Harry here. With summer winding down and kids heading back to school, demand always seems to pick up this time of year, so make sure you stay on top of any promotions sent your way and keep an eye out for new pockets of surge pricing!
Today, senior RSG contributor John Ince updates us on the latest in the Uber employee lawsuit and the news isn’t good for drivers. The appeals panel basically ruled against Judge Chen’s decision to certify the class and it will vastly reduce the scope of the class action (from 385,000 to just over 6,000). Drivers can still go to arbitration if they want to challenge the employee status quo, but they’ll have to do it individually through Liss-Riordan’s law firm.
Uber Gains Leverage Against Drivers With Arbitration Ruling [Bloomberg]
Sum and Substance: Uber Technologies Inc.’s arbitration agreements were largely ruled by an appeals court to be valid and enforceable in a blow to driver efforts to secure the benefits and protections of employees in California. The decision is the first by a federal appellate court on whether Uber can require drivers to take any disputes to private arbitration, where the company can fight them one-on-one. Uber seeks to bar drivers from joining class-action lawsuits unless they opt out of the standard contract, which few do. The U.S. Court of Appeals in San Francisco on Wednesday mostly agreed with Uber, while ruling that some claims don’t have to be sent to arbitration.
The ruling gives Uber the upper hand in a hard-fought lawsuit covering 385,000 current and former drivers in California and Massachusetts who sued to be treated as employees rather than independent contractors. It might also give Uber more leverage with drivers suing to upend its gig-economy workforce model in other states, where labor laws tend to give companies more leeway than in California. The company also faces lawsuits over its pricing and business practices, as well as efforts by local regulators to force it to comply with laws covering taxis. Uber, with a valuation last month of $69 billion, dominates the ride-hailing industry worldwide as the most used taxi app in 108 countries, according to analytics provider SimilarWeb. Uber’s net revenue was about $960 million in the first quarter of this year, and about $1.1 billion in the second quarter, with losses of more than $1.27 billion in the first half of 2016, according to people familiar with the figures.
A three-judge appeals panel overturned a decision by U.S. District Judge Edward Chen in San Francisco, who concluded the arbitration agreements were invalid and unenforceable in cases brought by drivers who challenged the company’s use of background checks to investigate their credit reports. That decision helped bring Uber to the negotiating table in a related case in which drivers claim they should be treated as employees and reimbursed for mileage and entitled to tips. … Uber, now armed with the appeals court ruling, may be able to extract more concessions and a more favorable settlement.
Or, it could walk away from negotiations altogether, confident that the vast majority of driver disputes would be left to arbitration. Shannon Liss-Riordan, the drivers’ lawyer, said Wednesday’s ruling “is not good for the class.” “We were very aware that this decision was likely coming, which was the primary argument for why I was urging the district court to approve the settlement,” she said in an e-mailed statement. … “We do still have the possibility of the PAGA penalties (which are mostly for the state of California), and we have more than 1,500 Uber drivers signed up in California to pursue individual arbitrations if necessary,” Liss-Riordan said in her statement.
My Take: There were clear indications that this ruling was coming at the recent hearing in San Francisco. It’s a huge blow to the drivers’ lawsuit because now drivers need to pursue legal action against Uber individually through arbitration. That said, Shannon Liss-Riordan, attorney for the drivers, has been collecting names of drivers who want to be represented by her firm in arbitration and it’s a good bet that Uber doesn’t want to have to be fighting thousands of small fires over this issue. So Uber will likely come back to the negotiation table and probably will put another offer on the table somewhere in excess of the $100 million that was rejected by Judge Chen, but a lot less than they would have offered has this ruling not been handed down.
Another Uber Settlement Rejected, This Time Over Riders’ Fee [Bloomberg]
Sum and Substance: Uber Technologies Inc. was dealt a second rejection of a legal settlement, this time in a case over claims the company misled riders when it charged them a $1 “safe rides fee” that earned the company almost half a billion dollars. U.S. District Judge Jon Tigar in San Francisco said the proposed $28.5 million payout wasn’t enough for customers, considering how much Uber took in from the fees. That revenue was $448,598,018, almost almost three times the sum Uber was thought to have collected from the fees and close to 16 times the amount of the settlement fund, according to what appears to be an improperly redacted version of the court’s order.
As part of an effort to assure passenger safety, Uber introduced the safe rides fee in April 2014 to cover costs such as background checks of drivers and insurance and vehicle checks. The fee started at $1 per trip, but the company had raised it to as much as $2.50 in some cities. Consumers alleged in the class action that driver checks weren’t as rigorous as the company advertised. In April, the company paid $10 million to settle similar claims filed by California prosecutors, who had alleged in their case that Uber’s background checks had missed thieves, burglars, a kidnapper and a convicted murderer. It’s the second rejection in two weeks by a federal judge overseeing Uber’s attempt to dispose of lawsuits.
Uber’s net revenue was about $960 million in the first quarter of this year, and about $1.1 billion in the second quarter, with losses of more than $1.27 billion in the first half of 2016, according to people familiar with the figures. … More importantly, Uber’s total revenue from the fees was almost three times the $132 million the plaintiffs’ lawyers estimated they would recover if they won the lawsuit, Tigar said in the improperly redacted filing. “In sum, the proposed settlement does not fairly and reasonably protect the class,” Tigar wrote. The judge also said that at this stage of the settlement the public should know how much Uber made from the fees. He gave lawyers five days to argue why the revenue information should continue to be sealed.
My Take: It’s just mind boggling how many legal battles Uber is fighting. I have trouble keeping them all straight. Why are so many parties suing this company? Part of the answer has to do with Uber’s deep pockets. Lawyers have a keen sense of smell for companies where they think they can get some hefty legal fees.
Part of it also has to do with the fact that Uber is operating in areas of the law that are still unsettled. But I suspect the biggest reason why so many are suing is that Uber’s deceptive practices and take no prisoners strategy creates a lot of ill will from parties who then seek restitution through the legal process. In this case, Uber was just asking for it, by using this weird misnomer “Safety Fee.” I mean like, come on – should passengers have to pay a fee for getting the safety that is sold as the basis of the entire ridesharing industry?
Chinese Regulators Reviewing Uber-Didi Merger [New York Times / Associated Press]
Sum and Substance: BEIJING — Chinese anti-monopoly regulators are reviewing the proposed merger of ride-hailing service Uber Technology Ltd.’s Chinese operations with its biggest local competitor. The Ministry of Commerce will look at whether the proposed tie-up with Didi Chuxing protects “fair competition” and consumer rights, a ministry spokesman, Shen Danyang, said Friday. Uber, headquartered in San Francisco, and Didi announced Aug. 1 they would combine their China operations, ending a bruising battle in which both sides had spent heavily to attract riders. Such anti-monopoly reviews are common for mergers or acquisitions in China involving foreign companies. Most are approved unchanged but business groups complain Beijing is using regulation to limit foreign access to promising industries. Regulators have met twice with Didi Chuxing managers to review its operations, said Shen at a regular news briefing. … Didi’s owners include Chinese Internet giants Tencent Holdings Ltd. and Alibaba Group.
My Take: Any regulatory pushback on this proposed merger would be a serious blow to Uber. Their pending exit from China / Didi merger was welcomed by investors as a way to stop the bleeding red ink. I’ve heard that Chinese anti-trust regulators aren’t nearly as fearsome as U. S. regulators, but I’m no legal expert. If any of you know more on this, please jump into the conversation.
Teen Shoots at Uber Driver After Argument Over Social Media Posts: SDPD [NBC San Diego]
Sum and Substance: A 16-year-old teen fired several shots at his Uber driver’s car following an argument over social media posts, San Diego Police said. The incident happened late Saturday night at after 10 p.m. when a 16-year-old and an 18-year-old called an Uber to pick them up in Mission Beach.
The driver came and picked up the teens, dropping them off at a home in San Diego’s Valencia Park neighborhood, police said. When the teens got out, the 16-year-old realized he left his phone in the Uber and called the driver. The driver agreed to return the teen’s phone after he finished driving the new passenger he had just picked up. The new passenger went through the teen’s phone and saw he was talking badly about the driver. They began posting on social media about it, according to SDPD.
When the driver returned the teen’s phone, the two got in an argument over the social media posts, police said. Eventually, police said, the driver drove away. As he left, the 16-year-old fired several shots, police said.
My Take: This article is the perfect lead to my article coming out shortly – Tips for Dealing and Driving With Teens. Always, keep in mind that teens are combustible commodities – totally unpredictable. You never know what’s going to trigger a reaction like this, nor do you know what that teen might be packing. The lesson is clear – don’t mess with teens social media accounts – unless you want trouble. That said, this teen is in for a heap of big trouble, over what? A few harmless posts… what is this world coming to?
There’s Only One Way to Compete with Uber [BackChannel.com]
Sum and Substance: For ride-sharing startups trying to challenge Uber, the best — and likely only — option is to focus on the drivers. …
If you’ve lived in or visited New York City this summer, you’ve likely seen the inescapable ad campaign of a ride-hailing company that claims to never, ever do surge pricing. That company is Gett, an Israeli outfit that launched in Tel Aviv in 2011, where it’s consistently ranked the top rideshare app.
It’s also big in Europe, where it is profitable and claims to be the leading option — in London, for example, Gett partnered with more than half the city’s black cab drivers in a direct challenge to Uber. Bolstered by a recent $300 million investment from Volkswagen, Gett plans to strengthen its hold on Europe. But in New York, Gett’s only U.S. market, the rideshare app remains an outsider. It doesn’t yet have the name recognition or ridership of Uber or Lyft, and Gett knows it: …
Indeed, there’s a new entry in the New York market that’s attempting this strategy of putting drivers first. Juno has been operating in beta since May, and all three drivers I spoke to as well as other experts agreed that it’s the most promising competitor to Uber in NYC yet. Helmed by Viber co-founder Talmon Marco, the company has set aside half of its founding shares for its drivers, so that if and when driverless cars do displace them, they can at least reap the benefits.
When I asked Juno marketing manager Keren Kessel why riders should choose Juno over another competitor, she described it as “the moral and ethical choice. It’s walking past a garbage can and putting the water bottle in the recycling bin versus a regular garbage can.” She added that because Juno drivers are paid more, they will create a better experience for customers. The ethics tactic seems to be working: as of August 26th, Juno had completed one million rides in three months — a metric that took Uber two years to hit—and registered 13,000 drivers, a milestone Uber hit after nearly four years.
Gett, meanwhile, had some 2,000 drivers as of last summer, after two years of operation, and when asked about current numbers said only that drivership is growing, while ridership has quintupled year over year. So far, Juno’s only advertising tactic has been its drivers, many of whom were recruited for their high Uber and Lyft ratings and who talk up the new platform to passengers who request a ride with the competition. In return, the drivers earn $15 for every new passenger they bring in. … If Juno’s burst of success this summer is any indication, the way for a new startup to take on Uber is to focus not on surge, which most riders seem willing to put up with, but rather on its greatest weakness: its relationship with drivers. For an opponent of Uber’s stature, nothing short of a direct aim at its Achilles heel will do
My Take: Although much of this article focuses on the NYC fortunes of Gett, the best part comes at the end with the shift of focus to Juno. The author hits the mark with the point that Juno is succeeding and surpassing most of Uber’s milestones simply by offering the drivers a much better value proposition – equity, better pay, and a clear indication that the driver’s voice is heard and valued in corporate headquarters. The buzz about Juno is building. It’s starting in New York City, but drivers everywhere are holding out hope that Juno is the wave of the future in ridesharing.
Readers, what do you think of this week’s round up?
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-John @ RSG
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