May 22 (Bloomberg) -- Ride-sharing services Uber Technologies Inc. and Lyft Inc. were accused of racketeering in a lawsuit by Connecticut taxi and livery firms, which said the companies “prey parasitically” on established services.
The services, operating without proper licenses, “cut corners illegally” and undermine “critical safety provisions of Connecticut taxi and livery laws,” the taxi companies said in a complaint filed yesterday in New Haven federal court.
Among a growing number of “sharing economy” businesses, San Francisco-based Uber and Lyft have faced criticism over their business model in some cities where they operate. Uber is in financing talks to raise money in a round that may value the company at more than $10 billion, according to people with knowledge of the situation.
Uber and Lyft, which began operating in Connecticut in April, typically take a cut of fees from transactions booked through their smartphone applications. Rather than owning cars, the companies partner with drivers who agree to be affiliated. The companies have said they’re different from taxi dispatchers and shouldn’t be compelled to comply with existing regulations.
The Taxicabs & Livery Council of Connecticut Inc. and more than a dozen taxi and livery companies are seeking a court order permanently barring the companies from operating illegally in the state.
“This baseless lawsuit is just another example of taxi company owners trying to shield themselves from perceived competition and limit consumer choice and driver opportunity,” Nairi Hourdajian, a spokeswoman for Uber, said in a statement. “Uber will vigorously defend the rights of drivers and riders to connect to safe, affordable and reliable transportation alternatives.”
Chelsea Wilson, a Lyft spokeswoman, said the lawsuit “is without merit and we look forward to resolving it quickly and effectively.”
The cab companies allege that Uber and Lyft operate profitably by “misappropriating the infrastructure of existing taxi and livery services” and ignoring regulations that apply to other hired-car services.
The ride-sharing firms duck the strict requirements imposed on taxis in areas such as safety, driver background checks and liability insurance, the cab companies alleged.
Liability and insurance issues are one concern raised by critics of the services.
“Our issue with these services is they are a taxi company,” said John Boit, a spokesman for the national Taxicab, Limousine & Paratransit Association, which isn’t a part of the Connecticut lawsuit. “They’re transporting human beings which is a dangerous prospect at any time, whether you’re in a family car, or whether you’re a taxi driver.”
The group has been tracking several lawsuits filed in the U.S. over accidents involving ride-sharing services, including a wrongful-death case against Uber over a child pedestrian’s death in San Francisco.
In that case, filed in January in San Francisco state court, the parents of Sofia Liu sued Uber and the driver who hit the girl. The girl’s mother and brother were seriously hurt as they crossed a street on a green light on New Year’s Eve in the city’s Tenderloin neighborhood.
Uber said Jan. 1 that the driver was “a partner of Uber” who wasn’t providing services on the Uber system during the time of the accident.
The case is Greenwich Taxi Inc. v. Uber Technologies Inc., 14-cv-00733, U.S. District Court, District of Connecticut (New Haven).
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