Uber was perfectly within their rights to do this, and even more for that matter, but yet here is Uber, a poster child of corporate culture acting against their interests out of the goodness of their hearts because they care about the consumer! Take that, Libtards!!!
I guess I consider myself a libtard. I'm somewhere between liberal and libertarian on the political spectrum. I value my privacy, but I also acknowledge that customers have a choice. If you don't like what a business does, don't use it.
As you said Uber is within their rights to do this with respect to when they can tracking customers via their app. They should disclose and make it clear when they are doing so. As long as they do that, even if there isn't an always/app open/never option I wouldn't have a problem with it. The consumer has the option of not using Uber and using a different service, or other transportation options.
You can view it as Uber acting against their interests in favor of the customers, or you can look at it as Uber acting in both theirs and their customers best long term interests. I guess it would just depend on if the monetary value that they gain by how much they track would offset the business they lose from customers that prefer their privacy and/or potential regulatory and legal costs down the road.