State regulators changed how they legally classify ride-hail giant Uber on Thursday, a technical move that may cost the company millions of dollars.
The California Public Utilities Commission voted Thursday morning to classify Uber partially as a charter party carrier, a designation usually used for towncars or limousines, due to the existence of Uber SUV and Uber Black services.
Uber Black is an option in Uber’s app that lets riders hail towncars that the company’s website calls “high-end rides.”
The ride-hail company’s new classification will also require it to pay fees to the CPUC going back three years, according to a legal decision by CPUC Commissioner Liane Randolph. The CPUC said it has yet to calculate the amount of those fees.
An Uber spokesperson told the San Francisco Examiner the company disagrees with the CPUC’s ruling and will appeal the decision.
The new designation will make Uber known legally in California as both a charter party carrier and a transportation network company, the latter of which is the state’s designation for ride-hails like Uber and Lyft. Previously, Uber’s subsidiary, Rasier-CA, took the brunt of legal wrangling for charter party carrier status. Rasier is a corporation registered in Delaware.
But in her decision, Randolph wrote that Rasier should not be the only entity regulated, as functionally it is “a mere instrumentality” of Uber. Rasier has no operations in California, she wrote, and Uber staff performs many legal functions Rasier should be responsible for, including investigating safety incidents, investigating complaints against the zero-tolerance intoxication policy for drivers and taking actions against intoxicated drivers.
Uber uses a number of subsidiaries in California for its myriad services: Uber USA, LLC and UATC, LLC, Rasier-CA, Rasier, LLC, and more.
In legal filings with the CPUC, Uber wrote that designating Uber as a charter party carrier, instead of Rasier, would create duplicative regulatory compliance leading to “millions of dollars in unnecessary and additional operational costs, and the implementation of the necessary operational changes could potentially harm aspects of the (ride-hail) service provided in California.”
In her ruling, Randolph wrote that problems arising from Uber’s corporate structure were of “Uber’s own design.”
“It was Uber’s decision alone regarding how it would operate its business with the creation of subsidiaries totally lacking in employees and dependent on Uber to run their (ride-hail and charter) operations,” she wrote. “What the commission needs to concern itself with is the goal of ensuring the entity … registers.”
Marcelo Fonseca, a San Francisco taxi driver, told the commission he welcomed the decision, but wished it would go further. Because the CPUC designated ride-hails like Uber and Lyft as “transportation network companies,” he said, cities have been unable to directly regulate and limit ride-hails, which has impacted the taxi industry.
“You dumped 50,000 of them on our streets and you turned driving for hire into a dead end,” he told commissioners in public comment. “Although I support commissioner Randolph’s findings that Uber is a TCP charter party carrier … I urge you to revisit the TNC issue. Uber X and Lyft are taxicabs in every sense of the word.”