An early entrant to the cab-hailing app market, Sidecar, has sued Uber claiming the cab giant used predatory pricing and fake bookings to put its rival out of business.
Sidecar launched in 2012 offering a range of innovative features in its app, including ride-sharing and the ability of ordinary drivers – rather than licensed chauffeurs – to use its service to pick up members of the public.
The company folded in 2015 and sold its technology to General Motors but this week sued Uber [PDF] in San Francisco, accusing the company of using illegal means to kill off competition. It wants to be compensated for what it says were monopolistic practices that broke Californian and federal law.
The lawsuit claims several things: That having recognized the threat that Sidecar posed to its business, the Uber's executives decided to subsidize the real cost of their rides by paying drivers more and charging customers less than the market cost. More worryingly, Uber is accused of developing a system to book Sidecar rides and then cancel them at the last minute in order to disrupt its business and undermine trust in its service.
Sidecar argues that after Uber launched its rival to Sidecar's ride-sharing approach, Uber X – a year after Sidecar's entry - it ran the service as a loss leader in order to put Sidecar out of business, and has since gradually raised its prices in order to offset the financial loss.
While that may sound like the reality of hard-nosed business, Sidecar points to the California Unfair Practices Act which states it is illegal to "sell any product at less than the cost thereof to such vendor… for the purpose of injuring competitors or destroying competitors" and also makes it illegal to sell a "loss leader" product if its effect "is to divert trade from or otherwise injure competitors."
Sidecar includes figures on Uber's price increases since 2015 – when Sidecar went out of business – claiming that they represent the company recouping its losses from loss leading and indicate the monopolistic benefits that it has achieved by getting rid of the competition.
And it provides figures for what it says is Uber's market share in key markets across the United States: As high as 75 per cent in New York and low as 60 per cent in San Francisco. As such, Uber has broached the anti-trust Sherman Act and should be forced to pay triple damages to Sidecar, the defunct comapny argues.
The issue of whether a company has a monopoly or not is not a simple one, but in general, in the US, if a company has more than 75 per cent of a market, it is general considered to have a monopoly. Likewise, if it is able to effectively fix prices in the market, or inflate them beyond their value.
As such, it is far from an open-and-shut case that Uber has a monopoly, especially since there is at least other significant competitor – Lyft – still in the market which continues to compete fiercely with Uber.
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What is perhaps surprising is that Sidecar doesn't make more of its claim that Uber created fake rides and cancelled them. The lawsuit claims that "Uber’s senior executives and officer devised secret programs to submit fraudulent ride requests on competitors’ apps," and notes that "these fraudulent requests were submitted with two goals in mind: (a) to undermine the value of competitive ride-hailing apps, for both passengers and drivers; and (b) to recruit drivers to work exclusively with Uber (instead of its competitors)."
But it doesn't go into much more depth than that and the accusations don't appear to make up a core claim for legal causes of action, even though such actions would appear to fit closely with many previous accusations leveled at Uber.
Those previous accusations include that it created fake cars specifically for regulators and the police to avoid being investigated, and had an entire secret division whose job it was to acquire competitive intelligence as well as "fraudulently impersonates riders and drivers on competitor platforms, hack into competitor networks, and conduct unlawful wiretapping."
The lawsuit seeks a jury trial and triple damages. We have asked Uber for comment and will update this article if it responds. ®