It seems there may be more to Uber’s success than meets the eye according to a lawsuit that was filed against their founder and CEO, Travis Kalanick. The suit was filed in December of 2015 by a Connecticut man who claims that Uber, the ultra-successful ride sharing app, uses an algorithm in the app to drive up prices during peak travel hours and other times of high demand. Spencer Meyer, the Connecticut man who filed the suit, is hoping that the suit will gain class action status.
Interestingly enough Uber technologies, valued at some 50 billion dollars at the moment, was not named in the suit; only its CEO Kalanick himself was named as a defendant.
One of the suit's strengths is that Uber stresses that its drivers are not employees of the company, but are in fact "independent contractors". Since all the cab drivers that can be summoned by the app are urged to follow the apps pricing guideline, you essentially have collusion going on between several independent small business persons. This may put Kalanick’s app in direct violation of federal antitrust laws. In the suit, Meyers claims that since the cab drivers are independent the app is a thinly vailed price fixing scheme and Uber takes a share of those profits that essentially stifle competition.
Kalanick tried to get the case dismissed from the U.S. District Court in New York, but was unsuccessful. District Court Judge Jed Rakoff ruled that the lawsuit will proceed and will be heard in court starting in November of 2016. Rakoff, in his statement as to why he refused to dismiss the case, wrote that advanced technologies that lead to large scale price fixing were not above antitrust laws. He even went on to say that the Uber technology ‘disguises’ itself as an app, but in reality is much more than that.
It will be interesting to see how this lawsuit turns out because it sounds like Judge Rakoff believes the Plaintiff has a strong case.