(Adds statement from Taxi and Limousine Commission and background, paragraphs 5, 8, 9)
By Akshay Balan and Mekhla Raina
Oct 12 (Reuters) - Lyft Inc, following its rival Uber's move, has sued New York City seeking to nullify a new rule limiting the time its drivers are allowed to spend cruising in Manhattan without passengers, the company said on Saturday.
The lawsuit, filed by the San Francisco-based ride-hail company on Friday, argues that the cruising rule is arbitrary and threatens to shift business away from ride-hailing companies like Lyft in favor of taxis.
"This rule is not a serious attempt to address congestion, and would hurt riders and drivers in New York," Lyft spokesman Campbell Matthews said in a statement to Reuters.
The "cruising cap" rule, implemented by the city's Taxi and Limousine Commission (TLC), 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.
"We will vigorously defend against this suit, and we will continue to fight for safer, less congested streets and for drivers' rights," TLC spokesman Allan Fromberg said in a statement, but mentioned that the agency has not been served with the suit yet.
The rule, along with several others introduced last year, is aimed at reducing congestion in Manhattan, where ride-share vehicles make up close to a third of peak time traffic, according to the TLC.
Uber contested the rule in September along with another rule banning issuance of new licenses to for-hire vehicles through August 2020.
Uber and Lyft disconnected drivers from their apps at times of slow demand this year in an effort to comply with the city regulation.
Both companies oppose the new rules, saying they will prevent drivers from earning money and deprive low-income New Yorkers of ride services in remote areas where regular taxis do not travel frequently. The city rejects that claim. (Reporting by Akshay Balan and Mekhla Raina in Bengaluru; Editing by David Gregorio)