A US District Judge has denied Uber founder Travis Kalanick’s bid to dismiss a proposed class action lawsuit which claims that Uber’s technology is illegally coordinating high surge pricing fares, reports Bloomberg. The Judge stated that Kalanick must face the claim that he conspired with drivers to ‘ensure they charge prices’ including surge pricing rates to hail rides during times of high demand.
Kalanick stated that such ‘a conspiracy involving hundreds of thousands of drivers was implausible and physically impossible’ but was rejected by the judge. Uber sent the following statement to Bloomberg: “These claims are unwarranted and have no basis in fact. In just five years since its founding, Uber has increased competition, lowered prices, and improved service.”
Surge pricing violates antitrust laws
The suit (Meyer v. Kalanick, 1:15-cv-09796, U.S. District Court, Southern District of New York (Manhattan)) was filed in December. This ruling lets a Uber user called Spencer Meyer from Connecticut, US, move forward with his claim that Uber’s pricing algorithm violates antitrust laws used to protect consumers from price manipulation. The judge also added that the suit could pursue claims that Kalanick’s actions drove out rivals like Sidecar, taking home about 80% of app generated ride shares.
Uber says drivers will have to pay for damages if it loses
The lawsuit seeks damages on behalf of over a million US Uber users. Uber, on its part states that the complaint and ruling would be impossible under the antitrust law; and that thousands of drivers would be forced to pay damages if the company lost at trial. It adds that the case if flawed because Kalanick isn’t competing with Uber drivers for rides.
In 2013, in an interview with Wired, Kalanick said that ‘surge pricing only kicks in in order to maximize the number of trips that happen and therefore reduce the number of people that are stranded’. If Uber couldn’t meet demand, customers would think of the service as unreliable, and avoid it in the future, he added.
Price gouging, or the practice of spiking the price of goods to a much higher level, usually after a demand or supply ‘shock’ (sudden increase or decrease), is deemed unlawful by multiple states in the US. Laws against it exist in 34 states and there are multiple ‘for and against’ arguments for it.
– Meanwhile, in October 2015, the Maharashtra Government released a draft of the City Taxi Scheme 2015, which states that online cab aggregators come in the same category as radio taxis/traditional cabs, will have capped surge pricing and a limited number of cars on their platform in Mumbai.
– In Karnataka, the fare of a cab ride cannot be higher than the one fixed by Government (Rs 19.5 per km) from time to time (even if implementing surge pricing).