Uber is on the receiving end of another lawsuit this week, and this time it's not from the ride-hail company's "driver-partners". Rather, according to the Chronicle, in a lawsuit filed yesterday in federal court taxi cab company Flywheel (formerly DeSoto Cab) alleges that Uber is practicing predatory pricing and violating antitrust rules in an effort to drive competitors out of business and establish a monopoly.
Basically, Flywheel says Uber is using all that venture capital money to artificially deflate the cost of its service — making it impossible for regular cab companies to compete.
"Uber has been able to maintain below-cost pricing for its UberX and UberXL services in the San Francisco Ride-Hail Market due to vast reserves of capital invested with the expectation of reaping extraordinary future returns,” Bloomberg quotes the complaint as reading. “In adopting this approach, Uber has veered from free market principles and artificially deflated fares of UberX and UberXL to prices below cost in an effort to drive competitors” out of the market.
Flywheel, which takes its name from a Redwood City-based ride-hail app for taxis, is the name adopted by the former DeSoto Cab company in 2015 in an effort to better compete with Lyft and Uber. As DeSoto, the company has been operating in San Francisco since the 1930s making them one of the oldest operating tax operation in the city BuzzFeed calls them the oldest, but that may in fact be Luxor, founded in 1928. “This lawsuit is about holding Uber responsible for their unlawful practices,” Flywheel Taxi CEO Hansu Kim told the Chron. “It is not about stifling competition or technological innovations. We want all on-demand taxi services to be treated fairly under the law, and competing on an even playing field."
Uber, unsurprisingly, disagrees with the allegations. “We compete with lots of ways to get around, especially car ownership,” Uber spokesman Matt Kallman told Bloomberg. “Our technology lets us make our network more efficient over time, and innovations like uberPOOL are further lowering prices, making ridesharing more available to more people.”
Flywheel, explained the director of the Stanford Program in Law, Science and Technology to the Chronicle, will likely have a tough case to make. “The complaint that a competitor charges too little money is usually not evidence of a secret conspiracy to drive everyone out of the market and then raise prices," observed professor Mark Lemley. "[It's] usually [made by] someone who is failing to compete in the market and is upset about it.”