California DAs sue ride-sharing app Uber, settle with rival Lyft

San Francisco and Los Angeles district attorneys claim Uber is misleading passengers on driver background checks and fraudulently charging "safe rides" fees. Lyft chooses to settle similar claims against it.

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.
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San Francisco District Attorney George Gascon announces California is suing Uber. James Martin/CNET

The world's eighth largest economy is suing Uber.

California filed an unlawful business practices suit against the ride-sharing company, charging the startup with misleading consumers about safety, San Francisco District Attorney George Gascon announced Tuesday. The news came as Uber rival Lyft agreed to settle with the state over the same issues.

"Uber has refused to comply with straightforward California laws that protect consumers from fraud and harm," said Gascon during a press conference at the district attorney's office in San Francisco.

This suit, brought jointly by Gascon and Los Angeles District Attorney Jackie Lacey, is the latest in a series of legal woes facing San Francisco-based Uber. In the past 10 days, the company has faced off against regulators in Nevada, Oregon, Thailand, Spain and India. While the service currently operates in more than 250 cities in 50 countries, some government officials are questioning whether Uber is as safe as it claims to be.

Uber's corporate culture also came under fire in recent weeks after a top executive said he would like to spend $1 million to "dig up dirt on its critic in the media," while another executive admitted he tracked a BuzzFeed journalist without her knowledge. Uber CEO Travis Kalanick wrote in a blog post last week that these missteps are driving the company to become "smarter and more humble."

The California district attorneys have several issues with Uber's service, which uses a smartphone app to pair passengers with drivers using their own cars. The lawmakers' complaints center on allegations that Uber misleads customers about its business and safety practices. That includes allegedly misrepresenting the quality of its driver background checks and shuttling users to airports without permission (taxis are required to have a license to ferry passengers to and from airports). Uber is also being accused of fraudulently charging a $4 "airport fee toll" and $1 "safe rides fee."

The suit asks for a permanent injunction against Uber requiring the company to make changes to stop violating California law. The state is also asking for civil penalties for all of the alleged unlawful business practices and wants a refund given to all passengers who've paid "airport fee tolls" or "safe rides fees."

The 5-year-old company has raised $2.7 billion and is now considered the most highly valued venture-backed company in the world, with a valuation of $41.2 billion. Uber hasn't disclosed how much money it makes.

"Californians and California lawmakers all agree -- Uber is an integral, safe, and established part of the transportation ecosystem in the Golden State," Uber spokeswoman Eva Behrend said in an emailed statement, declining to give specific details about the company's position on the suit. Uber has met with the district attorneys and will "continue to engage in discussions" with the lawmakers, Behrend said.

Those discussions apparently haven't gone well. The original offer Uber had to settle with the state is no longer on the table and "the reason why we are filing the lawsuit is because there was not the cooperation we needed," Gascon said at the press conference.

Uber, Lyft and Sidecar, another San Francisco-based ride-sharing service, each received letters from the district attorneys in September outlining the officials' concerns about their offerings. The three companies were given until October to respond.

While Uber didn't comply with the district attorneys' requests, Lyft opted to settle and pay $500,000 in civil penalties. Under the terms of the agreement, Lyft promised not to make misleading statements about how far back its background checks go or to compare its background checks to those conducted by taxi operators. Lyft also agreed to let the California Department of Agriculture evaluate the accuracy of its app for calculating ride fares.

Lyft is considered Uber's closest rival in the ride-sharing market and the venture-backed company has a valuation of more than $700 million.

"Lyft has shown itself willing to address the issues that Uber has not been willing to address," Gascon said today. "The settlement with Lyft demonstrates that technical innovation and corporate responsibility are not incompatible."

Lyft's settlement was the result of "months of productive conversations" and "demonstrates our shared commitment to consumers and innovation," Lyft director of communications Erin Simpson said in an emailed statement.

The district attorneys' complaint against Uber was filed in San Francisco Superior Court on Tuesday. Uber now has 30 days to respond. The lawmakers' negotiations with Sidecar are ongoing.

Updated December 10 at 11:25 a.m. PT to add that Uber has 30 days to respond to the district attorneys' complaint.