4 ms·

>"Uber passengers were paying only 41% of the actual cost of their trips; Uber was using these massive subsidies to undercut the fares and provide more capacity

>"Uber passengers were paying only 41% of the actual cost of their trips; Uber was using these massive subsidies to undercut the fares and provide more capacity than the competitors who had to cover 100% of their costs out of passenger fares." Wouldn't that constitute very clear violation of the Sherman Antitrust Act and be considered profound anticompetitive behavior? I'm fuzzy on specifics, but I thought offering your product at a loss to drive away or outlast competitors was one of the big giant no-nos alongside price-fixing. Is the person doing the analysis just interpreting the numbers in that way because they're not showing a profit? Or, in other words, would the FTC be likely to interpret the situation in the same way?

tossaway1 9y ago
Wouldn't that just be the same as any loss leader, which are not illegal in general...
- rayiner 9y ago
  Loss leaders are products priced under cost to get customers in the door to buy your other products. Selling your only product below cost in order to kill competitors is antitrust dumping. Luckily, antitrust enforcement in the US is a joke.
yjftsjthsd-h 9y ago
I could very easily be wrong, but I thought that only counted if you were a monopoly or coordinating with other companies? I mean, it's the "Antitrust" act. Would love it if anybody could clarify this.
- gnicholas 9y ago
  Correct. You can only get in trouble under antitrust laws if you're a big fish in the "relevant market". Defining this term is generally where all the fighting centers, because it makes or breaks the case. And in the case of Uber, they would argue that cabs are part of the same market. Including cabs (and not just Lyft) would make the market big enough that Uber would not be considered to have monopoly power. (Even with just Lyft, this is probably also the case.) Source: I was a summer law clerk for the antitrust department of the CA DOJ.
  - malandrew 9y ago
    The market is personal transportation. Uber competes with cabs, other TNCs, personal cars, car rental, public transportation, biking, walking, etc. In a few circumstances an Uber passenger may consider only cabs and Uber when deciding how to be transported. In many many other cases, Uber passengers are considering any of the other transportation methods above. I personally often decide between an Uber or taking the bus. I don't own a car.
  - otakucode 9y ago
    The Sherman Antitrust Act has a great deal more in it than only defining monopoly powers. No business is permitted to engage in price-fixing, regardless of size, and that is due to that act. Many other anticompetitive practices are defined in it as well, and also apply to all businesses deemed to be engaging in 'commerce'. I'm not talking about claiming Uber is a monopoly at all, just that their actions (as described by the article) sounds to me like anticompetitive practices that are illegal under the act.
- otakucode 9y ago
  The Sherman Antitrust Act regulates tons of different aspects of what businesses may do, and does not apply solely to large monopolies. It's certainly been used in the past to break up monopolies, but it is also the law which forbids companies of any size from using physical aggression, general intimidation tactics, and similar to collect debt for instance. If I own a lawn-mowing business and you owe me money, I can't go tell your neighbors and family that you're a deadbeat, and that's because of the Sherman Antitrust Act. (Notably, insurance companies are considered 'not commerce' so not regulated under this and medical insurance companies are known to do exactly this sort of thing to intimidate people into paying money they owe.)

tossaway1 9y ago

Wouldn't that just be the same as any loss leader, which are not illegal in general...

rayiner 9y ago
Loss leaders are products priced under cost to get customers in the door to buy your other products. Selling your only product below cost in order to kill competitors is antitrust dumping. Luckily, antitrust enforcement in the US is a joke.

yjftsjthsd-h 9y ago

I could very easily be wrong, but I thought that only counted if you were a monopoly or coordinating with other companies? I mean, it's the "Antitrust" act. Would love it if anybody could clarify this.

gnicholas 9y ago
Correct. You can only get in trouble under antitrust laws if you're a big fish in the "relevant market". Defining this term is generally where all the fighting centers, because it makes or breaks the case. And in the case of Uber, they would argue that cabs are part of the same market. Including cabs (and not just Lyft) would make the market big enough that Uber would not be considered to have monopoly power. (Even with just Lyft, this is probably also the case.) Source: I was a summer law clerk for the antitrust department of the CA DOJ.
- malandrew 9y ago
  The market is personal transportation. Uber competes with cabs, other TNCs, personal cars, car rental, public transportation, biking, walking, etc. In a few circumstances an Uber passenger may consider only cabs and Uber when deciding how to be transported. In many many other cases, Uber passengers are considering any of the other transportation methods above. I personally often decide between an Uber or taking the bus. I don't own a car.
- otakucode 9y ago
  The Sherman Antitrust Act has a great deal more in it than only defining monopoly powers. No business is permitted to engage in price-fixing, regardless of size, and that is due to that act. Many other anticompetitive practices are defined in it as well, and also apply to all businesses deemed to be engaging in 'commerce'. I'm not talking about claiming Uber is a monopoly at all, just that their actions (as described by the article) sounds to me like anticompetitive practices that are illegal under the act.
otakucode 9y ago
The Sherman Antitrust Act regulates tons of different aspects of what businesses may do, and does not apply solely to large monopolies. It's certainly been used in the past to break up monopolies, but it is also the law which forbids companies of any size from using physical aggression, general intimidation tactics, and similar to collect debt for instance. If I own a lawn-mowing business and you owe me money, I can't go tell your neighbors and family that you're a deadbeat, and that's because of the Sherman Antitrust Act. (Notably, insurance companies are considered 'not commerce' so not regulated under this and medical insurance companies are known to do exactly this sort of thing to intimidate people into paying money they owe.)