SAN FRANCISCO (CN) — A cab company sued Uber in Federal Court this week, claiming it's using billions of dollars in venture capital to slash prices and undersell competitors, while shifting most of its business risk onto drivers.
"Left unchecked, Uber is likely to succeed in establishing complete domination of the market by forcing out all competitors through its predatory pricing practices," Flywheel Taxi says. "Once its competitors have been removed, Uber, free of the constraints of competition, will be free to implement unfettered price increases for its services, and consumers will be left with no choice but to pay the prices — however exorbitant — demanded by Uber."
Flywheel is San Francisco's oldest taxi company, operating since the 1930s, and known until 2015 as DeSoto Cab.
In its Wednesday lawsuit, Flywheel says Uber, which began operating in San Francisco in 2010, uses its substantial financial backing to undersell its rivals, and pushes much of the costs and liability onto its drivers by requiring them to use and maintain their own vehicles, and carry personal insurance.
"Despite a business model that unabashedly shifts the risks of doing business to its drivers and lures drivers to a modern-day form of indentured servitude, Uber has yet to turn a profit," Flywheel says in the complaint. "Propped up by billions of dollars in venture capital, Uber has lost and continues to lose hundreds of millions of dollars each year due to its predatory pricing practices."
Flywheel also claims that Uber misleads drivers about their potential earnings to lure them away from the taxi industry. "In reliance on Uber's misrepresentations, thousands of former and potential San Francisco taxicab drivers have quit or foregone driving taxicabs and assumed monthly car payments with the expectation of earning 80 percent of all fares collected from their passengers," Flywheel says.
And it says Uber violated a host of federal, state and municipal regulations to get its unfair advantage over traditional cabs.
Uber spokeswoman Sophie Schmidt said in an email that her company's goal "is to provide a credible alternative to the private car. 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."
But Flywheel seeks compensatory damages and an injunction against Sherman Act monopolization and attempted monopolization, unfair trade by selling below cost, Lanham Act violations by false statements, an intentional interference with prospective economic relations.
It is represented by Shannon Seibert with Seibert & Bautista.
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