What you need to know about Uber’s latest controversies

December 10, 2014, 9:45 PM UTC
Photo courtesy: Sergio Perez — Reuters

You know Uber is having a tough time when even its home state is unhappy with the ride sharing startup.

Two California district attorneys filed a civil lawsuit against the San Francisco-based company yesterday, marking the latest bump in the road for a company that has experienced a meteoric rise this year — complete with a massive valuation that has recently soared to $41 billion.

Tuesday’s suits accuse Uber of misleading customers about the quality of background checks the five-year-old company performs on its drivers, as Fortune previously reported. The complaint also alleges that Uber illegally provides service at airports without authorization and defrauds customers by charging unnecessary fees such as a $4 “airport fee toll” and a $1 “safe ride fee”.

The district attorneys claim Uber is putting consumers at risk by misrepresenting the steps the company takes to ensure the quality and conduct of its drivers. The lawsuit is an attempt to force Uber to put an end to those practices the district attorneys say violate California law and to fully reimburse customers who paid the fees in question.

For it’s part, Uber told Fortune yesterday that the company has met with the district attorneys to address their concerns and that those discussion will continue.

Uber rival Lyft has also been the subject of a civil action brought by the district attorneys, but Lyft has settled that suit by agreeing to avoid any misleading statements regarding its own driver background checks going forward. Lyft will also pay a $500,000 penalty, the district attorneys said.

Of course, the lawsuit is far from the only battle Uber is fighting right now as the company recently came under fire in India, where the safety of passengers with Uber drivers is also a major concern.

Trouble Overseas

India’s capital city, New Delhi, banned Uber earlier this week following the alleged rape of a passenger by an Uber driver who was later arrested. While the alleged rape is certainly troubling, New Delhi officials actually claimed that the suspension of Uber’s services there came as a result of a licensing issue, with Uber apparently operating on a taxi permit that applies to other parts of India but not the capital area.

New Delhi has since expanded its ban to include all ride-hailing apps operating in the city without the proper licenses.

Meanwhile, Uber has also subsequently been banned in both Spain and Thailand, where the ride sharing service has been deemed an unlawful and unfair competitor to traditional taxi services. The company also faces other trouble abroad, including in the Netherlands and Germany, where courts have said Uber drivers must be licensed taxi drivers. Toronto is also trying to ban Uber, which the city says is “jeopardizing public safety” by running afoul of Canadian laws.

Of course, Tuesday’s lawsuit is also far from Uber’s first obstacle in the U.S., where there have been court challenges in Nevada causing Uber to suspended service there over conflicts with state laws concerning commercial motor carriers. Portland, Ore. is also suing Uber after the service appeared in the city last week. Portland officials are asking a court to force Uber to comply with local regulations in order to operate in the city.

Questions Over Passenger Safety

Unfortunately, the alleged rape in India was also part of a pattern for Uber, which was hit with a lawsuit involving similar accusations in Chicago earlier this year. There have also been several other instances of Uber drivers being accused of sexually assaulting a passenger in such cities as Seattle and Washington, D.C.

Such claims are at the heart of the growing concern, evidenced in the California lawsuit, that Uber’s standards when vetting potential drivers could leave something to be desired. The company’s website calls Uber “the safest ride on the road” and boasts about the “rigorous” screening process to which its drivers are subjected. Meanwhile, The New York Times reported this week that Uber and other similar services have lobbied regulators in multiple states to push against laws that would require stronger background checks for its drivers. (Uber hired former Obama campaign manager David Plouffe in August to help steer the company’s policy and political strategy.)

Public Relations Blemishes

Aside from the legal battles and criminal accusations against some drivers, Uber’s culture has also been attacked by some as being sexist. PandoDaily blogger Sarah Lacy, for instance, vowed to boycott the service for a variety of reason, including a sexist Uber promotion in France that offered to pair riders with “hot chick” drivers.

Uber looked even worse when, after Lacy’s post hit the web, BuzzFeed reported that an Uber executive had suggested that the company hire investigators to dig up dirt on critical journalists to use as ammunition against their critiques of Uber. The company later walked back those comments, saying that Uber has never considered doing opposition research on journalists.

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Billionaire investor Peter Thiel, who is a Lyft investor, criticized Uber as being the “most ethically-challenged company in Silicon Valley” in the wake of the incident. And, Sen. Al Franken publicly called on Uber to respond to questions about the company’s privacy policies and the type of information it collects on customers.

Uber’s reputation has also taken a hit thanks to its very public war of words with top rival Lyft. Their fierce competition for customers and drivers heated up over the summer with each company accusing the other of sabotage and poaching drivers. The rivalry has also included several instances of name-calling on both sides as well as Uber admitting to attempts to stifle Lyft’s fundraising efforts. Uber even hired a former Lyft executive earlier this year, which led to a lawsuit.

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What’s at stake?

In spite of the growing stack of controversies piling up on Uber’s plate, the company is currently valued at $41 billion based on its recent institutional fundraising of more than $1.8 billion. Meanwhile a separate, Goldman Sachs-led funding round that Fortune reported earlier this month could raise $1 billion.

The ride sharing service has seen its valuation balloon throughout the year after receiving an $18 billion pre-money valuation in June thanks to an influx of investors. It is likely that the ongoing fundraising is a precursor to an eventual IPO, which Fortune said recently could be more than a year away and would presumably be worth billions of dollars whenever it comes to fruition. While the possibility exists that constant hits to Uber’s public image could turn away some investors, it cannot be denied that the service has continued to grow in spite this year’s string of controversies.

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