NO BROTHERLY LOVE FOR UBER

Uber recently got hit with an 11.4 million fine courtesy of the Pennsylvania Public Utility Commission.  The fine resulted from Uber’s failure to obtain a transportation brokerage license before commencing operations in Pennsylvania.

The action presents an existential question for Uber – what is it exactly?  In Uber’s view, it is an app that connects people looking for a ride with drivers looking for riders.  Kind of a dating service if you will.

But the Pennsylvania Commission noted that “[Uber] exercised active and significant oversight of its drivers and that its service was reasonably available to the general public for compensation.”  To continue with the dating service analogy, it would be like Uber maintained a pool of eligible bachelors, who were subjected to Uber’s rules and regulations.  The control piece is a critical fact.  In addition, the Commission didn’t think much of Uber’s contention that it was not subject to the rules because Uber drivers drove their own cars.  As the Commission noted, “the definitions of transportation public utility, common carrier, and common carrier by motor vehicle convey the opposite position that the provision of transportation service can be offered indirectly and independently of actual ownership of a vehicle.”

So Uber is fighting a losing battle in the Keystone state. But what caught my eye in this story was not the $11.4 million that Uber was finally ordered to pay, but the original fine — $49 million.  This was calculated based on the statutory provision of $100 per violation, which increased to $1000 per violation after Uber received a cease and desist order, but continued offering its service.  Uber provided 81,000 rides up to the cease and desist order – for a total of about $8 million; and 41,725 rides after the cease and desist order, for a total of $41 million.

The number ultimately got reduced when the Commission decided to base the fine on the average trip cost ($7) during the period before the cease and desist order.  That came to $860,986.  It assessed a $250 per ride fine for the period after the cease and desist notice. That came to $10.4 million.   All told, the new penalty totaled $11,292,236.  Uber also got hit with discovery sanctions that took the number up to the $11.4 mark.

Uber has indicated it will appeal the Commission’s decision to the state courts, but in the meantime, it still may have to write the big check. The Commission denied Uber’s request that it stay its order pending the appeal.