Naperville Business Lawyer Discusses Sidecar’s Lawsuit Against Uber

Uber, Naperville business lawyerIt is common for people to associate certain brand names with the services they offer—to the point where the brand name essentially becomes a generic term. For example, when you want to search the internet to learn about a particular person or idea, you will probably “Google” the person or idea, even if your default search engine is Bing instead of Google. Similarly, when you need a ride and public transportation is not a viable option, you might decide to “Uber,” even if you end up riding with Lyft.

As a business law attorney, I understand that genericizing brand names is not a new phenomenon. It has long been done with physical products such as Kleenex facial tissues, Band-Aid adhesive bandages, and Velcro hook-and-loop fasteners. There is a problem, however, when a particular company tries to position itself as the top brand in a given sector by stifling competition in ways that are unfair and illegal. According to a recent lawsuit filed in California, a now-defunct company is alleging that Uber engaged in such practices to put their competitors out of business.

A Recap of the Situation

In December 2015, the ride-hailing company Sidecar announced that it would be ceasing operations at the end of that year. The 4-year-old company had competed against Uber and Lyft on a regional basis, serving about a dozen American cities including San Francisco, Los Angeles, and Chicago. As Uber and Lyft expanded, however, Sidecar seemed to stall. After Sidecar went out of business, the company sold its assets to General Motors in 2016.

“Predatory Pricing”

Earlier this month—almost exactly three years after Sidecar announced that it was closing—the company’s successor, SC Innovations Inc., filed a lawsuit in federal court alleging that Uber had used underhanded tactics to gain a larger share of the ride-hailing market. Sidecar claims that “Uber’s senior officers and executives directed clandestine campaigns” to make fake ride requests with Sidecar.  The company alleges that Uber sent ride requests to Sidecar but canceled them before the drivers arrived at their pick-up spots. The suit claims that this had the effect of keeping drivers busy without generating sustainable revenue. While the Sidecar drivers were busy chasing fraudulent requests, the company says, Uber was positioned to provide rides to real customers.

The lawsuit also claims that Uber offered bonuses and subsidies to its own drivers while decreasing the fares paid by passengers—effectively losing money on every ride. The suit says that Uber riders paid just 40 percent of the cost of rides in 2015, and the company covered its losses with money raised from private investors. “Uber intentionally sustained near-term losses that were designed to drive Sidecar out of the market,” Sidecar alleges, calling the practice “predatory pricing.”

The lawsuit seeks a declaration that Uber violated federal antitrust laws and state laws governing business competition. The suit does not seek specific financial damages.

Protect Your Company with Help from a Naperville Business Lawyer

If you own a business, it is important to comply with all applicable state and federal laws. For guidance with compliance concerns, contact an experienced business law attorney in Naperville. Call 630-756-1160 for a confidential consultation at The Gierach Law Firm today.

 

Sources:

Reuters

Ars Technica