By Jonathan Stempel
NEW YORK (Reuters) - Uber Technologies (NYSE:UBER) Inc sued New York City on Friday, seeking to void a new rule limiting how much time its drivers can spend cruising streets in busy areas of Manhattan without passengers, saying it threatens to undermine the company's ride-sharing model.
In a filing in New York state court in Manhattan, Uber also sought to void a rule banning the issuance of new licenses to for-hire vehicles through August 2020.
Seth Stein, a spokesman for Mayor Bill de Blasio, defended the rulemaking by the city's Taxi and Limousine Commission, saying it would protect New Yorkers "against a company that seeks to put profit first."
"Extending the cap on the issuance of new (for-hire) vehicle licenses for at least the next year in tandem with the cap on cruising is not only legal, it will bring needed relief to congested streets and hardworking drivers," Stein said.
Uber, which is based in San Francisco, has drawn criticism from many cities that its vehicles increase congestion and take away business from taxi and other services.
In New York City, the value of "medallions," or licenses, needed to operate taxis has plunged in recent years as ride-sharing services such as Uber and Lyft (NASDAQ:LYFT) gained popularity.
Uber is challenging the city's "cruising cap" rule that sets a 31% limit on how much time drivers of app-based vehicles may drive without passengers in Manhattan south of 96th Street -meaning they would have to have fares at least 69% of driving time.
New York's cruising rate was 41% in 2018. Under the new rule, the maximum would fall to 36% in February 2020 and 31% six months later.
"The rule would threaten the viability of the ride-sharing model as it currently exists, jeopardizing the benefits this model has created for riders and drivers," Uber said. It said that while it has "publicly and vocally supported" reducing congestion in Manhattan, the cruising cap was based on "flawed and arbitrary" economics.
Supporters say cruising and licensing caps could help ease traffic tie-ups and free up streets for cyclists, pedestrians and public transit.
Uber shares closed down $1.22, or 3.6%, at $32.60.
The case is ZEHN-NY LLC et al v New York City Taxi and Limousine Commission et al, New York State Supreme Court, New York County.