Chicago drops ban on advertising in Uber, Lyft cars; Video ad app maker drops constitutional legal challenge

By Jonathan Bilyk | Dec 12, 2018

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A decision by Chicago City Hall to amend a city ordinance to now allow interactive video advertising in vehicles operated by drivers for ride-hailing services like Uber and Lyft has brought to a conclusion one company’s legal quest to win a court order declaring such a ban unconstitutional.

Earlier this month, the city of Chicago and Minneapolis-based Vugo Inc. agreed to end the lawsuit, prompting U.S. District Elaine Bucklo to dismiss the case with prejudice, cutting short her deliberations over whether the city rules against the advertising in so-called “ridesharing” vehicles were ever even legal.

“The city of Chicago’s reversal on the rideshare advertising issue is a victory for rideshare drivers, the rideshare advertising industry and entrepreneurs and startups throughout the United States,” said Vugo founder James Bellefeuille in a prepared statement.

Vugo’s lawyer, Jeffrey Schwab, senior attorney at the Chicago-based Liberty Justice Center, called the city’s about-face on the matter “a victory for all rideshare drivers in Chicago, and for free speech and economic liberty.”

Schwab   Liberty Justice Center

While Vugo had sought a court order explicitly declaring the city’s rules unconstitutional, Schwab said the city’s decision to amend its ordinance effectively made Vugo’s lawsuit moot.

“There was no way we could have secured a judgment from the court declaring that the previous rules were unconstitutional,” Schwab said in an email responding to questions from The Cook County Record. “Since the city amended its code, there was no longer a case or controversy.”

Schwab said that also meant Vugo could not make a claim to any attorney fees, because the city’s decision meant there would be no “prevailing party” in the case positioned to stake such a claim.

First filed in February 2017 in Chicago federal court, Vugo’s lawsuit asked the court to declare unconstitutional a provision in the city’s so-called ridesharing ordinance banning advertising in ride-hailing, or ridesharing vehicles. The ridesharing ordinance governs how services like Uber and Lyft can operate in Chicago.

The rules had specifically prohibited ride-hailing service vehicles from displaying any commercial advertising on the outside or inside of their vehicles. Violators could have been subjected to fines of $500-$1,000 per violation.

 Vugo’s lawsuit, however, said the provision represented an unequal application of rules, as cabs are not subject to the same advertising ban.

Vugo has operated a service for years in other cities, including Los Angeles, San Francisco and Minneapolis, allowing Uber and Lyft drivers to earn a bit of additional money each month, typically around $100, by giving passengers the option of engaging with interactive advertising during their trip.

Under Vugo’s system, drivers can download the Vugo app onto a tablet computer which can be placed inside the vehicle. The app 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.”

The passengers can then choose to interact with the ads on the tablet’s touch screen.

Vugo says it is paid by advertisers, and then pays a percentage of that revenue to the drivers.

Vugo said the Chicago ordinance  left them completely unable to deploy their platform and services in Chicago, “even as the city explicitly authorizes taxicabs to display advertising and does not prohibit other passenger vehicles from doing so.”

After Judge Bucklo rejected the city’s attempt to dismiss the suit, the city responded to the lawsuit by arguing the ban protects drivers and passengers by reducing “visual and audio clutter,” reducing distractions and shielding “captive” passengers from the ads.

The city said the ordinance helps to maintain a distinction between ride-hailing services and traditional taxis.

And the city argued it was appropriate to allow taxis to sport advertising to help outnumbered cab drivers offset the cost of complying with a host of regulations not applicable to Uber and Lyft.

However, Bucklo never ruled on either the city’s or Vugo’s arguments, as the city used language in its 2019 revenue ordinance to amend the ridesharing ordinance, dropping the advertising ban.

Vugo was joined in the lawsuit by Chicago-based LegalRideShare, who intervened on behalf of a driver identified as Murray Meents.

“Allowing advertisements on Uber and Lyft cars is one step towards strengthening the driver community,” said LegalRideShare attorney Bryant Greening, in a prepared statement.

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Organizations in this Story

City of Chicago/City of Chicago LegalRideshare, LLC Liberty Justice Center Lyft U.S. District Court for the Northern District of Illinois Uber, Inc.

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