Uber has launched a cheaper version of its smartphone taxi app called UberX that allows ordinary drivers who have been pre-screened to pick up passengers in their own cars.

Uber officials say the UberX ride-sharing service, which launched Monday in Toronto and Mississauga, will bring fares down as much as 40 per cent compared with traditional taxi rides including its Uber service.

A ride from the downtown financial district to Yonge and Eglinton will cost about $12 with the UberX service, compared with $19 with taxi, according to UberX. The price will, of course, depend on traffic. A ride starts at $2.75 for the base fare plus 90 cents per kilometre and 30 cents per minute, plus a $1 surcharge that goes toward safety training.

The UberX driver will pay a 20 per cent fee to the company and pocket the rest.

But the City of Toronto is seeking advice about the service from the legal department and is reviewing legal options. “Based on the information currently available, the City is concerned that the UberX service may pose a serious safety risk to the public, including those who are signing on as drivers,” said Tracey Cook, executive director of municipal licensing and standards, in a statement.

Cook added that the city is concerned that the drivers do not hold a city-issued licence, which ensures required safety training, and vehicles have not undergone city-mandated mechanical inspection and may be inadequately insured.

Uber argues it doesn’t need to be licensed because it’s a technology company, not a taxi firm.

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“Ride sharing is new to the city,” said Ian Black, general manager for Uber Toronto, in an interview. “The current regulations don’t apply to ride sharing.

“We expect regulators and politicians will see the benefits and will say ‘We are ready to embrace innovation,’ ” Black said.

UberX, which already operates in cities such as New York and San Francisco, says its drivers have undergone criminal background checks going back farther than traditional taxi screening, and all vehicles have been visually inspected.

Any passenger is given the UberX driver’s name, a photo and the make and model of the vehicle.

While it does not conduct any driver testing or mechanical inspections on vehicles, which must be at least a 2005 model, UberX has a zero-tolerance policy and if there are any infractions, the drivers are immediately barred from operating.

Uber added that it has a $5 million insurance policy that will cover any liabilities that ordinary drivers’ insurance policies don’t.

But Pete Karageorgos, director of consumer and industry relations for the Insurance Bureau of Canada, cautions that anyone who drives a personal vehicle for commercial purposes must pay commercial rates.

“You can’t be using your personal policy for business,” he said, adding if there was an accident or incident while driving for UberX, it is possible the personal policy won’t provide any coverage.

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Uber’s position that it’s a technology company has infuriated taxi companies and rivals such as Hailo, which say that creates an unfair playing field where Uber can escape licensing fees and higher insurance rates, obligations that traditional companies must meet.

The city of Toronto has slapped Uber with 35 bylaw infractions, but the cases have not even begun to be heard. At a court hearing in August, Uber’s lawyer told a justice of the peace that the two sides were still trying to negotiate a deal, so the case was put over until October.

Mississauga’s enforcement officials met with Uber representatives last week and informed them they must follow city bylaws and that it intends to enforce those laws, said city spokeswoman Finola Pearson.

Uber has become a huge company with deep pockets, operating with the specific goal of shaking up the marketplace as fast as it can. In June, it closed a funding round that raised $1.2 billion (U.S.) of capital, valuing the company at $17 billion, almost five times higher than the previous round.

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Kristine Hubbard, operations manager for Beck Taxi, argues the city of Toronto needs to step in and stop UberX.

“It’s another way of circumventing the existing regulations,” she said. “You are letting potentially dangerous things happen for drivers and passengers.”

Justin Raymond, co-president of Hailo North America, says strangers driving strangers creates a highly risky situation.

“Throughout society, there are risks. There are rules and policies, and protective measures to ensure safety and to ensure in the event of accident, somebody is responsible,” Raymond said.

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