Why Is Uber Under Government Scrutiny For Charging ‘Advance Tips'? Explained

News18

27-05-2025

Last Updated:
Legal experts say advance tips by Uber, Ola and Rapido appear 'coercive' as 'it does look like an unfair trade practice under the Consumer Protection Act of 2019'
Uber, ride hailing app, has been under government scrutiny for allegedly charging passengers 'Advance Tips' for faster service.
Pralhad Joshi, Union Minister for Consumer Affairs, called the service 'deeply concerning" on social media. 'Forcing or nudging users to pay a tip in advance, for faster service is unethical and exploitative. Such actions fall under unfair trade practices," the minister wrote.
He stressed that the tip should be a token of appreciation given after the service completion, and not an entitlement beforehand.
What Action Has Government Taken Against Uber?
Joshi has directed the Central Consumer Protection Authority (CCPA) to investigate the matter. 'CCPA has issued a notice to Uber in this regard, seeking explanation from the platform," he posted.
He said the CCPA is also investigating other ride-hailing apps, including Ola and Rapido. They will be served notices if found to be indulging in such practices.
As of now, Uber has not publicly responded to the CCPA's notice. The outcome of this investigation could have significant implications for tipping practices and service models in India's ride-hailing industry.
What Are Advance Tips?
Uber's 'Advance Tip' feature in India allows passengers to add a tip for the driver before the ride begins, with the intention of incentivising drivers to accept ride requests more promptly.
This feature aims to benefit both riders, by potentially reducing wait times, and drivers, by increasing their earnings.
Namma Yatri, which is backed by the government initiative Open Network for Digital Commerce, was the first to start this feature in 2022. Rapido implemented it in 2023. And Uber announced it in November last year and implemented it in April 2025.
Like Uber, Rapido urges users to increase the ride fare, saying the available drivers are not accepting a ride at the current price. Similarly, Ola also tells users that their chances of getting a ride more quickly may increase if they add a tip.
As per legal experts, the practise appears 'coercive", as 'it does look like an unfair trade practice under the Consumer Protection Act of 2019."
Under the Act, unfair methods employed to promote the sale of an item include false representations about its quality and quantity, among other things.
How Companies Trick Consumers
Uber's 'Advance Tips' issue also highlights 'dark patterns" used by companies to trick customers into buying the product or service.
The CCPA issued guidelines in 2023, aimed at regulating and prohibiting such dark patterns. One such tactic listed in the guidelines is false urgency. It refers to falsely stating or implying a sense of urgency or scarcity to mislead a user into making an immediate purchase, or taking immediate action that may lead to a purchase.
Last year, nearly 12,000 screens from 53 apps across nine industries were analysed by Advertising Standards Council of India, which identified an average of 2.7 deceptive patterns per app. It included apps like Ola, Uber and Rapido, and found that 32% of surveyed companies showed instances of false urgency, and 42% engaged in drip pricing.
Why Is Government Scrutinising Such Companies?
The CCPA under Consumer Protection Act, 2019 views advance tipping as coercive. It pressures consumers to pay extra for timely service, undermining the voluntary nature of tipping.
Another practice employed by companies is drip pricing. Here, the prices of a product or service are not fully revealed. This practice feels like 'digital haggling," with commuters comparing it to street-side fare negotiations.
The advance tips feature creates a perception that rides will not be accepted without a tip, especially during peak hours or bad weather. Some experts noted that consumers are 'held to ransom" to secure rides, with 84% of app taxi users facing cancellations when drivers dislike destinations or payment methods.
Uber makes advance tips feature non-refundable, even if service is poor, exploiting a passenger. Social media backlash, as seen in posts on X, likens this to 'bribery" rather than tipping, with users feeling coerced to pay for basic service.
Industry sources note that tips are exempt from the 5% GST applied to ride fares, allowing platforms to boost driver earnings without tax liability. This creates an unfair advantage for apps using a Software-as-a-Service (SaaS) model like Namma Yatri, prompting larger players like Uber to adopt the feature to stay competitive. The CCPA is probing whether this skirts tax regulations.
Uber and Ola were issued CCPA notices in January for alleged differential pricing based on users' phone operating systems (iOS vs. Android), which both denied. The 'Uber Files' (2022) exposed earlier scrutiny from the Reserve Bank of India and tax authorities over tax liabilities (Rs 800 crore claimed by DGGI in 2024), highlighting a pattern of regulatory challenges.
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