City Investigating Uber's Business Practices

By Chuck Sudo in News on Oct 26, 2012 7:15PM

The Chicago Department of Business Affairs and Consumer Protection is investigating Uber, the car service that’s a favorite with young local techies but has had separate lawsuits filed against it by consumers and local taxi companies, citing unfair business practices.

Business Affairs and Consumer Protection Commissioner Rosemary Krimbel testified during City Council Budget hearings Thursday her office has cited Uber numerous times for violating a series of city ordinances and has told the company to clean up its business practices or their license to do business with the city will be revoked. The issue at the center of Uber’s problems with the city is the 20 percent gratuity the company charges as part of their fees. That gratuity is split between the company and the driver, but the separate lawsuits claim the it isn't disclosed to the consumer. Krimbel noted that similar car services like Hailo and Snag Cab generate their smartphone revenue from advertising.

"If they want to suggest a tip like every single backseat credit card machine does--it suggests a 10, 20 or 30 percent tip--that's fine and we told them that. But, their whole business model is a problem because of how they charge. They're gonna eventually have to change or they will be revoked."

Uber has run into similar problems in Washington, DC, San Francisco and other cities over their business practices. Uber CEO Travis Kalanick, speaking with the Tribune, denied his company does anything wrong and that Uber is transparent with consumers about the gratuity.