Uber CEO Must Face Price-Fixing Lawsuit by Passengers

Harry here.  Of all the departments at Uber, I feel like their legal department has to be one of the busiest at the company.  Some of these lawsuits are pretty legitimate, but I can only imagine how many meritless lawsuits are brought against the company.  I guess that’s the good and bad about living in a litigious society.

Today, RSG contributor John Ince takes a look at the first Uber lawsuit aimed at their CEO, a Federal judge who doesn’t see the difference between Uber/Lyft and taxis and a great wrap-up of Uber’s power driver war in SF. 

In this week's round up, John Ince covers a price-fixing lawsuit brought by passengers and more!

Uber CEO must face price-fixing lawsuit by passengers: U.S. judge

Sum and Substance: Travis Kalanick, chief executive officer of Uber Technologies Inc, failed on Thursday to win the dismissal of an antitrust lawsuit accusing him of scheming to drive up prices for passengers who use the popular ride-sharing service. 

U.S. District Judge Jed Rakoff in Manhattan said Kalanick must face claims he conspired with drivers to ensure they charge prices set by an algorithm in the Uber smartphone app to hail rides, including “surge pricing” during periods of peak demand. 

Passengers, led by Spencer Meyer of Connecticut, claimed that drivers conspired with Kalanick to charge fares set by the algorithm, with an understanding that other Uber drivers would do the same, even if they might fare better acting on their own. Rakoff said the plaintiffs “plausibly alleged a conspiracy” to fix prices in this manner, and could also pursue claims that Kalanick’s actions drove out rivals such as Sidecar, enabling Uber to command 80 percent of mobile-app generated ride shares. 

“The advancement of technological means for the orchestration of large-scale price-fixing conspiracies need not leave antitrust law behind,” the judge wrote. 

Meyer’s lawsuit seeks class-action status on behalf of Uber passengers nationwide who have used the app and a subclass of passengers subjected to surge pricing. “In creating Uber, Kalanick organized price-fixing among independent drivers who should be competing with one another on price,” he said. “Today’s decision confirms that apps are not exempt from the antitrust laws.”

The case is Meyer v Kalanick, U.S. District Court, Southern District of New York, No. 15-09796.

My Take:  The lawsuits against Uber have been piling up, but this is the first lawsuit I’m aware of that’s targeting Uber CEO Travis Kalanick.  Uber is not named as a defendant and the reason is simple: class action status is much easier to achieve going against Kalanick, who by the way has a net worth somewhere north of $5 billion (though most if it is in Uber stock, which isn’t very liquid right now).  This lawsuit goes right to the heart of Uber’s business model – surge pricing.  It would be ironic indeed if the Uber CEO were found at fault for conspiracy and price fixing with drivers – when drivers can’t seem to get organized for their protests vs Uber.

Federal judge not so sure Uber and Lyft are any different from cab companies

Sum and Substance: What’s the difference between Uber and a taxi company? A federal judge isn’t so sure there’s much of one. 

U.S. District Court Judge Nathaniel Gorton on Thursday ordered the city of Boston to revise its taxi regulations within six months, and to give the court a good reason why the city shouldn’t be forced to regulate taxis and other ride-hailing services in the same way. He did so while refusing to dismiss a claim from taxi companies that the city was violating their equal-protection rights because they are being held to a different standard than the new-age transportation services, which are unregulated by the city. Other claims were dismissed.

For years, the taxi industry has argued Uber and Lyft drivers should face the same regulatory hurdles cab companies and their drivers deal with because they perform the same function: offering the public rides for a fee. Uber and Lyft have fought local efforts to regulate their drivers like taxis and livery drivers.

Boston officials argued that the claim should be dismissed, saying taxis are distinct from services like Uber and Lyft, pointing to markings on taxi cabs as an example. Gorton, however, was inclined to the cab companies’ argument that many of the “obvious differences” between cabs and Uber—like the markings or the types of vehicles used—only exist because the city has different requirements for cabs. “The City may not treat the two groups unequally and then argue that the results of that unequal treatment render the two groups dissimilarly situated. Such circular logic is unavailing,” Gorton wrote. 

Gorton also wrote that some of the differences that made Uber and Lyft distinct from taxis in the past — hailing through a smartphone or credit card-only payments — are disappearing as taxis adopt technology. He pointed to the city’s cab regulations to say that, by the letter of the law, taxis and ride-hail services alike fall under the same Boston Police definition of a for-hire transportation service. 

A spokeswoman for Boston Mayor Marty Walsh said the city was reviewing Gorton’s order and could not yet say how the city would proceed with a review of its taxi regulations. And Gorton acknowledged that the possibility that statewide legislation is passed before the end of the summer establishing new laws for Uber and Lyft—which could wind up preempting any local regulations—also complicates the regulating process for the city.

My Take:  Uber has expertise in circular logic, as any driver who has tried to get a straight response from an Uber CSR can attest.  Whenever a driver tries to call Uber out on their double talk, they get nowhere.  But here we have a U. S. Federal Circuit Judge expressly criticizing Uber for their “circular logic.”   This is a case worth following.  If Uber cannot prevail here, it gives taxis all over a leg up in their attempt to gain regulatory parity with Uber and Lyft.

Uber Incentives Aim to Lure Power Drivers

Sum and Substance: Uber giveth and Uber taketh away. In January, the ride-hailing company slashed rates by double-digit percentages from coast to coast, triggering a storm of outrage from drivers who saw their earnings reduced. Now it’s showering them with various bonuses, income guarantees and other incentives, in a bid to lure new drivers, win back defectors and get current drivers to log more hours on the road. 

For Uber, recently valued at $62.5 billion by its investors, the effort shows that it confronts a costly challenge to maintain its market share of on-demand rides, even in key markets like its hometown of San Francisco, at the same time that it faces expensive investments to expand internationally and enter new fields like food delivery. 

At the same time, the new offers could backfire if drivers struggle to meet Uber’s specific terms. And critics say by placing strict requirements on where and how often drivers work, Uber could weaken its argument in a high-stakes legal case that its drivers are independent contractors, not employees. In one offer, Uber is now guaranteeing $2,000 a week in gross earnings for new drivers who work 60 hours a week. Another, more-extensive program for existing drivers promises bonuses based on how many trips they complete. For 100 trips in a week, they get an extra $350, for instance. 

“There’s a big battle going on between Uber and Lyft for the power drivers,” said driver Harry Campbell, who writes the popular blog The Ridehare Guy. Although frequent drivers account for only about a fifth of those companies’ workforce, they do a majority of the driving, he said. 

Uber driver Kathy Allen, a single mom, says some aspects of the bonus program are murky. “If you create a metric that you base people’s pay on, you need to be transparent about it. You should give workers the ability to track it and tell them how it’s calculated,” Allen says. To earn incentives, drivers must reach certain milestones, like accepting 90 percent of ride requests, performing a certain number of trips within San Francisco or completing 1.8 trips per hour. Uber says these criteria help prevent fraud.

However, exerting control over where, when and how drivers work is at the heart of a class-action suit alleging that drivers should be reclassified as employees rather than independent contractors. And the fine print frustrates some drivers. “Uber is like the casinos gaming the gambler,” said Kathy Allen, a Navy veteran who drives for Uber in San Francisco while she hunts for a full-time job. “They stack the odds for the house in their favor.”

My Take:  This is the best analysis I’ve seen of the power driver bonus and the war between Uber and Lyft for power drivers.  This battle may very well define the outcome of the bigger rideshare war.  Whoever attracts the most drivers, will eventually attract the most passengers.  Then there’s the wild card looming in the background – Juno.   Will the NYC startup be able to win the hearts and pocketbooks of drivers with their promise of lower commissions (10%) and equity in the company?  That’s the billion dollar question.  Soft launch scheduled for this spring.  Stay tuned.

The Truth About How Uber’s App Manages Drivers

Sum and Substance: Last year, my colleague Luke Stark at NYU and I spent nine months studying how U.S. Uber drivers interact with the platform. We analyzed online driver forums, where tens of thousands of drivers share advice and compares notes on their experiences and challenges with the Uber system. We also conducted in-depth interviews with seven drivers to explore worker experiences of the on-demand economy.

We found that through Uber’s app design and deployment, the company produces what many reasonable observers would define as a managed labor force. Drivers have the freedom to log in or log out of work at will, but once they’re online, their activities on the platform are heavily monitored. The platform redistributes management functions to semiautomated and algorithmic systems, as well as to consumers.

Algorithmic management, however, can create a deal of ambiguity around what is expected of workers — and who is really in charge. Uber’s neutral branding as an intermediary between supply (drivers) and demand (passengers) belies the important employment structures and hierarchies that emerge through its software platform.

My Take: When Harvard Business Review starts analyzing Uber’s control mechanisms, you know this is serious stuff.  This is a good analysis of the subtle and technologically empowered mechanisms Uber uses to influence the decision making of it’s drivers.  How effective is Uber at this kind of suggestive control?  My guess is that they’re pretty good and that’s likely the argument that will be presented at a trial in June when the plaintiffs argue that Uber has misclassified drivers as “independent” contractors.

Drivers, what do you think about the week’s top stories?

-John @ RSG