Story Highlights

• A federal judge in San Francisco denied in part the company’s bid for dismissal of the case
• The case proposes to represent everyone who arranged for a ride through Uber and paid the gratuity

Uber Technologies, the smartphone-summoned car service, must face a consumer lawsuit challenging its 20% gratuity surcharge on rides, handing the embattled company its latest setback as the nascent industry faces legal attack in the U.S. and Europe.

Uber retains “a substantial portion” of the gratuity as additional revenue rather than giving it to drivers, according to a complaint this year by an Illinois resident who accused the ride-share company of misleading customers about the true cost of its service. The lawsuit seeks group status on behalf of Uber users.

A federal judge in San Francisco denied in part the company’s bid for dismissal of the case, letting it go forward on claims the company violated unfair-competition and consumer-protection laws. The judge threw out a breach-of- contract claim.

Uber, Lyft and other car-booking companies face a growing number of legal challenges as they seek to crack open the U.S. taxi and…