Controversy: Taxi Company V. Uber

In December 2016, Delux Cab a taxi company in San Diego, sued Uber over alleged false advertisements regarding passenger safety and driver background checks (Reynolds, p.1). The taxi company claims that Uber advertised “industry-leading background screening and strict safety standards while making disparaging remarks about competing taxicab owners and drivers” (Reynolds, p.1). Uber claimed that its background checks included screening the past seven years of their drivers’ history that included scrutiny at the county, state and federal level (Reynolds, p.1). The former head of communications for Uber stated, “unlike the taxi industry, our background checking process and safeguards are consistent across the united states and often more rigorous

Department of Justice’s databases (Reynolds, p.1). It is reported that the error rate for taxicab background checks are one percent, while Ubers is 43 (Reynolds, p.1). Last Thursday, U.S. District Court Judge Cathy Ann Bencivengo ruled that Delux Cab had done enough to advance its case alleging false advertising under the Lanham Act (Reynolds, p.1). Bencivengo rejected Uber’s argument that its advertisements were “puffery” (Davis, p.1). The judge stated that “a reasonable consumer might conclude that Uber’s claims that its rides are safest, its standards are strictest, and its background check procedures are more rigorous than competitors’” are factual based which could persuade them to only rely on Uber (Reynolds, p.1). Bencivengo found that Uber’s statements did, in fact cause the taxicab company to lose a good reputation, revenue, and profits (Reynolds, p.1). Judge Bencivengo denied Uber’s request to disregard the companies’ class allegation and Uber’s request for a hearing in the courtroom, she instead directed the company to file an answer to the complaint by May 5 (Reynolds,

The Lanham Act allows “business competitors to sue one another for false advertising” (Trager et al., p.613). In my opinion, Delux Cab has a righ to sue Uber under the Lanham Act because their statements regarding their safety checks in comparison to other taxi cab companies is a misleading description of a service. Also, the statements Uber made caused damages to Delux Cab and most likely other cab companies. Delux Cab reported a loss in profits and reputation, which is in adherence with the Lanham Act’s requirement that injury must be “proximately caused” (Trager et al., p.615). The Federal Trade Commission policy establishes that the false advertising “must be likely to affect the consumer’s conduct or decision with regards to a product or service” (Trager et al., p.616). In this lawsuit, Uber mislead its consumers to believe their service was safest, influencing their decision to choose Uber over taxicab companies. Additionally, the judge presiding over the case found that the representation is likely to mislead a “reasonable consumer acting reasonably” which is included in the FTC’s policy statement (Trager et al., 616). Lastly, Uber attempted to portray their advertisements as “puffery” which the FTC describes as “advertising that exaggerates the merits of products of services in such a way that no reasonable person would take the claim seriously” (Trager et al., p.617). Clearly Uber’s advertisements were more than puffery