It’s David versus Goliath, on wheels.
A San Francisco cab company is suing ride-hail giant Uber, which it accuses of using $15 billion in venture capital funding to charge unrealistically low prices.
Flywheel Taxi, formerly DeSoto Cab Co., alleges that Uber has “sustained substantial losses” by illegally charging customers significantly below what it costs to provide ride-hailing service.
Those VC billions, Flywheel alleges, allow Uber to “monopolize the ride-hail market in San Francisco through anticompetitive and predatory conduct.”
Essentially, the suit claims people ride Uber because it’s priced so low, but the prices are only low because billionaires keep throwing money at the company –– which, the suit alleges, has yet to describe a profit.
Representatives for Uber were not immediately available for comment.
The suit, filed in U.S. District Court of Northern California on Wednesday, takes aim at the engine driving Uber’s rapid worldwide expansion, and that of tech firms more widely: venture capital funding. Uber is described as being valued at more than $68 billion, according to various news reports, though that number has been disputed.
Hansu Kim, co-president of Flywheel Taxi, oversaw DeSoto’s rebrand into Flywheel Taxi early last year. The cab’s iconic red color reflects a widely used taxi app, Flywheel, which is designed to compete with Uber on smartphones.
In a statement from Flywheel, the company alleges that once all of its competitors have been forced from the market, Uber, “unfettered by competition, will be free to charge exorbitant prices for all ride-hail transportation in San Francisco.”
The lawsuit comes at a troubling time for Uber, as a United Kingdom employment tribunal recently agreed that Uber drivers were not self-employed, and should receive a “national living wage” as well as annual leave and other benefits, according to the Guardian UK.
The suit also alleges Uber engages in false statements to the public about safety and pricing, and false statements to drivers regarding earnings and tips.
For instance, beginning in 2011 and through 2016, Uber told customers that UberX and UberXL driver payments “includes the tip,” but “in reality” that fare did not include a tip, the complaint from Flywheel reads.
Douglas O’Connor, a former Uber driver who later became a lead plaintiff in an ongoing lawsuit in California regarding Uber drivers’ status as independent contractors or employees, said he wishes Uber allowed its drivers to be tipped.
“I felt like during my time I had a lot of lost income because Uber wouldn’t let me receive electronic tips while drivers on Uber Taxi [another platform within Uber] could,” he said.
That suit regarding driver’s employment status is ongoing. Judge Edward Chen of a federal district court rejected a settlement for the suit earlier this month.