Uber has been hit with a lawsuit by the district attorneys for Los Angeles and San Francisco that accuses it of misleading consumers over its background checks on drivers and could lead to millions of dollars in fines.
The DA's have also entered into a settlement agreement with rival service Lyft over similar charges for up to $500,000, they announced Tuesday. The move casts a longer shadow over the startup's $40billion valuation.
“Uber has refused to comply with straightforward California laws that protect consumers from fraud and harm,” District Attorneys George Gascón and Jackie Lacey said in a statement.
The moves follow an ultimatum sent to the companies by the DAs in September, accusing them of violating California business laws and deceiving consumers.
A major concern is that their background checks on drivers don't go far enough and don't screen out drivers who commit criminal offenses. The news comes a few days after Uber was banned from operating in Delhi after a driver with a criminal history there allegedly raped a passenger.
The Uber lawsuit also accuses it of charging a fraudulent $4 toll fee for airport visits, even though drivers weren't paying any charges because they weren't legally authorised to operate at airports.
The DAs want a court injunction forcing Uber to obey the law, along with fines of up to $2,500 for each violation, which could reach into tens of millions of dollars. And they want Uber to reimburse consumers who paid its "safe rides fee."
Uber charges a $1 "safe rides fee" for each UberX ride, supposedly to cover an "industry-leading" background check, but that's a misrepresentation, the DAs said.
Uber doesn't employ fingerprinting to confirm drivers are who they say they are, Gascon said at a press conference in San Francisco Tuesday. Taxi regulations in California's bigger cities require such checks.
"At the end of the day, you can't conduct the most comprehensive check possible if the information you obtained has nothing to do with the person signing up to be a driver," he said.
Uber even fought a California law that would have required ride-sharing companies to use finger printing, he said.
"Consumers need to be aware there are things Uber has been saying they do that they have not been doing," Gascon said.
In a statement, an Uber spokeswoman said the company met with the DAs to try to address their concerns. "We will continue to engage in discussions with the district attorneys," she said.
As for Lyft, the company has agreed to a permanent injunction prohibiting it from making misleading statements about its background checks. It will pay $500,000, or $250,000 if it complies with the injunction by the end of the year.
The DAs sent a letter to Sidecar in September that outlines similar concerns. Negotiations with that company are ongoing, officials said Tuesday.
Martyn Williams covers mobile telecoms, Silicon Valley and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is [email protected]