Home Global Village Could rising competition and new lawsuit stop Uber’s successful run?

Could rising competition and new lawsuit stop Uber’s successful run?

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News Analysis |

A British mobile advertising agency has sued Uber to force the ride-hailing company to pay millions of dollars of bills that Uber had refused to pay after claiming that ads being generated were fraudulent. Fetch Media filed its lawsuit this week in the same California federal court where Uber had sued Fetch in September, accusing the agency of billing it for nonexistent, non-viewable or fraudulent ads, and failing to pass back rebates and commissions.

Ad fraud, sometimes called click fraud, is a persistent issue in online advertising, occurring when automated programs mimic legitimate users by clicking ads. Uber voluntarily dismissed that lawsuit on December 22nd, two weeks after the case was reassigned to US District Judge Yvonne Gonzalez Rogers, and said it would instead pursue related claims in a San Francisco state court.

Cheng Wei, founder and chief executive of Didi, said in a statement “globalization is a top strategic priority for Didi.” Didi first invested $100 million in 99 in January 2017, getting a stake and management rights in the Brazilian app.

Fetch, a London-based unit of Japan’s Dentsu, suggested that Uber dismissed its federal case on concern it might lose after it was assigned to Rogers, who has overseen other litigation involving the San Francisco-based company.

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In the lawsuit, Fetch asked that Judge Rogers be assigned to determine both companies’ contractual responsibilities, and direct Uber to pay more than $19.7 million of invoices still owed for 2017. “Fetch does not believe that Uber can avoid federal-court scrutiny of its incorrect contract theories so easily,” the company said. Uber did not immediately respond on the day to request for comments.

The Association of National Advertisers, a trade group, last May estimated that marketers would lose $6.5 billion in 2017 because of fake web traffic caused by “bots.” Uber had said in September that it had hired Fetch to place ads to encourage new riders to download the Uber app, and would pay for “legitimate clicks” that helped attract riders.

It has previously partnered with overseas ride-hailing companies to offer reciprocal services in other countries, but Didi is now looking to launch its own services overseas.

But it said Fetch wrongly claimed credit for app downloads that occurred without ads ever being clicked. Uber said it paid Fetch more than $82.5 million, but that Fetch’s failure to stop ad fraud contributed to at least $50 million of damages. According to Uber, the alleged fraud surfaced in early 2017 as customers began complaining about where its ads appeared.

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Uber said, in one example, it had asked Fetch not to place ads on Breitbart, the conservative news website run by Steve Bannon, a former strategist for US President Donald Trump, but that ads appeared there anyway. In court papers, Fetch called Uber a “faithless business partner,” and said it had helped Uber monitor ad fraud despite not being contractually required. Fetch also said its work helped Uber register more than 35 million riders.

As if Fetch weren’t a problem enough, China’s ride-hailing application Didi Chuxing has agreed to acquire control of Brazil’s 99, the companies said in a statement on the same day as the Fetch lawsuit, potentially creating a formidable rival to Uber in Latin America’s largest economy.

The acquisition further aggravates Didi’s global rivalry with Uber Technologies Inc, especially in Latin America. Reuters reported in December that Didi planned to enter Mexico this year.

The companies did not disclose the stake acquired nor the value, but two people familiar with the deal told a publication that the transaction would value 99 at over $1 billion and that Didi would hold a ‘significant majority’ of the Brazilian firm. The Chinese company bought out investors such as Riverwood Capital, Monashees Inc, Qualcomm Ventures, Tiger Global Management LLC and SoftBank Group Corp, said one of the people.

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A Brazilian newspaper had earlier reported the valuation of the deal and the investors involved. The acquisition further aggravates Didi’s global rivalry with Uber Technologies Inc, especially in Latin America. Reuters reported in December that Didi planned to enter Mexico this year.

According to Uber, the alleged fraud surfaced in early 2017 as customers began complaining about where its ads appeared.

It has previously partnered with overseas ride-hailing companies to offer reciprocal services in other countries, but Didi is now looking to launch its own services overseas. Didi’s Mexico entry represents the 4-year-old firm’s first move to deploy drivers under its own brand outside of China.

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Cheng Wei, founder and chief executive of Didi, said in a statement “globalization is a top strategic priority for Didi.” Didi first invested $100 million in 99 in January 2017, getting a stake and management rights in the Brazilian app.

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