In the Guardian this weekend, there was a curious column which (h/t Jolyon Maugham QC) simultaneously accused Uber of both making huge losses and as having been the beneficiary of governmental tax avoidance facilitation. What the article failed to notice however is that Uber may well have committed other legal sins. With so much emphasis on tax law these days, we often fail to see the wood for the trees, or indeed, the great spectrum of illegal activities in which companies may engage. What the article revealed was in fact the proposition that Uber has been engaged in predatory pricing, an anticompetitive activity which contravenes Article 102 TFEU (leaving to one side the prerequisite of establishing dominance). The law on this matter is relatively simple. If you price your services below your own average variable costs, you are held to have priced predatorily (see: Case C-62/86 AKZO Chemie v Commission  ECR I-3359). This is precisely the activity in which Uber is accused of having engaged:
“A recent article in The Information, a tech news site, suggests that during the first three quarters of 2015 Uber lost $1.7bn while booking $1.2bn in revenue. The company has so much money that, in at least some North American locations, it has been offering rides at rates so low that they didn’t even cover the combined cost of fuel and vehicle depreciation…
…sitting on tons of investor cash, Uber can afford to burn billions in order to knock out any competitors, be they old-school taxi companies or startups like Kutsuplus….
…Uber’s game plan is simple: it wants to drive the rates so low as to increase demand – by luring some of the customers who would otherwise have used their own car or public transport. And to do that, it is willing to burn a lot of cash, while rapidly expanding into adjacent industries, from food to package delivery”
This is not the first time that accusations against Uber’s activities have been misplaced. Elsewhere, authors have focused upon the question of whether Uber is an employer and as such owes duties to its employees. That’s a minor slap on the wrist compared to the antitrust implication of its structure. Uber uses an algorithm to set prices for cabbies. If Uber is not an employer, then it is fixing prices, a serious violation of antitrust law regardless of jurisdiction (for more on this, see an excellent post from colleague Dr Julian Nowag). This could cost Uber up to 10% of its annual worldwide turnover under Article 101 TFEU. In the US, the crime comes with the possibility of treble damages and incarceration. In the UK, the cartel offence under the Enterprise Act 2002, Part 6 comes with a term of imprisonment of up to 5 years.
It is an unfortunate trait of humans that we often see our own woes as most critical (a by-product of the selfish gene?) Us tax geeks in particular; we may sometimes forget that there is more to this world than tax considerations. We often close our eyes, not only to legitimate commercial reasons which influence decisions, but also to the fact that tax law is just one piece of the smorgasbord of regulations which constrains the activities of companies. With that in mind, should we turn our attention to the antitrust implications of country-by-country reporting?
Follow-up blog to come later in the week…