6.

169. Id.

170. Id.

171. Lochhead & Torres, supra note 21.

172. Id.

173. Id.

174. Douglas MacMillan, Sam Schechner & Lisa Fleisher, Uber Snags $41 Billion

Valuation, WALL ST. J. (Dec. 4, 2014), http://www.marketwatch.com/story/uber-snags-41-

billion-valuation-2014-12-04.

175. See Jeff Bercovici, The Bear Case For Uber (Yes, There Is One), FORBES (July

28, 2014), http://www.forbes.com/sites/jeffbercovici/2014/07/28/the-bear-case-for-uber/

(suggesting that using Uber’s services leads to “a world with less pollution and no traffic

jams, where taxis are cheap and safe and you never have to wait for a pickup”).

176. Frizell, supra note 7.


contractors puts drivers, customers, and competitors in danger.177

It is critical that legislators take action in order to protect these

third parties by regulating Uber as a transportation company.178

Most states will eventually revise legislation to allow Uber to

operate.179 In order to keep control over the company’s business

practices, this legislation must specifically address the standards to

which Uber will be held.180 Some states and cities have chosen to pass

legislation specific to Uber and other ride-sharing companies.181

Other states have chosen to expand current regulations for taxicab

companies to include Uber.182 Regardless of the method chosen,

regulators must clarify that Uber is considered a transportation

company, its drivers are employees of the company, and it will be

regulated in the same manner as other transportation services.183

By regulating Uber as a transportation company, it will be

forced to raise its standards for insurance, safety features,

compensation of employees, and compliance with local laws and

regulations.184 Drivers and passengers will be insulated from

exploitation and ambiguous terms.185 Fair competition will stabilize

prices in the transportation industry and promote consumer choice.186

Taxi and livery services will be able to continue operating without fear

of going bankrupt.187 And Uber will continue to be a multi-billion

dollar tech sensation that is finally playing by the rules.188

Erin Mitchell


178. Id.

179. See Judd, supra note 2 (describing the strides that Milwaukee, Seattle, and

California have made to pass laws that “clear the way” for Uber drivers to operate legally).

180. See id. (illustrating how Milwaukee is specifically keeping control over

background checks, vehicle inspections, and insurance standards in allowing Uber to

operate within the city).

181. Lochhead & Torres, supra note 21; Velotta, supra note 6; Judd, supra note 2.

182. Judd, supra note 2; Vara, supra note 7.

183. See Lochhead & Torres, supra note 21 (discussing Uber management’s view that

the company is a technology platform rather than a transportation company and the

company’s efforts to avoid liability under that theory).

184. Id.

185. Id.; Williams & Alexander, supra note 8; Judd, supra note 2.

186. Lowrey, supra note 33.

187. Yellow Group LLC v. Uber Technologies Inc., No. 12 C 7967, 2014 WL 3396055,

at *2 (N.D. Ill. July 10, 2014); Manzo v. Uber Technologies, Inc., No. 13 C 2407, 2014 WL

3495401, at *2 (N.D. Ill. July 14, 2014); Judd, supra note 2.

188. See MacMillan, Schechner and Fleisher, supra note 174 (discussing Uber’s $41

billion valuation and projections for further increased revenues in the future).

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