False Advertising in the United States
Company name
Uber is one of the United States companies that have been engaging in false advertisement activities. Uber is a technology company based in the United States that is known for vehicle hires. The company has lately developed and is offering food delivery, package delivery, carriers, and freight transportation. The company has also partnered with Lime, electric bicycle, and motorized scooter so that it can offer renting services. The company was founded in 2009 in San Francisco, California, United States. It has its headquarters in San Francisco, United States. The company currently has managed to operate in more than 900 metropolitan areas in the whole world. Currently, the company operates in more than 69 countries and is earning close to $14.47 billion. The company has over 110 million active customers worldwide.
Advertising Message
In 2013, the company was engaged in a false advertising allegation. The company was looking for more drivers who could offer their vehicles for driving positions. As a result, they advertised the position of drivers and quoted higher profits that individuals who sign up for such a position would earn. In May 2013, Uber company advertised the position of the driver on their website and placed what every driver would be making. In the advert, drivers operating in New York City were making an annual income exceeding $90,000, while those operating in San Francisco were about $74,000 annually. The false advertising also included the fact that Uber claimed that its vehicle solution program was providing the best financing options to its drivers regardless of driver credit history. They also deceived consumers that they could own a car for as little as $20 a day. This information was published on the company website in August of 2015. This was a piece of false information because the actual amount made by drivers operating in New York was actually $61,0000, while those drivers operating in San Francisco made $53,000 annually.
Investigation
Who conducted the investigation?
The investigation was conducted by the Federal Trade Commission. This is an Independent Agency of the United States Government that is put in place to deal with consumer protection. FTC deals with antitrust law and ensures that consumers are always protected from high prices, false advertising, and any other trade malfunction that infringes consumer’s rights. FTC was on the front of conducting the investigations on allegations concerning Uber company false advertising. The issue was brought to the attention of the Federal Trade Commission by Delux cab. This is a taxi cab company that also operates in San Diego.
Outcome of investigation
Federal Trade Commission conducted an investigation on Uber’s false advertising and came up with such results. From the investigation, the Federal Trade Commission found that Uber drivers were earning far less in 18 major United States cities that the price that was quoted on their website advertisement. From the investigation, FTC also found out that drivers who were operating in New York were making only $61,000 annually. This is 10% less than the amount that was quoted in their advertisement. Those operating in San Francisco were found to be earning $53,000, which is 28% less than the amount that was on the company website. The company also exaggerated its hourly earning in 16 other United States cities, including Orange County in California. From the investigation, it was also found that drivers ended up paying more amount for cars than what the company had started in the advertisement.
Uber technologies did not agree to the allegations, but they agree to pay some amount to settle such claims. The company was then forced to pay $25 million to the Federal Trade Commission for deceiving their consumers to settle consumer protection lawsuits that were brought by law enforcement officials. The company also agreed to give 28.5 million a settlement for consumers over claims of misleading advertisement and fee. The company agreed to also refrain from using words such as “the safest ride on the road” while making its advertisements and advertising materials. From then, the company acknowledged that they had made a progressive improvement in their driver experience and will continue to focus on their services to ensure that they become the best option for their consumers and drivers.
Was it fair? Was it satisfactory?
Yes, the ruling by the court for the company to pay the lawsuits protection and to settle its drivers and consumers was fair. Misleading consumers is not good. So many drivers had signed up for the driving position simply because of attractive income that was portrayed on Uber’s website only to be disappointed by the less amount that they were making in reality. It was just right that they are compensated for the loss that they had made as a result of the misleading advertisement made by the company. It may not be as satisfactory because other companies go through harsh treatments. Some even face a few years of not operating as a punishment. The company received a fair judgment because their operations were not stopped. It was also fair that the company stops using some ambiguous words like being the safest ride on the road because, in one way or the other, they are not. There are other organizations like Lyft, who also offer the best services.
Conclusion
Why false advertising can increase profit in the short run but can ruin a business in the long run.
It is not right for any organization to engage in false advertising because it leads to the destruction of company image and brand. However, many organizations engage in false advertising because they tend to gain a competitive advantage over their competitors. When companies engage in false advertising, they tend to gain much attention from consumers, especially if the advertisement is appealing to the eye. As a result, many consumers tend to find out what the organization has and how their services look like. Through this, such organization s gain many consumers and hence making a lot of profits.
This may only work for a while before consumers find out that an organization is lying on the quality and quantity of services they are offering. When consumers find out, they tend to stop associating with such companies and even warn their friends to stop associating with them because they are lying to their consumers. This breaks the trust that the companies have built with their consumers and hence the loss of consumers. This leads to a reduction in profit since there are few consumers left. It also destroys an organization’s image and hence destroying company brands. False advertising ruins a company’s reputation and destroys the trust that exists between a company and its consumers and suppliers hence loss of profits.