Are Uber's gratuity fees misleading? Judge says yes

A US judge rules the ride-sharing service must face a lawsuit in which a passenger alleges the company pockets a "substantial portion" of the tips meant to go to drivers.

Dara Kerr Former senior reporter
Dara Kerr was a senior reporter for CNET covering the on-demand economy and tech culture. She grew up in Colorado, went to school in New York City and can never remember how to pronounce gif.
Dara Kerr
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An Uber passenger alleges the company misrepresents its "gratuity" fee. Uber

A US judge on Wednesday rejected Uber's bid to throw out a lawsuit in which an Uber passenger claims the ride-sharing service fed her false information. The case boils down to the gratuity fee that Uber charges on some rides.

The proposed class action suit was initially brought by Caren Ehret who alleges Uber charges a 20 percent fee above the metered fare for some rides calling it a "gratuity," which is "for the driver." However, Ehret alleges that a large percentage of the "gratuity" goes to the company rather than the drivers.

"Plaintiff contends that Uber's 'gratuity' representations are false, misleading, and likely to deceive members of the public,'" the judge's order reads. "Plaintiff further alleges that by continually misrepresenting the 'gratuity' in its advertisements and then keeping a substantial portion of the gratuity, Uber 'effectively increases the 'metered fare' and/or is charging an undisclosed fee. This is false advertising.'"

Ehret has said that if she knew Uber was pocketing a portion of the "gratuity" fee, she would not have agreed to pay it.

Uber sought to dismiss all of Ehret's claims. US District Judge Edward Chen in San Francisco denied all but one of the company's motions. One of the counts that Chen is pushing forward is an allegation that Uber violated California's unfair competition laws.

"The Court finds that Plaintiff has sufficiently alleged that Uber's misrepresentations were false and misleading," Chen's order reads.

Ehret's lawyer, Hall Adams, told CNET, "We hope that Uber will now work with us to make whole the passengers it misled."

This isn't the only lawsuit centered on Uber's gratuity fees. A class action lawsuit has been filed against the company by its drivers, who claim they should be getting 100 percent of the gratuity fees. A similar suit has also been filed against Uber competitor Lyft.

Uber, which was founded in 2009, has grown at a breakneck pace. It's currently in 35 countries and more than 100 cities. The company has also impressed investors with its potential -- it's now the most valued venture-backed company in the world, with a valuation of $18.2 billion.

When contacted by CNET, an Uber spokesperson said, "We are currently reviewing the ruling and do not have any comment at this time."