Uber the Monopolist- What Happens When Uber is the Only Game in Town?

Nearly everyone who uses Uber is impressed by this transportation service. In many cases it makes transportation within urban and suburban areas less pricey. Due to the supply of "Uber Drivers", the service is also much more convenient to obtain on demand transportation than it was in the pre-Uber-era dominated by government-regulated taxicabs. Uber may be a boon to consumers (for the moment) and to the drivers (until the self-driving vehicle displaces all the drivers). But there is a much bigger problem that I do not believe the public sees or even fully understands.

Uber is the prime example of creative destruction. In the case of on demand transportation, destroying not only an older, established way of serving consumers but, more importantly of destroying the government-granted monopoly of the taxi medallion. The taxi industry sat on its fat ass for so long that it had zero incentive to innovate. They relied 100% on what they believe to be a government backed privilege that would never be destroyed....that is until the government didn’t really back it anymore because something better came along. While this is very short sighted on the part of the government that sells these medallions, the fact remains that the government let it happen. Worse of all, the NYC Taxi and Limousine Commission continues to let it happen by allowing Uber to operate outside the law.

Uber is a true monopolist partially because its success involves destroying the medallion and the independent car service companies that have traditionally served the markets. Entry restrictions and other government-granted privileges that use to protect traditional taxicab owners from competition is now long gone. While Uber likely could have passed any restrictions to entry, had it chosen to do it the proper way, the problem is that they chose to do so in an improper and underhanded fashion. The key here is not that they entered in a destructive manner, but that they did so in an illegal and unfair manner. A technology company my ass. They are partially technology and partially transportation. But the fact of the matter remains that they entered the market and the government regulators took so long to get on the ball that by the time they did, it was too late. When the regulators finally woke up, Uber was already here to stay. So the government could only say to them "fine...you can stay so long as you submit to our regulations". By then, it didn’t matter, Uber was already a powerhouse. So much for the government protecting the small businesses that have served as the backbone of our neighborhoods for decades. Most of all, so much for the government requiring businesses to follow the rule of law. Uber broke the law (and continues to do so) and is either granted absolution by the NYC Taxi and Limousine Commission or they simply continue without any repercussions.

A monopoly in an of itself is not wrong or illegal. But an entity that becomes a monopoly by engaging in illegal anti-competitive behavior is an illegal monopoly. Using new technology to destroy a long-entrenched monopoly is not itself a lamentable, monopolizing development. Using aggressive tactics to obtain drivers and customers is also not improper. The ultimate problem is that for Uber to succeed, it must destroy all the competition. Uber can’t leverage anything if it’s just one of several competing ride-sharing apps. That’s why the company must behave so aggressively. Again, aggressive tactics are fine, but the law specifically prohibits certain exclusionary or predatory conduct because it is anti-competitive. Such anti-competitive conduct comes in many forms. Exclusionary conduct has been defined as conduct, other than competition on the merits or restraints reasonably necessary to maintain competition on the merits

Uber's actions and conduct is not just aggressive, but it is clearly exclusionary and predatory. Pick your poison.....Uber has engaged in Predatory Pricing, Predatory Bidding, Predatory Affiliation, violated the Federal Trade Commission Act (FTC Act) (15 USC 45) that prohibits ‘‘unfair or deceptive acts or practices in or affecting commerce".....and most of all, we all know that Uber has intentionally engaged in Misclassification of Drivers for the Purpose of Gaining an Unfair Advantage.

Of course any company worth the weight of its corporate charter wants as large a market share as it can possibly achieve and will act aggressively in pursuit of that as-large-as-possible market share. That’s what competition is supposed to incite companies to do. Competition is good. Competition is healthy for the market and for the consumer. Competition, in the case of Uber, has required the traditional taxis and car services to find new ways to gain customers and to WOW them with their customer service. This was a well needed kick in the ass. BUT...the main point is that the law does not protect competitors, but seeks to protect competition itself.  Competition on some basis other than the merits or any conduct by an entity that secures market share by means other than the competitive merits of a specific service is anticompetitive and illegal. this is the essence of Uber.....illegal anticompetitive conduct.

The purpose of antitrust laws is to protect free enterprise and consumers. What if there were only one grocery store in your community? What if you could buy a phone from only one retailer? What if only one dealer in your area sold cars?  Without competition, the grocer may have no incentive to lower prices. The phone shop may have no reason to offer a range of choices. The car dealer may have no motivation to keep its showroom open at convenient hours or offer competitive financing. Competition in America is about price, selection, and service. It benefits consumers by keeping prices low and the quality and choice of goods and services high. Competition also encourages businesses to offer new and better products. Competition makes our economy work. Antitrust laws often have to be used by competitors in order to ensure that our markets are open and free. The law seeks to promote free and open competition and encourages challenges to anticompetitive business practices to make sure that consumers have access to quality goods and services at competitive prices, and that businesses can compete on the merits of their work.

The word “antitrust” dates from the late 1800s, when powerful companies dominated industries, working together as “trusts” to stifle competition. Thus, laws aimed at protecting competition have long been labeled “antitrust.” Fast forward to the 21st century: you hear “antitrust” in news stories about competitors merging or companies conspiring to reduce competition. Antitrust laws often have to be used by competitors and consumers to challenge business practices that could hurt consumers by resulting in higher prices, lower quality, or fewer goods or services.

While the government and its regulatory agencies are supposed to monitor business practices and challenge them when appropriate, the reality is that our government has done nothing to stop Uber and our elected officials are not going to take any corrective action. Thus, we need the industry to “think outside the box”. How ironic is it that one of the most successful monopoly-destroyers of recent years — Uber — is quickly becoming a monopoly itself.

The average consumer may not know it now, but when Uber is the only game in town, what will stop Uber from raising its prices beyond the norm and essentially raping the average consumer with its "surge pricing". The answer is NOTHING. When the competition is gone, Uber will be able to do whatever it wants. Some will say that no one will use the service if it gets too expensive. Remember that Uber changed the rules of the game. People now not only want, but they expect on demand transportation..... and Uber has shown that the consumer is willing to pay for it. When Uber is the only game in town, because they have gone unchecked for so many years, who will stop them then. The time to act is now. Contact me to discuss this matter further.