Uber Must Face Antitrust Suit for Driving Rival Out of Business

Uber Technologies Inc. must face claims that it drove ridesharing pioneer Sidecar out of business by leveraging the support of its deep-pocketed venture capital backers to operate at a loss for years, a San Francisco federal judge ruled Friday.

The ruling hands the tech giant a rare defeat after a string of victories against antitrust and unfair competition lawsuits targeting its sharp-elbowed tactics and alleging regulatory gamesmanship.

It gives a green light to Sidecar’s claims that Uber uses its war chest to subsidize both driver pay and passenger prices while it undercuts rivals that can’t afford to lose money on every ride. Because it’s so heavily capitalized, Uber can afford to wait while the competition withers, the suit says.

The decision also represents a reversal of Magistrate Judge Joseph C. Spero’s previous ruling in the same case, which he tentatively dismissed in January. The judge held at the time that the suit’s allegations of a “duopoly” involving Uber and Lyft Inc. were squarely foreclosed by precedent.

Ruling for Sidecar Friday, Spero said its second amended complaint cured the main flaw he found in the previous version: Rather than argue that Lyft teams up with Uber in a “disciplined oligopoly,” the suit now claims Uber’s market dominance shields it from market forces, including competition by Lyft.

“Sidecar has plausibly alleged that Uber could unilaterally raise the ‘price’ that it keeps for itself from ride-hailing transactions to supracompetitive levels,” the judge wrote, “while insulated by network effects from Lyft or a new market entrant.”

It could conceivably achieve those increases “through fare increases not fully passed on to drivers, commission increases reducing drivers’ pay not offset by discounts for passengers, or a combination of two,” Spero said.

Those same dynamics also mean Uber is dangerously likely to recoup any losses it suffers on the way to a total monopoly, he found.

The ridesharing giant has faced parallel allegations in state and federal courts nationwide. The suits all center on essentially the same conduct, but some of them have involved antitrust claims, while others have alleged unfair competition and violations of state pricing laws.

A Boston federal judge threw out one of the cases last summer, and Uber got a California appeals court to affirm dismissal of state law predatory pricing claims in March, one day before it beat a similar suit filed in San Francisco federal court by the city’s oldest taxi company.

Sidecar is represented by McKool Smith PC and Zelle LLP. Uber is represented by Gibson, Dunn & Crutcher LLP.

The case is SC Innovations Inc. v. Uber Techs. Inc., N.D. Cal., No. 18-cv-7440, 5/1/20.