Uber must pay a $50,000 fine for submitting false information to state regulators about numerous substandard rides it provided on its Uber Black luxury limousine service, a violation that officials said caused “harm to the regulatory process.” The penalty was called too low.
In the previously unreported final decision, the California Public Utilities Commission found that San Francisco-based Uber had lax review procedures and failed to detect obviously falsified limousine licenses presented to it by independent limousine companies that Uber had subcontracted to give rides on Uber Black.
“We find that Uber did not act with due care in verifying information provided by its subcarriers or even attempt to mitigate the situation,” the commission ruled in the Jan. 30 decision. “Several instances of the false information were easily discernable such as information containing false issuance and expiry dates.”
But Uber then forwarded “numerous falsified documents and information” about those rides to the agency, causing officials “to spend a great amount of time and resources in reviewing the falsified documents,” the commission held. “This exemplifies harm to the regulatory process.”
Uber also violated a commission rule that prohibits using unlicensed subcarriers, according to the decision, by allowing several of them to operate on Uber Black even though the company could have easily determined their limousine licenses were invalid by using publicly available information.
However, Uber avoided a potentially much greater penalty: In unanimously approving the decision, the five commissioners, all appointed by Gov. Gavin Newsom, rejected a $38 million fine urged by the agency’s consumer protection unit, which, as the Public Press previously reported, brought the case after extensive investigation.
The decision ends a three-year-long proceeding that received little news media attention but illustrates the commission’s efforts to protect public safety in an industry known for pushing regulatory boundaries. The case exposed not only inadequate subcarrier license reviews by Uber but also limitations in the commission’s own licensing system, which did not give Uber access to internal agency information it needed to better screen subcarrier limousine firms and drivers.
Uber found not at fault for many substandard rides
Passengers pay a premium to use Uber Black, which boasts of providing “perfect” rides featuring only top-rated drivers and posh, all-black vehicles. “People driving with Uber Black must maintain a minimum rating requirement of 4.85 stars, be insured to drive commercially, and meet state- or local-level livery regulations,” according to Uber’s website. (The Uber app invites riders to rate their drivers on a five-star scale. Livery refers to companies offering vehicles for hire.)
But lawyers for the agency’s Consumer Protection and Enforcement Division had alleged that there were more than 200,000 unauthorized limousine rides on Uber Black, mostly in 2019, with hundreds of Uber Black drivers who were not properly insured or not enrolled in mandatory drug testing and driving record reviews, according to a legal brief.
The lawyers contended that Uber had “turned a blind eye” to the problem because it provided a large pool of limousine drivers and was profiting “handsomely.” They argued that the larger fine was necessary to deter future violations, given Uber’s huge financial resources and the numerous alleged violations.
Uber’s attorneys countered that Uber had substantially complied with the law, cooperated with the investigation and already improved screening of subcarriers. Uber had been the victim of a relatively small number of dishonest limousine companies that engaged in fraud to access the Uber Black platform, they claimed, and should not be fined.
The commissioners concluded that Uber was not liable for most of the unauthorized rides. They stated in the decision that — under the rules and regulations cited by the consumer protection officials — Uber was responsible for making sure subcarriers held valid limousine licenses issued by the commission, but had no further duty to verify that subcarriers met underlying requirements for their licenses, such as those for insurance and driver monitoring. Nor was Uber responsible for subcarriers’ violations, they held.
Moreover, they concluded in the decision that though Uber had made efforts to check subcarriers’ licenses using public information, the company lacked access to internal commission records necessary to more completely verify them and whether drivers were authorized. As a result, the commissioners made clear in the decision, Uber was being fined $50,000 not for having used unauthorized subcarriers but for submitting false information to the agency, namely erroneous data from numerous waybills, the records of each ride that the agency relies on for enforcement and fee assessment.
Still, Uber could have been hit with a much greater fine, as state law treats the submission of false information to regulators seriously, providing a potential penalty of up to $100,000 for each false record submitted.
As the commissioners explained in the decision, they considered the severity of Uber’s violation to be “moderate” due to the “numerous” falsified records submitted and the fact that Uber had failed to “diligently” examine them. However, the commissioners said they were treating all the waybill records as “one set of documents” because the agency had requested them as a set during its investigation.
The commissioners did not specifically address nearly two dozen alleged assaults and other instances of driver misconduct on unauthorized Uber Black rides that Uber had acknowledged during the case. They said only that Uber Black’s use of several subcarriers that Uber could have identified as lacking valid licenses through publicly information was not “the direct cause of any physical or economic harm.”
A ‘black eye’ for the industry
The decision was sharply criticized as overly lenient.
Loretta Lynch, who was president of the commission from 2000 through 2002 and a commissioner until 2005, wrote in an email, “The $50,000 fine in the face of extensive evidence of falsification sends a clear message to all other companies that they can violate the commission’s regulations, submit falsified information to the PUC and even when caught walk away with a token fine.”
Lynch, in a previous interview about a draft of the decision, said the proposed $50,000 fine wouldn’t even cover costs of the investigation that discovered the use of unauthorized subcarriers on Uber Black.
Sara Eastwood-Richardson, executive director of the Greater California Livery Association, which represents about 500 independent limousine companies that compete with Uber Black, also said the fine seemed too low to provide effective deterrence. Uber Black’s use of substandard limousines took fares who might have otherwise gone to legitimate limousine companies, she added, and cheated customers by not providing promised quality and safety.
“We think it just gives a black eye to luxury transportation,” Eastwood-Richardson said in a phone interview.
Uber did not reply to emailed requests for comment on the commission’s final decision. In an earlier email responding to queries about the draft of the decision, Uber spokesman Zahid Arab said Uber now confirms that every limousine company providing rides on Uber Black has a valid commission license and that each driver is subject to ongoing criminal and driving record reviews. He added that Uber understands “the importance of regulatory standards for the safety and integrity of our platform. That’s why we already have robust screening measures and safety features on our platform and are committed to working closely with the CPUC to continue to enhance them.”
Attorneys for Uber did not respond to an email seeking comment. Uber has previously said that safety incidents occur on only a tiny percentage of its rides.
An attorney for the consumer protection unit referred questions to the commission’s public affairs office.
No determination on alleged assaults
Terrie Prosper, director of strategic communications for the agency, noted in emails that the commissioners found facts and mitigating circumstances that weighed in Uber’s favor.
For one, they decided that the “root cause” of the unauthorized rides on Uber Black was dishonest subcarriers who presented fraudulent information to Uber in order to get fares using the platform. They also concluded that Uber did not intentionally submit false information, “actively” cooperated with the investigation and conducted an internal inquiry that led to the removal of additional unauthorized subcarriers from Uber Black.
The decision revoked the licenses of eight subcarriers who were in a subset of 33 limousine companies that the investigation eventually focused on due to their high earnings and number of trips. Three were in Northern California, the rest in Southern California. All eight were found to have been operating without valid limousine licenses, mandatory insurance and driver monitoring.
As to the alleged assaults, Prosper said the decision “does not make any determinations on these allegations.” She added, “The issue before the CPUC in this investigation was Uber and Uber Black subcarriers’ alleged violation of the Public Utilities Code, CPUC General Orders, and other rules or requirements in the provision of services. The decision focused on those issues.”
Unlike taxis, which are regulated locally, Uber is regulated by the commission, which in 2013 became the first agency in the nation to legalize ride-hailing.
Uber is best known as a transportation network company for the smart phone-enabled app that connects people seeking rides with private drivers using personal vehicles. Uber must verify that these non-professional drivers meet safety standards set by the commission, such as those for drug testing and monitoring of driving records.
But Uber is also a transportation charter party company, and under its Uber Black brand uses the same app to connect passengers with professional drivers working for independent companies, or subcarriers who have fleets of limousines that can be identified by the commission-issued “TCP” license number displayed on their exteriors. Each subcarrier must meet commission requirements for its own limousine license.
Overall, about 7,580 limousine firms operate in California, including those working as subcarriers for Uber Black, according to Prosper. Each may have multiple vehicles and drivers.
Agency orders reforms
The final decision goes beyond the draft version that had been proposed by an administrative law judge for the commission, Rafael Lirag, who oversaw a lengthy hearing on the case. As the Public Press reported, his draft prompted an appeal by the consumer protection unit, which argued that it departed from commission precedent and failed to effectively punish Uber and protect the public.
The draft decision had found that Uber violated only the commission rule against submitting false information. But the final order found that Uber also broke the rule that prohibits transportation companies from using subcarriers that don’t have a limousine license that is valid on its face.
According to the order, “it is clear from the evidence in the proceeding that some Uber Black subcarriers listed on Uber Black’s platform were operating without a valid TCP license,” and that Uber failed to spot them, even though it had access to information that would have allowed it to do so.
The draft decision had rejected all 15 reforms proposed by the consumer protection unit for Uber to prevent unauthorized limousine firms and drivers from providing rides on Uber Black, deeming them unclear or beyond the scope of the case. It ordered Uber to work with the consumer protection unit on other proposals.
But in the final order the commissioners decided that the consumer protection unit’s proposed reforms “require additional information and further consideration” and that the joint proposal “must” meet the unit’s approval.
“The verification methods being conducted by Uber are insufficient and need improvement,” they concluded.
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