Significance of the Uber’s Price Fixing Problem

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Significance of the Uber’s Price Fixing Problem
Just recently after settling one lawsuit, Uber and its CEO Travis Kalanick face an antitrust class action lawsuit. The suit is filed by Spencer Meyer who alleges that Uber is engaged in a price-fixing conspiracy against the Sherman Antitrust Act which protects customers from corrupt collusion. Spencer’s argument is that since Uber claims that its drivers are independent contractors, then they should not conspire secretly over how much they should charge their consumers, and since they are doing so, then it amounts to price fixing since the app enables all the independent drivers to have identical prices. The suit has a number of implications.
If the suit was to go against Uber, the company stands to pay millions of dollars in penalties. According to Steinbaum (1), the firm reached a settlement provision of $100 million with its drivers in Massachusetts and California in April 2016. This is an indication that Uber could be faced with penalties or even higher fees in terms of settlement provisions if the suit was to turn out in Spencer’s favor. However, the problems don’t just end there.
The suit also exposes another of the company’s soft underbelly, violation of labor laws. In arguing against the antitrust violation claims, Uber will try to claim that Uber’s drivers are independent contractors and are thus not engaged in corporate collusion. However, this exposes the company to suits by employees who may feel that they are entitled to a minimum wage, the right to unionize, overtime benefits and unemployment benefits (Carter 1).

Uber received a blow in the UK when the employment tribunal ruled that Uber’s drivers should be classified as employees and not self-employed persons (Osborne 1). This could happen in other countries, and it has a direct effect on Uber’s operations.
Uber is able to keep its operating costs low by treating drivers as self-employed people. In this light, the firm is not responsible for labor requirements such as the payment of the minimum wage, overtime benefits, unemployment benefits, and collective bargaining agreements. The antitrust suit is likely to bring to the fore labor laws violation suits which could, in turn, lead to increased operating costs for the company (Wickins 1). The result of this is declining profits, and possibly a decline in market share. This could, in turn, lead to the firm’s management to rethink its business model.
With increasing costs and declining profits, Uber will have to rethink its business model and strategy, and most likely will reorganize. The company could consider making changes to its application and its business model in order to comply with all the relevant laws such as labor and antitrust. The suit is also likely to fan identical suits in other states in the US as well as countries the world over and ultimately bring technology companies, especially in the Silicon Valley under more scrutiny.
Works Cited
Carter, Z. (2016, April 22) The Legal Problem that Could Crash Uber. The Huffington Post, 2016. Retrieved from http://www.huffingtonpost.com/entry/legal-problem-could-crash-uber_us_5718d485e4b0479c59d714f6
Steinbaum, M. (2016, May 11) Uber’s Antitrust Problem. American Prospect, 2016. Retrieved from http://prospect.org/article/uber%E2%80%99s-antitrust-problem
Wickins, G. (2016, July 13) The Uber Price-Fixing Ride: What are the Antitrust Implications? CNBC Africa, 2016. Retrieved from http://www.cnbcafrica.com/news/special-report/2016/07/13/the-uber-price-fixing-ride-anti-trust-implications/
Osborne, H. (2016, October 28) Uber Loses Right to Classify UK Drivers as Self Employed. The Guardian, 2016. Retrieved from https://www.theguardian.com/technology/2016/oct/28/uber-uk-tribunal-self-employed-status