[Updated 6/3/17, 9:27 a.m. PT. See below.] Ghostruck, a Seattle startup connecting movers with customers, was fined $75,500 by the Washington Utilities and Transportation Commission (UTC) for “operating as a residential moving company without the required permit,” the commission announced Thursday.
More than two-thirds of that penalty was suspended for two years, provided that the company not operate without the required permit, and it’s far less than the $730,000 in penalties the company faced when the UTC initially filed a complaint in February.
The case underscores the legal grey area that many “Uber for X” startups occupy when they try to act as marketplaces to bring together regulated service providers and customers, without actually engaging in the regulated activity.
The penalty stems from a UTC staff investigation that found that Ghostruck was indeed engaging in the regulated activity, both by virtue of its advertising and a contract consumers were required to sign directly with the company, and through a subsidiary it operated to provide moving services when no third-party mover was available through its app.
The UTC staff’s full investigative report (PDF) makes for interesting reading, including details such as Ghostruck’s reported revenue in Washington: $76,325 for 2014 and $228,357 for 2015. The company announced in 2015 that it had expanded to a dozen other markets.
The UTC staff report asserts that “the violations cited in this report caused serious harm to consumers. In the 141 household goods moves reviewed in this investigation, consumers did not receive a single document that meets the requirements of [residential moving regulations] in place to protect consumers.”
The report further notes that Ghostruck executives, including co-founder and CEO Nathanael Nienaber, were notified on numerous occasions that it was operating without required permits, and ignored UTC staff attempts to “provide it with direction in obtaining the appropriate permits.”
Nienaber says in a statement e-mailed to Xconomy Saturday morning: “We’ve had an open, ongoing dialogue about these issues with the UTC since 2014 about where we stood in their eyes. We’ve have been operating for since 2015 under the impression that we were complaint.”
Ghostruck was founded in 2012 and funded to the tune of $1.2 million in 2014—according to an SEC filing; the company said in a press release it raised $2.2 million—by investors including Founders Co-op and defunct business-to-business startup accelerator 9Mile Labs.