Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Rider charges Uber founder with price fixing conspiracy, (Dec 17, 2015)

By Linda O’Brien, J.D., LL.M.

The founder and chief executive of ride sharing service Uber has engaged in a conspiracy with its drivers to fix the prices of rides by the implementation of surge pricing in Uber’s fare pricing algorithm, according to a complaint filed by an Uber rider in the federal district court in New York City (Meyer v. Kalanick, December 16, 2015).

Travis Kalanick is the founder and chief executive officer of Uber Technologies, the international transportation network company that developed a software application that allows users to request rides from independent, third party drivers who provide transportation services.

The complaint states that the Uber app matches riders with drivers and offers different car service experiences, such as uberX, uberTAXI, UberBLACK, UberSUV, and UberLUX. Uber drivers charge the fares set by the Uber algorithm. Following the completion of a ride, Uber calculates a fare using a base amount, ride distance, and time spent in transit. The fare may be multiplied during “surge” periods if rider demand is high and/or driver supply is low. The transaction is processed on behalf of the driver. Uber collects a percentage of the fare as a software licensing fee and remits the remainder to the driver.

Kalanick’s business plan generates a profit through price fixing, the plaintiff alleges. In September 2014, Uber conspired with its drivers to negotiate an effective hike in fares that would benefit them at the expense of riders. Uber initially required drivers of SUVs and limo cars to accept lower fares for rides. Drivers, who should have been in direct competition with each other over price, banded together and asked Uber to reverse that decision and reinstitute higher fares. Uber colluded with those drivers to put the higher fares back in place, the complaint charges.

According to the lawsuit, Kalanick touts Uber’s business model as procompetitive. If Uber were a transportation service and employed its drivers, instead of a claimed technology company using independent contractors, Uber would be free to compete with other companies using its pricing algorithm. However, Uber has refused to employ its drivers so the drivers don’t compete on price.

The complaint also alleges that Uber’s pricing algorithm artificially manipulates supply and demand by imposing surge pricing on drivers who would otherwise compete with one another on price. Uber and Kalanick control the fares charged to riders. Through the pricing algorithm and surge pricing component, Kalanick and Uber have artificially set the fares that its drivers charge to riders.

The plaintiff asserts claims for price fixing in violation of Section 1 of the Sherman Act and New York Donnelly Act. The action seeks declaratory relief, restitution, disgorgement, treble and punitive damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 1:15-cv-09796.

Attorneys: Andrew Arthur Schmidt (Andrew Schmidt Law PLLC) for Spencer Meyer.

Companies: Uber Technologies, Inc.

News: Antitrust NewYorkNews