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Summary:

Popular new car service Uber is in a fight with taxi lobbies in cities across the country. Cab companies hit Uber hard in Chicago this week with a lawsuit that claims it is deceiving customers.

Chicago mobster

Taxi companies in Chicago want to run upstart car service, Uber, out of town. In a complaint filed Thursday in federal court, a coalition accuses Uber of trademark violations and consumer fraud for keeping a portion of the drivers’ tips.

The complaint says Uber is deceiving consumers about the amount they pay for the fares:

Uber adds an automatic “20% gratuity” onto the metered fare. Uber misleads the public and fails to disclose to consumers that only half of such “gratuity” actually goes to the driver. The remaining half, in fact, goes to Uber.

The taxi groups also claim that marketing terms like “Uber Black Car” and “Uber Taxi” violate trademark laws because they confuse consumers.

The Chicago dispute is the latest and most dramatic episode in a battle that is playing across the country as Uber competes with the powerful taxi lobby in various cities. The upstart has become a hit because it allows customers, who place their credit cards on file, to quickly summon a car with an app that recognizes their location and customers can rate the drivers at the end of the trip.

The taxi lobby is leaning heavily on city governments to shut down the service, claiming it is a danger to the public. In this week’s court complaint, the cab companies blast Uber for creating a two-tier taxi service that caters to rich hipsters (emphasis ours):

While Uber advertises itself as “Everyone’s Private Driver”—that is in fact a gross mischaracterization as Uber only chooses to cater to what it perceives as the technologically elite and well-off individuals. It is obvious that through Uber’s marketing it caters to young, hip, urban professionals, which is perfectly reasonable on the livery side. But using the publicly regulated (and limited number) taxis in order to create a two tier system— “high quality taxis” for the “haves” and the remainder for the “have nots”—runs contrary to the many ordinances enacted in Chicago to ensure non-discriminatory service for everyone in Chicago, not just those “cool” enough to use Uber.

The complaint, which is embedded below, seeks an injunction against Uber and damages to compensate the cabbies for lost profits.

Meanwhile, consumers have filed a separate class action lawsuit claiming they overpaid for Uber’s rides.

Update: This story has been amended to clarify that taxi companies, not drivers, are suing Uber. See Uber CEO Travis Kalanick’s comment below.

Yellow Cab v Uber
(Image by  sababa66 via Shutterstock)

  1. Love Live Uber.

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  2. Travis Kalanick Friday, October 5, 2012

    This article is completely bogus. It is entrenched, large taxi companies suing uber, not drivers This writer got the facts wrong, did not seek comment from Uber, and basically turns this into a hit piece on Uber by substantially misinforming the public.

    Om, it would be nice if you stood by some sort of journalistic standard.

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    1. Travis, thanks for your comment. I’ve updated to story to clarify that it is cab companies that are suing Uber (the original headline said “Chicago cabbies” which admittedly is not the same as “cab companies”).

      But more generally, I don’t think this is a “hit job” on Uber and the article is not “completely bogus.” For what it’s worth, I’ve used Uber and think the company has hit on a clever way to disrupt an entrenched, often inefficient taxi industry.

      We’re simply reporting here on a legitimate news item — the taxi industry is using Uber’s tip practices as the basis for a lawsuit. This is just a fact. You’re welcome to comment on the substance of the allegations. Does Uber take half the tips a customer believes they are giving to the driver? If this is the case, is this nonetheless a better deal for drivers?

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      1. Thank you for reporting on this story. There is nothing honest about a company witholding a single penny of a gratuity, period. This is especially wrong with an automatic gratuity, which to a customer is both a requirement and a pledge. I think it’s amusing that anyone would wink at this because they like a clever company. Perhaps they ought to get together and form a screwtopia.

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      2. Travis Kalanick Monday, October 8, 2012

        - consumer pays the driver the 20% in gratuity
        - uber charges the driver a service fee for bringing him business. this is no different than any of the old school radio dispatch systems that are prevalent in chicago and many other cities.

        in many industries it’s called a marketing or lead generation fee and comes out of their overall revenues. individual operators around the world (even those that make gratuity) pay for lead generation to generate business.

        example: hair salons that charge stylists for the seat at the salon are not stealing gratuity from the hair stylists..

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  3. Go Uber. I used them and liked their service.

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  4. I don’t think there is any merit to the lawsuit, but I do think it’s disingenuous to tell people they are paying a 20% gratuity without telling them that actually half of that is just an additional payment to the company.

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  5. This is another example of the free market providing a better and more organized service to the people. Having my own private driver on hand is an excellent idea. The unions are just throwing a fit over the fact that they’re losing more customers to better, more organized choices.

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    1. Don’t free markets rely on good information? I couldn’t care less about protecting cab company owners, but it doesn’t strike me as fair to charge a 20% tip & not pass that on to the driver.

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  6. Watch this to see how city gov’t taxi regulations actually benefit the entrenched taxi companies, to the detriment of customers and smaller competitors:

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  7. Here in Chicago I have downloaded a new and free app called SnagCab. I have personally used Uber and have been very disappointed with the poor service and drivers’ attitude. SnagCab is very simple for me. It’s pathetic for me to give a tip for poor service.

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    1. @Gio… I used snagcab and it was a good experience.

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  8. I’m a cab driver associated with Uber. I have been working with them for about 6 months and I think they have a great system. Uber charges customers the price of the fare on the meter plus another 20% gratuity. From the entire amount that the customer gets charged, Uber gets 8%, with the rest going to the driver (it is different with the black sedans). Any cab driver accepting to work with Uber knows the rules from the start and they like it because they don’t have to pay anything for the service. They get all the customers from the street, and extra customers through Uber. They don’t use the taxi dispatch system as much because it is antiquated and a waste of time. Cab drivers don’t make more money through Uber per fare, compared with a fare picked up through the regular dispatch service. They make extra money because more and more customers prefer to use Uber. It is by far a much better service that what the cab companies have to offer. As of yet I haven’t met an Uber customer who doesn’t love the service.

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    1. My system lowers your “lease” fees while offering the same benefits….check out my post.

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  9. As a driver !i love using uber because there is no favor-ism ,where in taxi dispatch companies “some drivers get special orders because the either know the dispatchers or brib them ” . In using ober the computer choses the closest driver ..
    The cab companies are the main problem themselves , they charge the drivers left and right .
    Example : they charge 5-6 % for accepting credit cards , and if the driver loses the little receipt or can’t make it to the office by cretin time , they deny to pay the driver .. The keep the money for themselves which the driver did the service .
    In conclusion , I know I am all over and it might not make sense to most of you , but this cab companies are full of crap and they are scam artists

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    1. check out my post.

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  10. I look on with amusement and frustration. My father was a lead engineer designing the first and subsequent communications satellites beginning in the 50′s. My thoughts on the impact of technology have preceded most everyone else’s by 20 years or more all of my life. From the perspective of my own 20+ years in Hospitality and after a stint as a cab driver, I realized solutions to taxi service long before technology was developed to realize my vision. As I waited for others to get busy and society to embrace advances, I traveled the country interviewing EVERYONE who has any interest at all in taxi service or driver culture. My plans reflects anticipated resistance being leveled at Uber. And while I stand to make some money for growing a new business model, I am not shackled with the ROI pressures Uber directs down to both the drivers and the public. My system makes drivers happy, has other benefits for communities besides reliable service and a ride costs the same as any taxi. If anyone has $200K and a background in PR or military logistic leadership, please contact me and we can put an end to all this bickering once and for all in several states rather quickly. Cab_fund @ yahoo.com

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