SAN FRANCISCO (CN) — A federal judge signaled Friday he will likely advance a lawsuit claiming Uber used monopoly power to drive a competitor out of business.
During a Zoom video court hearing, U.S. Magistrate Judge Joseph Spero said he finds allegations that Uber uses its vast network of drivers and riders to stifle competition adequate to survive a motion to dismiss.
“Plaintiff has at least alleged Uber intends to decrease payments to drivers and in some cases has increased commissions and raised prices in various ways on the passenger side,” Spero said. “It seems to me those are sufficient allegations of market power.”
SC Innovations Inc., formerly Sidecar Technologies, sued Uber in 2018, claiming the dominant ride-hailing app used anticompetitive practices to drive it out of business. Sidecar held between 10 to 15% of market share for app-based rides in San Francisco, Los Angeles and Chicago before it shut down in 2015.
Spero previously dismissed Sidecar’s suit with leave to amend in January, finding the plaintiff failed to show Uber wields monopoly power as it shares the market with its only remaining competitor Lyft. In order to advance its lawsuit, Spero said Sidecar must show that “Uber can unilaterally raise market prices by restricting its output,” or reducing the number of rides offered.
In a 42-page amended complaint, Sidecar claims that Uber uses a vast trove of data to price discriminate, or charge riders different rates for the same type of rides, such as the company’s use of “surge pricing” when ride demand is high.
“There is no constraint on Uber’s ability to price at monopoly levels because of the network effects,” Sidecar attorney Lewis LeClair said at Friday’s hearing, referring to the impact of Uber’s large network of drivers and riders in suppressing competition.
Uber lawyer Daniel Swanson countered that Sidecar’s lawsuit is based on a false premise that Uber’s competitor Lyft cannot lower prices when Uber raises them or add more drivers to its network when Uber reduces its number of drivers.
“If Lyft charges less, it will get more riders, more drivers, lower wait times, reduced prices,” Swanson said. “Drivers will make more money.”
Uber currently controls about 70% of the ride-hailing market in the United States compared to Lyft’s share of about 30%, according to Sidecar’s lawsuit.
The fact that Lyft has increased its market share over the last decade undermines claims that Uber is using its dominant position to stifle competition, Swanson insisted.
“The only thing that could happen if Uber raises prices and loses customers, is that Lyft would pick them up,” Swanson argued.
Sidecar claims Uber’s large network of drivers enables it to shorten wait times for riders. This makes the service more convenient and valuable to riders. In order to snatch more market share, Lyft would have to lower its price more significantly to compete with the more convenient service, Sidecar argues.
Like Uber, Lyft has also priced rides at below cost to capture more market share. Sidecar argues that since Lyft became a publicly traded company in April 2019, it faces more pressure to “recoup its own massive losses through higher prices.” That constraint has made it more difficult for Lyft to lower prices and seize a bigger slice of the market, according to Sidecar’s amended complaint.
Citing a Reuters analysis of 2019 ride data in Chicago, Sidecar notes that Uber raised prices 13% for its “Uber pool” rides, in which riders share cars with other passengers, in order to steer more customers toward its more expensive ride options, such as “Uber X,” thus increasing corporate revenue.
Sidecar argues that Uber was able to raise prices and cause a 10% reduction in all carpool rides, which shows that the company wields monopoly power.
However, Judge Spero was not convinced that example means Lyft could not pick up at least some riders or drivers if Uber were to suddenly drop 5% of its riders or drivers.
LeClair replied that Sidecar is not saying Lyft could pick up no new business in such a scenario. Rather, he argued, any reaction by Lyft would “not be sufficient to constrain Uber’s ability to price at monopoly levels.”
Spero appeared open to that line of reasoning. If Uber dropped 10,000 drivers, and Lyft was only able to add one driver in response, that would not disprove the theory that Uber wields monopoly power, he said.
“To a certain extent, isn’t it a matter of degree,” Spero said. “He says a non-significant portion of the market share cannot be captured by Lyft.”
After about 45 minutes of debate, Spero took the arguments under submission.