Uber is one of the most common ways to get around, often being seen as a more convenient alternative to cabs. Even New York, with its iconic yellow taxi cabs, has a flourishing Uber market. But not everyone is happy with Uber’s popularity. There have been a few lawsuits throughout the country surrounding Uber. In California, people questioned whether Uber’s drivers were employees or independent contractors. Now, the federal court in Manhattan is hearing an antitrust case which delves into what exactly Uber is.
The plaintiff is Spencer Meyer, an Uber customer from Connecticut who believes Uber is a conspiracy rather than the convenient service it claims to be. He believes this conspiracy was created by Uber’s drivers, including Travis Kalanick, Uber’s chief executive and also the defendant in the case. The complaint alleges that instead of competing against one another, drivers sought to create a hike in prices that they would collectively benefit from at their riders’ expense. The lawsuit claims that the “surge pricing” algorithm, which sets trip prices based on availability or demand of drivers, plays a key role in this conspiracy.
Boies, Schiller & Flexner LLP, the lawyers representing Mr. Kalanick, argue that the alleged scheme is “wildly implausible”. They state that Uber is not a conspiracy but a revolutionary app that changed the way people get around. They say that Uber changed the way people get a cab to the same degree that Google changed the way people look for information. According to the company, the pricing model that Uber uses is a key feature of a single enterprise. They say that the drivers are people who independently make the decision to become “driver partners” for Uber and to abide by its pricing algorithm, rather than conspirators that are part of a price-hiking scheme. Kalanick’s lawyers compare this process to a manufacturer’s efforts to control prices that distributors charge.
Unfortunately for Mr. Kalanick, his motion to dismiss the suit was denied. U.S. District Judge Jed Rakoff of Manhattan ruled that the lawyers suing had “adequately pleaded a horizontal antitrust conspiracy”. Judge Rakoff felt that the conspiracy was plausible enough to pass this hurdle, and did not write off other aspects of the plaintiff’s case, such as the claim that Uber excludes traditional taxis as well as livery car services. An attorney for Mr. Kalanick fought against these claims by stating that this is a narrow view of the market that does not accurately reflect the real world. He then mentioned a study which shows that when Uber’s surge pricing is in effect, Uber riders make the switch to taxis and public transport.
Judge Rakoff also did not dismiss the claim by the plaintiff’s lawyer that “Uber’s dominant position and considerable name recognition has also made it difficult for potential competitor to enter the marketplace.”
Mr. Kalanick’s lawyers disputed this claim as well. The lawyers stated that Uber has largely increased the options for transportation, lowered the prices, and improved the overall driving service experience for millions of Americans. The lawyers also believe that antitrust law has appreciated the benefits of technological innovation for years.
This lawsuit brings up an interesting conversation about a service that has become extremely popular. Many people are partial to Uber, while others wonder if it is monopolizing the driving service industry, or tricking people out of their money.