Uber Technologies, which reportedly doesn't make profits to speak of, is poised to take a a bit of a financial hit after announcing Thursday that it has agreed to a $25 million settlement to end a lawsuit in California that accused the company of misleading consumers about the safety of its service.
The ride-hailing service is now paying the price - $25 milion to be precise- and the payment comes in two parts. First, Uber must pay $10 million to district attorneys in L.A. and San Francisco within 60 days. Next, Uber will be compelled to pay an additional $15 million if it fails to adhere to the terms of the agreement, focused on the company's marketing, at any point in the next two years.
The civil lawsuit, filed in December 2014, alleged that Uber misled its customers about the strength of its background checks on drivers in Los Angeles and San Francisco.
Uber had billed these background checks as "the gold standard" that made its service the "safest ride on the road." This claim failed to hold up, however, after investigations uncovered at least 25 instances of an approved Uber driver having serious criminal convictions ranging from burglary to child sex offenses, and even murder.
In addition to misleading customers, the lawsuit accused Uber of misleading drivers about the fees for airport rides. The company began charging a $4 fee for passengers being collected from or going to California airports. However, prosecutors found that the toll wasn't being passed on to the airports, while it also worked at some airports where the service wasn't authorized.
Announcing the settlement, Uber revealed that it has already changed the misleading descriptions of its service, adjusted toll charges and now only offers services at airports where it is permitted.
"We're glad to put this case behind us and excited to redouble our efforts serving riders and drivers across the state of California," the company added.
Of course, even without any alleged profits of its own, with billions of dollars from investors, $10 million, or even the full $25 million, will hardly make Uber bat an eye. However, the case does represent something greater: a precedent that startups don't have the license to mislead consumers or ignore regulations as part of a bid to increase market share.
"It sends a clear message to all businesses, and to startups in particular, that in the quest to quickly obtain market share, laws designed to protect consumers cannot be ignored," San Francisco District Attorney George Gascón said. "If a business acts like it is above the law, it will pay a heavy price."
