FTC Takes Aim at Uber Over Subscription Tactics Despite Trump Era Deregulation Hopes

FTC Sues Uber Over Subscription Practices: Signals Continued Tech Scrutiny Under Trump

In a move that sent Uber's stock tumbling approximately 4% to $71.28, the Federal Trade Commission filed a lawsuit against the ride-sharing giant, alleging deceptive practices related to its Uber One subscription service. The action marks the first major FTC case against a tech company in President Trump's second term and signals that despite Silicon Valley's hopes for regulatory relief, the administration appears committed to maintaining aggressive oversight of the tech sector.

"Dark Patterns" and Digital Deception at the Heart of the Complaint

According to the complaint filed in the U.S. District Court for the Northern District of California, Uber deployed so-called "dark patterns" – user interface designs that manipulate or mislead consumers – in marketing and managing its $9.99 monthly Uber One subscription service.

Dark Patterns are deceptive user interface (UI/UX) design choices intentionally crafted to trick users into taking actions they didn't mean to. These manipulative techniques often benefit the business at the user's expense, nudging them towards unintended purchases, subscriptions, or data sharing.

The agency's lawsuit alleges a series of violations, including that Uber enrolled some users without consent, misrepresented potential savings, and created deliberately cumbersome cancellation processes that could require navigating up to 23 screens and 32 separate steps.

"Americans are tired of getting signed up for unwanted subscriptions that seem impossible to cancel," said FTC Chair Andrew Ferguson, a Trump appointee, in a statement accompanying the filing. "The Commission is fighting back on behalf of the American people."

The case represents a continuation of the agency's broader crackdown on subscription services across industries and specifically targets what the FTC describes as misleading marketing claims. The agency contends that Uber advertised potential monthly savings of $25 without factoring in the $9.99 monthly fee – a practice it characterizes as fundamentally deceptive.

Furthermore, the complaint alleges that Uber charged some customers before the conclusion of free trials or ahead of stated billing dates, contradicting the company's own published policies.

Uber Pushes Back, Citing Recent Improvements

Uber has forcefully denied the allegations, insisting that its subscription enrollment and cancellation processes are "clear, simple, and follow the letter and spirit of the law."

"We do not enroll or charge users without their explicit consent," a company spokesperson said in a written statement. "Our cancellation process now takes 20 seconds or less within our app, and all savings claims accurately reflect the value our subscribers receive."

Former FTC officials representing Uber have raised concerns about the agency's process, describing the investigation as "unusual and hurried" and suggesting that the Commission deviated from its typical standards of thoroughness and fairness.

Industry observers note that the timing of the case is particularly challenging for Uber, as the company has been working to increase profitability partly through its subscription offerings and related advertising opportunities, which are now reportedly generating approximately $1 billion in annual revenue.

Tech Industry Rethinking Political Strategy

The case comes despite apparent overtures from Uber to the new administration. Both the company and CEO Dara Khosrowshahi each reportedly contributed $1 million to Trump's inauguration festivities, part of a broader pattern of tech executives seeking to establish relationships with the administration.

However, these financial gestures have not translated into a more lenient regulatory approach, disappointing technology executives who had anticipated a shift from the Biden administration's aggressive antitrust and consumer protection agenda.

"What we're seeing is remarkable continuity in enforcement philosophy despite the change in administration," said a senior antitrust attorney who requested anonymity because they represent multiple tech companies. "The personnel has changed, but the playbook remains largely the same."

The FTC's action against Uber exists within a larger tapestry of ongoing regulatory actions against major technology firms. The Justice Department and FTC continue to pursue significant antitrust cases against Meta, Google, Amazon, and Apple – many initiated during previous administrations but still advancing through the courts under Trump's leadership.

Financial Implications: Market Reaction Versus Long-Term Impact

While Uber's share price dropped approximately 4% following news of the lawsuit today, financial analysts suggest this may represent an overreaction to headline risk rather than a fundamental challenge to the company's business model.

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, offering a measure of a company's core operational profitability. It's considered important because it helps evaluate performance by excluding the effects of financing decisions, accounting practices (like depreciation/amortization), and tax environments.

The market reaction appears to price in a 1-1.5% long-run impact to EBITDA, which falls significantly below Uber One's contribution to the company's financial performance. The service reportedly generates over $1 billion in run-rate revenue.

"The market is adjusting Uber's equity risk premium, but not pricing in an existential threat," explained a senior analyst at a major investment bank who declined to be identified as they were not authorized to speak publicly. "Every 100 basis point adjustment in risk premium translates to approximately $1.4 billion in market capitalization."

If the FTC were to win its case and secure a "one-click cancellation" requirement, industry experts estimate this could increase subscription churn by around 5 percentage points among Uber One's estimated 30 million members. This would potentially reduce annual revenue by approximately $150 million – a material but manageable impact for a company of Uber's scale.

However, the more significant concern for investors may be Uber's status as a repeat offender in the FTC's eyes, following previous settlements related to privacy (2017) and driver earnings (2018). This history could potentially lead to trebled financial penalties in the current case.

Beyond Uber: Industry-Wide Implications

The lawsuit carries significant implications beyond Uber itself, potentially affecting numerous subscription-based services across the technology and consumer sectors.

Companies with similar subscription models – including Lyft, DoorDash, and Grubhub – may face heightened regulatory scrutiny and potential copycat litigation. These businesses will likely need to evaluate and potentially overhaul their user experiences, particularly around cancellation flows, incurring both direct costs and potential revenue impacts from increased churn.

The case also serves as a warning for investors in companies that rely heavily on what industry insiders call "subscription breakage" – revenue derived from consumers who maintain subscriptions they no longer actively use or want. Such business models could face both regulatory challenges and valuation compression, with some analysts suggesting companies heavily dependent on such practices already trade at approximately one turn discount on enterprise value to sales multiples compared to peers with more transparent business models.

Subscription breakage refers to the revenue companies gain from customers who pay for a subscription but underutilize or don't use the service. This is sometimes called the "gym effect," where paid memberships go largely unused, effectively becoming profit for the business.

"We're entering an era where subscription fatigue meets regulatory zeal," said a consumer technology analyst at a major asset management firm. "Both U.S. and EU regulators are increasingly focused on these practices, making friction-laden subscriptions an earnings quality red flag for investors."

Scenarios and Strategic Responses

Industry observers outline several potential scenarios for the case's resolution and Uber's strategic response.

In a base-case scenario, which many analysts assign roughly 55% probability, Uber would reach a settlement in the $100-150 million range and implement user experience changes that might increase churn by approximately 2 percentage points. This would cause a modest 40 basis point impact to margins, likely offset by growth in Uber's advertising business.

A more severe outcome, assigned roughly 20% probability, would involve court-ordered changes prohibiting automatic enrollment and renewal, potentially reducing Uber One revenue by 30% and causing a significant one-turn derating in Uber's EV/EBITDA multiple.

However, some analysts also outline a potentially positive scenario (25% probability) where a quick settlement establishes industry-wide standards that Uber can efficiently implement, potentially giving the company a compliance advantage over smaller competitors less equipped to manage complex regulatory requirements.

Uber itself has several strategic options to consider. Beyond simply modifying its user experience to enable easier cancellations, the company could potentially spin out its Uber One and advertising businesses into a separate membership-commerce unit that might command higher SaaS-style valuation multiples. Alternatively, the company might pursue credit card partnerships that shift some subscription costs to financial institutions while providing enhanced cancellation rights.

Catalysts to Watch

Investors and industry observers should monitor several upcoming developments that could affect both Uber specifically and subscription businesses more broadly:

1. A preliminary injunction hearing likely to occur within 60 days
2. Uber's Q2 2025 earnings call, which may provide updated membership and churn disclosures
3. Potential parallel investigations by state attorneys general that could multiply Uber's liability
4. Competitor responses and user experience modifications at companies like Lyft and DoorDash

While this lawsuit represents a significant challenge for Uber in the near term, most analysts view it as a manageable regulatory burden rather than a fundamental threat to the company's business model – what one investor described as "reputational smoke, not existential fire."

Nevertheless, the case underscores that technology companies operating subscription businesses must adapt to a regulatory environment that remains stringent across administrations and increasingly focused on consumer transparency and choice.

"The bottom line is that subscription-based business models aren't going away," said a technology policy expert at a Washington think tank. "But the era of obscured terms and difficult cancellations is likely coming to an end, regardless of which party controls the White House."