Uber was sued in federal court Wednesday by Desoto, the oldest cab company in San Francisco that recently rebranded itself as a ride-hail company called Flywheel. In it’s complaint, Flywheel alleges that Uber used “predatory pricing tactics” to cause a “race to the bottom” in transportation services.
Flywheel also accuses Uber of lying about the availability, pricing, and safety of its rides, lying to drivers about the income they can earn, discriminating against disabled passengers and on the basis of gender and race, and illegally increasing fares during peak hours through surge pricing. The company is seeking damages from Uber “greater than $5 million.”
Uber promotes itself as a disrupter. But according to Flywheel, “Uber has done little more than implement a business strategy that openly flouts the law while shifting many of the costs and nearly all of the risks of providing ride-hail services from itself to its drivers and passengers while forcing a race to the bottom through predatory pricing tactics — where, propped up by billions of dollars in venture capital funding, Uber will remain until its illegal strategy has forced all other competitors from the market.”
In essence, Flywheel says that Uber’s practice of subsidizing its rides to keep fares cheap is unfair and anti-competitive, because Uber can rely on its vast reserves of venture capital to do so. “Uber CEO Travis Kalanick has repeatedly stated in public speeches that Uber intends to ‘destroy’ all of its competitors and has made clear that UBER is doing so through below-cost pricing of UberX and UberXL services,” the lawsuit reads.
The ride-hail giant is arguing that Flywheel allegations of predatory pricing don’t make sense. Flywheel is focused on a narrow portion of Uber’s business — ride-sharing — to make its accusations of underpricing, but Uber says it’s broader goal is to end personal car ownership, which is why it is subsidizing its rides to keep fares so low.
“We compete with lots of way to get around, especially car ownership,” an Uber spokesperson said in response to the lawsuit. “Our goal is to provide a credible alternative to the private car. Our technology lets us make our network more efficient over time, and innovations like UberPool are further lowering prices, making ridesharing more available to more people.”
Of course, Flywheel has a vested interest in knocking Uber off its perch among ride-hail startups. The company recently expanded into New York City, the most lucrative transportation market in the country. Flywheel offers two main products: an e-hail app for riders, and a smartphone-based operating system for taxi drivers that replaces the jumble of meters, dispatch, advertising, navigation systems, and credit card readers currently clogging the interior of their vehicles.
But Flywheel has its own controversies. The startup listed a Long Island City address as its New York City headquarters that is also the location of Taxi Club Management Inc., a medallion group operated by controversial taxi mogul Evgeny “Gene” Freidman, who was recently sued by the state attorney general for failing to pay his drivers properly.