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Friday, September 20, 2019

Uber subsidiary sues Chicago over bike-sharing contract, says grants Lyft monopoly, skipped public bidding


By Scott Holland | Aug 6, 2019

Bicycle riders enter an intersection in Chicago. | Courtesy Wikimedia Commons

CHICAGO — An Uber-owned company is suing the city of Chicago, alleging the city's bike-sharing contract essentially grants a monopoly to Lyft.

Social Bicycles LLC, which operates Jump, filed a complaint Aug. 2 in federal court in Chicago against the city and its transportation department concerning the $65 million contract signed in 2013 with Alta Bicycle Share. When Bikeshare Holdings bought Alta, it renamed it Motivate; Lyft purchased Motivate in July 2018, three months after Uber acquired Jump.

The city renegotiated the contract in March 2019, seeking to “dramatically expand” its scope by giving Motivate sweeping, exclusive operational rights, “without ever engaging in a competitive bidding or request for proposal process, as required by state and local public contracting laws,” the complaint said.

Mayor Richard Daley first promoted a bike-share program in 2007, ultimately tabling the idea when the two proposals were deemed too costly. Mayor Rahm Emaneul revived the concept in 2011 after the city earned an $18 million Federal Highway Administration grant.

Jump said the city’s initial contract used the common model in which the municipality buys the bikes and docks — in this case 3,000 Divvy bicycles and 301 docking stations — then partners with a private company that operates the system and directly charges users.

“The city spent an initial $30 million in federal and local funding to buy the bikes and stations,” the complaint said. “As the Chicago Tribune reported at the time, ‘Alta was shielded from the bulk of the risk because taxpayers funded all of Divvy’s startup costs.’”

With dockless systems, such as Jump, cities typically don’t purchase any infrastructure, but sometimes require operators to go through a permit process. Jump said it uses integrated locking mechanisms to operate thousands of electric units in 20 cities worldwide.

The complaint alleges Lyft approached the Chicago Department of Transportation last summer to amend the 2013 contract, which resulted in the addition of an exclusivity clause explicitly barring Jump or any other competitor from entering the market with any type of rental bicycle. It said the city is committed to negotiating expansion of exclusivity rights to cover scooters, another field in which Uber's Jump competes directly with Lyft.

“The (Emanuel) administration announced to the public its intention to enter into the amendment in March 2019,” according to Jump, “but did not engage in a proposal process as required by law, and a city council vote was hastily scheduled for just weeks later.”

The complaint quotes people who opposed the expanded contract, such as current Mayor Lori Lightfoot, Chicago Against Violence CEO Rev. Andre Smith and the CEO of the Washington Park Chamber of Commerce. Although council approval came before Lightfoot took office and Lightfoot hasn’t explicitly implemented the amendment, “she is authorized to do so and could sign the amendment at any time without Jump’s knowledge,” the company said.

Formal allegations include a violation of the Illinois Municipal Purchasing Act and the Municipal Code of Chicago. Jump also said the contract violates its equal protection rights under the 14th Amendment and the Illinois Constitution.

In addition to a jury trial, Jump wants a court to void the amendment and to prevent the city and CDOT from taking any action to implement the new deal. It also wants to be compensated for the cost of pursuing the litigation.

Representing Jump in the matter are lawyers from the New York firm of Kaplan, Hecker & Fink LLP, and Massey & Hail LLP, of Chicago.

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Organizations in this Story

City Chicago Department Transportation Lyft Motivate (doing business as Divvy Bikes) Uber

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