A Minneapolis-based tech firm which provides interactive video advertising to be displayed in Uber and Lyft vehicles has received a green light to continue its legal challenge against a Chicago city ordinance barring such advertising in the vehicles, as a federal judge said she wasn’t sure she was buying the city’s assertions the ad ban was needed to protect “captive” Uber and Lyft passengers.

On Aug. 9., U.S. District Judge Elaine Bucklo rejected the city of Chicago’s attempt to dismiss the lawsuit brought by Vugo Inc. and other associated plaintiffs, challenging the city rules.

“While I am persuaded that the City generally has an interest in protecting captive audiences from unwanted intrusion, I cannot determine from the pleadings alone that rideshare passengers are sufficiently ‘captive’ to interior advertising to justify its wholesale ban under the ordinance,” Bucklo wrote. “For example, the complaint describes Vugo’s app as ‘interactive,’ which suggests that passengers may be able to turn off any messages they prefer not to see or to hear. Yet, the ordinance prohibits interior commercial advertising in all formats, regardless of how easy or difficult it may be for passengers simply to turn it off, and thus is arguably overbroad in that respect.”

The decision comes as the latest step in the legal action launched earlier this year by Vugo, through its attorneys at the Liberty Justice Center, of Chicago. The Feb. 2 lawsuit specifically argued the ordinance establishing the advertising ban was unconstitutional as it trampled the free speech and equal protection rights of Vugo and the ride-hailing service drivers, as the ban applied only to advertising displayed in the vehicles operated by drivers for Uber, Lyft and similar services, while not applying at all to traditional taxis.

In announcing the lawsuit, Vugo said the unequal application of the rules amounted to the city improperly “picking winners and losers in the economy.”

The lawsuit assails regulations imposed by the city in its 2014 ridesharing ordinance, which governs how services like Uber and Lyft can operate in Chicago. The rules specifically prohibit ride-hailing service vehicles from displaying any commercial advertising on the exterior or within the interior of their vehicles. Violators could be subject to fines of $500-$1,000 per violation.

In other cities, including Los Angeles, San Francisco and Minneapolis, Vugo said its products can generate an additional $100 per month in passive income for Uber and Lyft drivers.

Under Vugo’s service, drivers download an app onto tablet computers, which then generates interactive advertising, which can be tailored to customers based on certain data, including “trip signals” and “city, state, route, pick-up point for the trip, business category, specific keywords, and the passenger’s destination.”

Passengers can then choose to interact with the ads on the tablet’s touch screen. Vugo said it is paid by advertisers, and then pays a percentage of revenue to drivers using its services.

Vugo has said it would like to offer its services to drivers in Chicago, but is blocked by Chicago’s ridesharing ordinance. That prohibition prompted the lawsuit.

In response to the lawsuit, the city asked Judge Bucklo to dismiss, arguing it had the right to restrict the advertising as commercial speech – which is often more easily restricted than other forms of speech – and because it is seeking to protect “captive” passengers, while improving public safety by reducing distractions.

Judge Bucklo agreed that the city’s “long-recognized interest in protecting the public, and particularly a captive audience, from unwanted intrusions extends to safeguarding the comfort of passengers riding in vehicles on the public way.”

However, the judge said, at this stage of the proceedings, that is not enough, and the city must do more legal leg work to demonstrate its “blanket ban on interior commercial advertisements in rideshare vehicles” can be applied in this manner.

Further, she questioned how the ban has “a material effect on either traffic safety or roadway appearance,” claims the city had asserted gave it the right to restrict Vugo’s advertising.

“… The City has not shown, on the pleadings, that the ordinance directly advances its substantial interests or that it is narrowly tailored to serve those interests,” Bucklo wrote.

 

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Organizations in this Story

Uber Technologies, Inc.
1455 Market St
San Francisco, CA 94103

Lyft

San Francisco, CA

Liberty Justice Center
190 South LaSalle Street
Chicago, IL 60603

City of Chicago
121 N LaSalle St
Chicago, IL 60602

U.S. District Court for the Northern District of Illinois
219 S Dearborn St
Chicago, IL 60604

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