Uber Car Service Faces Serious Challenges in Chicago

Uber is a service that allows people to use their smartphones to order—and pay for—a "black car" (limo) or (in some places) a cab. I have never used it, but it gets a lot of good press and seems like a good idea. Uber is essentially an electronic dispatch service between passengers and licensed car or cab drivers. When you need a car, you press a button in the Uber app on your phone (which knows where you are because of GPS) and then Uber gets one of its participating drivers to come get you. When the ride is over, your credit card gets charged by Uber, and Uber pays the driver.

But the service has run into significant legal and regulatory blowback. The taxicab business is a highly regulated cartel in most American cities, so it is governed by rather exacting regulations. It also consists of people and companies who have generally paid good money to get a stake in the cartel. They are not so keen about technology startups that disrupt their money-making processes. So they pressure local authorities to change regulations to make the Uber service illegal. Or they sue Uber directly. Or (as in Chicago) both.

Although Uber is fighting back these challenges in some places—Washington D.C., notably—it faces the full gamut of challenges here  in Chicago: regulatory, legal, and the plaintiffs' bar.

First, Chicago's Department of Business Affairs and Consumer Protection recently proposed regulatory changes that would essentially shut down Uber's limo service in Chicago by preventing it from using a "device" (such as GPS in a smarthpone) to charge by distance traveled or time spent in the car. The regulations seem tailored specifically at Uber, and only Uber.

Uber has responded by urging its users to pressure the powers to be, and to sign a petition. Similar tactics were successful in DC, so there is some hope.

Second, the cab and livery services in Chicago have sued Uber in the Northern District of Illinois claiming that the service violates the unfair competition protections of Lanham Act and Illinois state law. Something notable about the complaint is that it is the first complaint I've ever seen that features embedded tweets. (See paragraphs 7, 32, and 43.)

Uber has retained the Quinn Emanuel firm and moved to dismiss the complaint for lack of standing and failure to state a claim. (The motion was presented today.) The standing argument is that Uber is not a direct competitor of any of the plaintiffs because it is a licensed radio dispatch service and plaintiffs are "taxi licensees, taxi affiliations, and a livery service." The idea, apparently, is that a dispatch service does not directly compete with the actual providers of transportation services, and the plaintiffs therefore cannot possibly prove the direct competitive harm required to have standing in unfair competition cases.

As long as we're talking about Twitter, Uber's lawyers might want to take a look at Uber's Chicago twitter feed, because it currently hails Uber service's as "'Everybody's Private Driver,' an on-demand transportation service." Thus, at the very least, Uber seems to be holding itself out as a provider of transportation services, even if it doesn't actually own any vehicles or employ any drivers.

Third, Uber has been sued in a putative class action in Cook County. That lawsuit alleges that Uber misrepresents the nature of the 20% "gratuity" for the driver added to every taxi bill because, in fact, Uber takes a cut of this gratuity. Uber denies any wrongdoing. Based on the cryptic online docket, it appears that Uber has moved to dismiss or strike the complaint, and a hearing is scheduled for February 15th.

Lawyers: keeping things interesting.

Anyhow, this is all just a dry run for the day when robot cars take over.