The FTC’s Weak Case Against Uber One Could Cost Consumers

Last month, Judge Jon Tigar of the U.S. District Court for the Northern District of California denied most of Uber’s motion to dismiss the Federal Trade Commission’s (FTC, the Commission) consumer protection lawsuit regarding Uber One, the company’s subscription service, which provides users discounts and other benefits on eligible deliveries and rides.

The ruling was mixed. Judge Tigar correctly dismissed with prejudice the Commission’s claim that Uber One’s “$0 Delivery Fee on eligible food, groceries, and more” was deceptive under Section 5(a) of the FTC Act. But he allowed the FTC’s Restore Online Shoppers’ Confidence Act (ROSCA) claims to proceed, leaving Uber potentially liable for billions of dollars in civil penalties and other relief.

The FTC claims that Uber violated Section 4 of ROSCA by failing to clearly and conspicuously disclose all material terms of Uber One before obtaining billing information from customers. These terms include the recurring nature of the Uber One subscription, its associated benefits and savings, the timing of charges, and the method of cancellation. Additionally, the FTC argues that Uber ran afoul of ROSCA by charging customers for Uber One without obtaining their express informed consent, such as by allegedly failing to adequately disclose material information about the subscription.

Although Judge Tigar found that the FTC plausibly claimed that Uber One’s disclosures were not clear and conspicuous—citing, among other things, their “subtle appearance” —the FTC’s position won’t hold up in court. This is because Uber did clearly disclose the key terms of Uber One to consumers during the enrollment process. Specifically, Uber explicitly stated that users authorize a $9.99 charge on any payment method linked to their account, with the charge recurring “monthly thereafter, based on the terms, until [they] cancel,” while also explaining that users could avoid future charges by canceling up to 48 hours before their billing date in the app. Indeed, other courts have found similar terms sufficient to warrant dismissal. For example, Walkingeagle v. Google, which involved Google’s paid YouTube subscriptions, found comparable disclosures sufficient to justify dismissal rather than prolonged discovery and litigation.

The FTC’s claims of harm under ROSCA are not only dubious but also myopic, given the lack of any procompetitive defenses and a balancing analysis under this particular statute. Uber’s biggest competitor, Lyft, also offers a subscription service, Lyft Pink, which affords subscribers similar benefits, such as 5 percent off certain rides and free priority pickup upgrades, which it estimates saves members an average of $23 per month. Uber One is thus one of the key ways Uber competes with Lyft for users in a dynamic rideshare market. In fact, Uber One’s global membership grew from 6 million members in December 2021 to 50 million members as of this March—hardly indicative of an anti-consumer practice.

The lawsuit could not just force Uber to change its Uber One enrollment and cancellation processes, but also expose the company to hefty fines. In particular, the FTC seeks consumer redress and excessive civil penalties that could reach billions, or even tens of billions, of dollars. State plaintiffs asserting related claims also request both civil penalties and equitable monetary relief under their own consumer protection laws, further adding to the magnitude of potential monetary remedies.

However, to recover civil penalties, the FTC must establish that the defendant had “actual knowledge or knowledge fairly implied…that such act is unfair or deceptive,” per Section 45 (m)(1)(A) of the FTC Act. Unfortunately for the Commission, it has not done so. To help make its case, the FTC highlights Uber’s receipt of a probe letter it issued regarding the company’s subscription programs as suggestive of its witting violation of ROSCA. But receiving a probe letter does not entail that a company has acted illegally and, as such, that it is knowingly engaged in unlawful behavior. Indeed, the FTC routinely sends out similar letters and other investigatory notices—not at all implying that a recipient has acted illegally. Rather, determining whether a company is behaving unlawfully is the reason such letters are issued in the first place.

Not only does the FTC fail to establish that Uber satisfies the knowledge requirement necessary to justify civil penalties, but the FTC’s request for such penalties is a thinly veiled attempt to use its prosecutorial discretion to circumvent the Supreme Court’s 2021 decision in AMG Capital v. FTC. In this landmark case, the Court unanimously ruled that Section 13(b) of the FTC Act does not authorize the Commission to seek equitable monetary relief, such as restitution—relief which it sought from companies for decades. Now, the FTC is doing everything in its power to stretch its civil penalty power to make up for its lost authority. Case in point: The FTC sued Amazon over dubious allegations related to Amazon Prime’s enrollment and cancellation processes under the chairmanship of Lina Khan, ultimately resulting in a $2.5 billion settlement, of which $1 billion was civil penalties.

While Judge Tigar rightly dismissed the Commission’s insupportable claim that the representation of Uber One’s benefits for eligible delivery orders was misleading, the FTC’s unfounded ROSCA claims and request for civil penalties remain. The “Trump-Vance” FTC’s decision to continue the Biden administration’s weaponization of ROSCA, with its weak case against Uber, subjects another major American tech company to time-consuming and expensive litigation over one of its popular, procompetitive offerings, with a prospect of billions of dollars in unjustified fines. That’s time and money that Uber could otherwise invest in continuing to improve its popular products for consumers.