Uber Israel May Face Criminal Charges Over Its Ride Service

Uber’s contract with drivers explicitly prohibits them from earning a profit, only to reduce their costs, but the Transportation Ministry suspects drivers are making money.

Uber Night fees are calculated via an algorithm that takes into account the distance and duration of the trip, the make and model of the car and the cost of gasoline.
Olivier Fitoussi

Two years after Uber rode into Israel, the ride-hailing service is on a collision course with the Transportation Ministry.

The Marker has learned that the ministry is weighing criminal prosecution of the heads of Uber Israel in connection to the night service it launched in November. Sources say Uber Israel CEO Yoni Greifman was recently summoned to the Transportation Ministry as part of a probe by the ministry’s legal division that could become a criminal investigation.

Officials believe the U.S. company’s app violates an Israeli law under which “no one may provide rides or allow another to provide rides for pay or any other form of compensation.”

San Francisco-based Uber offers taxi-hailing services in Israel, but its efforts to introduce UberX, which matches paid drivers with riders, have run up against powerful opposition from taxi drivers.

Frustrated in its efforts on UberX, the company launched a more modest version called Uber Night that operates only at night and allows drivers only to share expenses with riders, without earning a profit.

Uber said that its nighttime service was totally legal. “Uber Night is a pilot program designed to meet regulations and is similar to other applications already used in Israel that aim to cover [drivers’] expenses,” the company said.

“These services provide an answer to the need for low-cost, available and comfortable transportation, especially at times when transportation alternatives are limited. We are committed to lowering travel prices and hope the Transportation Ministry will exploit the opportunity and adopt technology-based solutions as the rest of the world has,” it said.

Greifman’s latest appearance at the Transportation Ministry comes as officials step up the pressure on Uber.

Several months ago, the company was told it faced a conditional penalty that would be dropped if it stopped offering its ride-hailing service in Israel. Officials say Uber hasn’t met the condition.

Meanwhile, ministry officials have alerted the Israel tax Authority to the Uber program on the assumption that participating drivers are not reporting their income from it. The ministry is also pouring through road accident records and will alert insurance companies about policy holders offering rides for a fee in violation of contract terms.

Uber Night fees are calculated via an algorithm that takes into account the distance and duration of the trip, the make and model of the car and the cost of gasoline.

A 2.5-kilometer ride that takes about seven minutes can cost the passenger 25 shekels ($6.80) — less than a taxi would cost, but not by much. But a ride in a newer model car, for instance, will cost the passenger a lot more than the same ride on an older model because the charge takes into account faster depreciation of a newer vehicle.

Passengers pay through the Uber app, which deducts 25% before paying the driver.

Uber’s contract with drivers explicitly prohibits them from earning a profit, only to reduce their costs, but the Transportation Ministry suspects drivers are making money, based on complaints from passengers about excessive charges.

The problem for any legal action is that Israeli law doesn’t define transportation-related costs. That has allowed Uber to take into account things like depreciation. That accounts for as much as the recognized expenses for Uber drivers as gasoline and other operating costs.

Uber is not alone in Israel in offering shared rides. Waze and Moovit can match drivers with passengers, who share the costs.

The Transportation Ministry has called the services a “gray area,” but doesn’t look at them as such serious potential violations of the law.

Unlike Uber, which passengers use to order a ride, the other apps match drivers and passengers who happen to be going to the same destination.

Uber has met with resistance in other countries, including France, Germany and India, because of opposition from taxi drivers who stand to lose business, In Israel, too, taxi driver associations are flexing their muscles in a bid to keep Uber out of the market.