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Lawsuit Alleging Uber’s Anti-Competitive Practices Drove Rival Out of Business Is Moving Forward

By Rich Duprey – Updated May 4, 2020 at 4:39PM

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Sidecar Technologies ended up selling its assets to GM after being driven from the market.

Uber Technologies (UBER -3.34%) is alleged to have engaged in anticompetitive practices that resulted in rival Sidecar Technologies going out of business, a point Sidecar's successor company will be allowed to pursue in a lawsuit against the ride-sharing leader.

A federal court judge in San Francisco found the allegations "sufficiently plausible" to allow the case to proceed against Uber.

Uber driver giving friends a ride

Image source: Uber Technologies.

Charges of bad faith

Founded in 2011, Sidecar Technologies was an early player in ride-sharing, operating in 11 U.S. markets and introducing innovations that are now standard in industry apps. 

Its founder Sunil Paul says Uber engaged in "predatory pricing" to undermine its rivals, subsidizing the costs of fares and the pay it gave to drivers, all the while planning to raise prices and cut driver compensation after it drove competition from the market.

Sidecar alleges that those practices actually caused it to go out of business, selling its assets to General Motors (GM -1.24%) in 2016, which Paul says was "because Uber is willing to win at any cost and they have practically limitless capital to do it."

Sidecar subsequently sued Uber. In January, district court chief magistrate judge Joseph Spero dismissed an earlier version of the case. However, he is allowing the new suit to go forward, writing, "At this stage, the court finds Sidecar's allegations of market power to be sufficiently plausible to avoid dismissal."

That doesn't mean SC Innovations v. Uber Technologies will be successful, of course, but it means the arguments deserve a hearing. Uber has faced increased scrutiny in recent years over various policies and safety measures, as well as communities and countries, imposing limits on its ability to operate in their jurisdictions.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.

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