Download - SDNY Class action suit against Uber
-
8/18/2019 SDNY Class action suit against Uber
1/27
UNITED STATES
DISTRICT COURT
SOUTHERN DISTRICT OF
NEW
YORK
- - - - - - - - - -- - - - - - - - - - -- - - - - - - - - - -- - - - - x
SPGNCER MEYER,
i nd iv idua l ly
and on
behal f
of those
s imi l a r l y
s i t u a t ed ,
P l a i n t i f f s ,
15 Civ. 9796
OPINION ND ORDER
-v -
_ , ~ - i - · ' ...
· - ' ' - ' ~ ' ' ' ' ° ' '
u
c l
TRAVIS KALANICK, D o c : ; ~ :·: ,\;T
r · '" ' '° '"; . ~ . . , T
.
~ ~ ~ ~ ~ ~ ~ ~
~ ~ ? ~ ~ ~ M ~
JED
S.
RAKOFF, U.S.D.J .
On
December
16, 2015, p l a i n t i f f
Spencer
Meyer,
on
behal f
of
himsel f and those
s imi l a r l y s i t u a t ed ,
f i l e d t h i s p u t a t i v e
a n t i t r u s t c la s s ac t i o n l awsu i t ag a i n s t defendant Trav is
Kalanick, CEO and co-founder
o f
Uber Technologies ,
Inc .
( Uber ) .
See
Complaint ,
Dkt.
1.
Mr.
Meyer ' s F i r s t Amended
Complaint , f i l e d on
January
29,
2016,
a l l eg ed t h a t Mr. Kalanick
had orches t ra t ed and
f a c i l i t a t e d an
i l l e g a l
p r i ce - f i x in g
consp i racy in v io l a t i o n
of
Sect ion 1
of
the f ed e ra l Sherman
Ant i t rus t Act, 15 U.S.C. § 1,
and
the
New York Sta t e
Donnelly
Act ,
New York Genera l
Business
Law
§
340. See
F i r s t
Amended
Complaint
( Am. Compl. ) , Dkt. 26, g[g[ 120-140. P l a i n t i f f
cla imed, in essence,
t h a t
Mr. Kalanick, whi le
d i sc l a imin g t h a t
he was running
a t r anspor ta t ion
company, had
consp i red
with Uber
dr ive rs
to use Uber s
pr i c ing
a lgor i thm to se t the p r i c e s
charged to
Uber r i d e r s ,
thereby r e s t r i c t i n g p r i c e compet i t ion
1
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 1 of 27
-
8/18/2019 SDNY Class action suit against Uber
2/27
among
dr ive rs
to the
de t r iment
o f
Uber r i d e r s , such
as p l a i n t i f f
Meyer.
See
id .
1, 7.
On
February
8, 2016, defendant Ka lan ick moved to
di smiss
the
Amended
Complain t .
See Notice
o f Motion, Dkt.
27.
P l a i n t i f f
opposed on
February
18,
2016;
defendant r e p l i e d on February
25,
2016; and
o ra l
argument
was
he ld on March 9,
2016.
Having
cons ide red a l l o f the p a r t i e s '
submiss ions and
arguments , t he
Court hereby den ies
de fendan t ' s
mot ion
to
dismiss .
In r u l i n g on a
mot ion
to dismiss ,
t he
Court accep ts as t r u e
t he
f a c t u a l a l l e g a t i o n s in
t he
compla in t and draws
a l l
reasonab le
in f e rences in
favor of the
p l a i n t i f f . Town o f Babylon
v.
Fed. Hous.
Fin. Agency, 699
F.3d 221, 227 (2d Ci r . 2012). To
surv ive
a
mot ion
to dismiss , a compla in t
must
co n ta in su f f i c i e n t
f a c t u a l mat t e r , accep ted as
t rue , to
s t a t e
a
cla im to
r e l i e f
t h a t
i s
p l a u s i b l e on
i t s
f ace .
Ashcrof t
v.
Iq b a l ,
556
U.S.
662,
678 (2009)
( in t e rna l
q u o ta t i o n marks o mi t t ed ) . In the
a n t i t r u s t
con tex t , s t a t i n g a cla im under
Sec t ion
o f the Sherman
Act
r e q u i r e s a complaint with enough
fac tua l
mat t e r ( taken as t rue)
to
sugges t t h a t an agreement was made. Asking fo r
p l a u s i b l e
grounds
to
i n f e r
an
agreement does
not impose a p ro b a b i l i t y
requirement a t the
plead ing
s tage ;
t s imply c a l l s
fo r enough
During
or a l
argument ,
the
Cour t i n v i t e d both s ide s t o submit l e t t e r s
regard ing
c e r t a i n s tud ie s
c i t ed
by p l a i n t i f f
in the
Amended
Complaint . See
T r ansc r ip t
of Proceedings dated
March
9,
2016 ( Tr . ) ,
24:12-16. These
l e t t e r s , r espec t ive ly
dated
March
11,
2016 ( P l . Let te r )
and
March
15,
2016
( Def. L e t t e r ), w i l l
be
docke ted
along with
t h i s
Opinion.
2
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 2 of 27
-
8/18/2019 SDNY Class action suit against Uber
3/27
fac t
to r a i s e a reasonab le
expec ta t ion
t h a t discovery w i l l
r ev ea l evidence of
i l l e g a l
agreement . Bel l Atl . Corp. v.
Twombly,
550 U.S.
544,
556
(2007).
The r e l ev an t a l l eg a t i o n s
of
the Amended Complaint are as
fo l lows .
Uber,
founded
in
2009,
i s a technology company
t h a t
produces an
app l i ca t ion
fo r smartphone dev ices
( the
Uber
App )
t h a t matches r i d e r s with
dr ive rs
( ca l l ed d r iv e r - p a r tn e r s
2
See
Am Compl. 2, 21, 24, 27. Uber
s t a t e s
t h a t
t
i s not
a
t r anspor ta t ion
company
and
does
not employ
dr iver s .
See id .
2,
23.
Defendant Kalanick,
in
ad d i t i o n
to
being the co- founder
and CEO
of
Uber,
i s a
dr ive r
who has used the Uber
app.
See id .
3. P l a i n t i f f Meyer i s
a
re s iden t
of
Connect icu t ,
who
has
used
Uber ca r s e rv i ces
in
New
York. See id .
7.
Through the
Uber App, users can
reques t
p r iv a t e
d r i v e r s t o
pick
them
up
and
dr ive
them
to
t h e i r
d es i r ed
l oca t ion .
See
id .
24.
Uber
f a c i l i t a t e s payment
of the f a r e
by
charg ing the u s e r ' s
c r ed i t ca rd o r
o t h e r payment in fo rmat ion
on f i l e .
See id . 32.
Uber c o l l e c t s
a
percen tage o f
the f a r e as a
sof tware
l i c ens ing
fee
and remi ts
the
remainder to
the dr iver .
See Am
Compl.
27.
Drive rs us ing
the Uber
app do not
compete
on
pr ice , see id .
2,
and cannot
nego t i a t e
fa res
with dr ive rs fo r
r ides ,
see id .
34.
2 The Court uses dr iver s and sometimes Uber dr iver s ins tead of Uber ' s
term
dr iver -par tner s for the sake of s impl ic i ty ,
but
t h i s
usage
i s
not meant to
imply
any employment
r e l a t ionsh ip between
Uber
and these
dr ive r s ,
which
defendant
f i rmly denies .
3
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 3 of 27
-
8/18/2019 SDNY Class action suit against Uber
4/27
Ins tead , dr ive rs
charge the f a r e s s e t
by
the Uber a lgor i thm. See
id .
2. Though Uber
c la ims to
a l low
d r i v e r s to depar t downward
from the f a r e
s e t
by the a lgor i thm, t he re i s no p ra c t i c a l
mechanism by which dr ive rs
can do
so. See id . 69.
Uber ' s
surge
p r i c i n g model , designed by Mr. Kalanick, permi ts fa res
to
r i s e up to
t en
t imes the
s t an d a rd
fa re
dur ing
t imes
of high
demand.
See id . 26, 48, 50. P l a i n t i f f a l l eges t h a t the
dr ive rs
have a
common
motive to consp i re because adher ing to
Uber ' s pr i c ing a lgor i thm
can
yie ld
su p ra -co mp e t i t i v e pr i ce s , Am
Compl. 90, and t h a t i the dr ive rs were ac t i n g
i ndependent ly
i ns t ead
of
in concer t ,
some
s i g n i f i c a n t p o r t i o n would not
agree to
fo l low
the Uber
pr i c ing
a lgor i thm.
See id .
93.
P l a i n t i f f fu r t h e r
c la ims
t h a t the d r i v e r s have had many
oppor tun i t i e s
to meet
and
enforce t h e i r commitment to the
unlawful
agreement .
Am
Compl.
92. P l a i n t i f f
a l l eges t h a t
Uber holds
meet ings
wi th p o ten t i a l
dr ive rs
when
Mr.
Kalanick
and
his subord ina tes decide to o f f e r Uber App
se rv ice s in
a new
geographic
l oca t ion . See
id .
40. Uber
a l so
organ izes even ts
fo r i t s
dr ive rs
to get toge ther , such
as a picn ic in
September
2015 in Oregon with over 150 d r i v e r s and t h e i r fami l i es in
a t tendance , and other
pa r tne r
ap p rec i a t i o n even ts in
p laces
inc lud ing New York City . See id . 41. Uber prov ides d r i v e r s
with
in fo rmat ion regard ing
upcoming
even ts
l i k e l y
to c rea t e
high
demand fo r t r an s p o r t a t i o n
and informs
the
d r i v e r s what t h e i r
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 4 of 27
-
8/18/2019 SDNY Class action suit against Uber
5/27
i n c reased
earn ings
might
have
been
i
t hey had logged on
to the
Uber App dur ing
busy
per iods .
See id .
58.
Moreover p l a i n t i f f
a l l eges , in
September 2014
dr ive rs using the Uber App in New
York City co l luded with one
anothe r
to
n eg o t i a t e
the
r e i n s t i t u t i o n of higher fa res fo r r i d e r s us ing UberBLACK and
UberSUV s e rv i ces
(ce r t a in
Uber
car
s e rv i ce ex p e r i en ces ) . See
id .
25 87. Mr. Kalan ick
as Uber ' s
CEO d i r e c t e d
or
r a t i f i e d
n eg o t i a t i o n s between Uber and t h ese d r i v e r s , and Uber
ul t ima te ly
agreed to r a i s e
fa re s .
See
id . 87.
As
to
market d e f in i t i o n ,
p l a i n t i f f a l l eges
t h a t
Uber
competes
in the
r e l a t i v e l y new mobi le app-genera ted
r ide -sha re
s e rv i ce market , of which Uber
has
an
approximate ly 80 market
share . Amended o m p l a i n t ~
94-95.
Uber ' s
ch ie f
compe t i to r
in
t h i s market
Lyf t , has
only a 20 market share , and a t h i rd
compe t i to r ,
Sidecar ,
l e f t
the
market
a t
the
end
of
2015.
See
id .
95-96.
Although p l a i n t i f f contends, n e i t h e r t ax i s
nor
t r a d i t i o n a l
cars fo r h i r e are
reasonab le s u b s t i t u t e s
fo r
mobi le
app-genera ted
r ide -sha re
s e rv i ce , Uber ' s own
exper t s
have
suggested t h a t
in
ce r t a in
c i t i e s in the
U.S. ,
Uber
cap tu res 50
to
70
of
bus iness cus tomers in the combined
market
of t a x i s ,
ca r s fo r hi re ,
and
mobile-app genera ted
r ide -sha re se rv ice s . See
id .
107.
P l a i n t i f f
cla ims
to sue
on
behal f
of the fo l lowing
c l a s s :
a l l per sons in the United Sta t e s who
on
one
or
more occas ions ,
5
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 5 of 27
-
8/18/2019 SDNY Class action suit against Uber
6/27
have used
the
Uber
App to ob ta in r ide s from Uber dr iver -par tne r s
and paid f a r e s fo r t h e i r r ide s se t by the Uber p r i c i n g
a lgor i thm,
with ce r t a in
exc lus ions , such
as
Mr. Kalanick .
See
id . 113. P l a i n t i f f a l s o
i de n t i f i e s
a subc lass o f r i d e r s who
have
paid f a r e s
based on
surge pr i c ing . See id .
114. P l a i n t i f f
a l l eges t h a t he and the puta t ive c las s have s u f f e red
a n t i t r u s t
i n ju ry because , were it not fo r Mr. Kalan ick ' s consp i racy to f ix
the fa res charged by
Uber
dr ive rs , d r ive rs would have competed
on
pr i ce
and Uber ' s fa res would have been su b s t a n t i a l l y lower .
See
id .
109. P l a i n t i f f a l s o contends t h a t
Mr. Kalan ick ' s
des ign has reduced output
and
t ha t , as independent
s tud ie s
have
shown, the e f f e c t of surge
pr i c ing
i s to lower demand so
t h a t
pr i ce s
remain
a r t i f i c i a l l y high. Am Compl. 110. Based
on
these a l l eg a t i o n s , p l a i n t i f f
c la ims
t h a t Mr. Kalanick has
vio la t ed
the
Sherman
Act,
15
U.S.C.
§
1, and
the
Donnelly Act ,
New
York Genera l Bus iness Law § 340. See
id .
120-140.
The
Sherman Act p ro h i b i t s [ e ]v e ry con t rac t , combinat ion in
the form
of
t r u s t
or
otherwise ,
or
consp i racy , in r e s t r a i n t
of
t r ad e
or
commerce. 15 U.S.C. § 1. [A] p l a i n t i f f
c la iming §
v i o l a t i o n must f i r s t es t ab l i s h a combinat ion o r some form of
concer ted
ac t i o n between a t l e a s t two l eg a l l y d i s t i n c t economic
e n t i t i e s . Capi ta l
Imaging Associa tes , P.C. v. Mohawk Val ley
Med. Associa tes , Inc . , 996 F.2d 537, 542 (2d Cir . 1993) .
I f
§
p l a i n t i f f
es tab l i shes
the ex i s tence
of an
i l l e g a l con t rac t
or
6
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 6 of 27
-
8/18/2019 SDNY Class action suit against Uber
7/27
combinat ion,
t
must then proceed to demonst ra te t h a t
the
agreement co n s t i t u t ed
an
unreasonable r e s t r a i n t o f
t r ade
e i t h e r
per se
or under
the ru l e
of
reason .
Id .
a t 542.
Conduct cons idered
i l l e g a l
per se i s
invoked
only
in a
l i mi t ed
c la s s
of cases ,
where a
d e fen d an t ' s ac t i o n s
are
so
p la in ly
harmful
to
compe t i t ion
and
so obvious ly l ack in g
in any
redeeming pro-compet i t ive va lues t h a t t hey
are conc lus ive ly
presumed
i l l e g a l
without fu r the r examinat ion . Id . ( in t e rna l
c i t a t i o n and
quota t ion
marks omi t t ed) . By con t ras t , most
a n t i t r u s t
c la ims are analyzed
under
a ' r u l e
o f
rea son , '
according
to which
the f i n d e r of
fac t must
decide
whether
the
ques t ioned p r ac t i c e imposes an unreasonable r e s t r a i n t on
compe t i t ion ,
t ak ing
i n t o account
a
v a r i e ty o f f ac to r s , i n c lu d in g
s p ec i f i c in fo rmat ion about the re levan t bus iness , i t s cond i t ion
before
and
a f t e r
the
r e s t r a i n t
was
imposed, and
the
r e s t r a i n t ' s
h i s t o ry , natu re , and e f f e c t .
Sta t e
Oi l Co.
v. Khan,
522
U.S.
3,
10 (1997).
A n t i t r u s t law a l s o di s t ingu i shes between v e r t i c a l and
h o r i zo n t a l
pr i ce
r e s t r a i n t s .
Res t ra in t s
imposed
by
agreement
between
compet i to rs
have
t r a d i t i o n a l l y been
denominated
as
h o r i zo n t a l r e s t r a in t s , and
t hose
imposed by
agreement between
f i rms a t d i f f e r e n t l eve l s
of
d i s t r i b u t i o n as
ve r t i c a l
r e s t r a i n t s . Bus.
Elecs . Corp. v. Sharp Elecs .
Corp. ,
485
U.S.
717,
730
(1988). Res t ra in t s
t h a t
are per
se
unlawful inc lude
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 7 of 27
-
8/18/2019 SDNY Class action suit against Uber
8/27
hor i zon ta l agreements among compet i to rs to f ix
p r i c e s ,
while ,
a t l e a s t in the con tex t o f r esa le pr i ce
maintenance,
[ v ] e r t i c a l
pr i ce r e s t r a i n t s are to be judged
accord ing
to
the
ru le of
reason . Leegin Creat ive
Leather Products ,
Inc. v. PSKS Inc . ,
551
U.S.
877, 886, 907 (2007). In
the
i n s t a n t case , the Court
f inds
t h a t
p l a i n t i f f has adequate ly p led both a hor i zon ta l and a
v e r t i c a l consp i racy .
As to
the hor i zon ta l
consp i racy , p l a i n t i f f
a l l eges t ha t
Uber dr ive rs agree to
p a r t i c i p a t e
in
a consp i racy
among
themselves
when they assen t to
the
te rms o f Uber ' s
wri t t en
agreement
( the
Driver
Terms )
and
accept
r i d e r s
using
the Uber
App. See Am Compl. 70-71.
In doing
so, p l a i n t i f f ind ica tes ,
dr ive rs agree to c o l l e c t fa res through the Uber
App,
which
s e t s
fa res fo r
a l l
Uber dr ive rs
accord ing
to the Uber pr i c ing
a lgor i thm.
See
id .
3
In
p l a i n t i f f ' s
view,
Uber
d r i v e r s
forgo
3
Defendant Kalanick contends t ha t Uber ' s Driver
Terms do
provide t ha t
d r i v e r - p a r t n e r s have
the d i sc re t ion
to
charge l e ss than the suggested
pr ice
determined by
Uber ' s
pr ic ing a lgor i thm. Reply Memorandum
of
Law in Support
of
Defendant
Trav i s Kalan ick ' s Motion to Dismiss, Dkt. 34 ( Def. Reply
Br. )
a t
2
n . l ,
c i t i n g
Declara t ion
of
Michael Colman, Dkt.
29,
Exhib i t 2 ( Dr iver
Terms )
4.1 ( Customer sha l l always have the r igh t
to :
( i ) charge a fa re
t h a t i s l e s s
than
the pre-ar ranged fa re . . ) . Customer
here
r e f e r s to
an independent company in
the
bus iness
of
prov id ing
t r anspor t a t ion
se rv ices , t ha t i s , Uber ' s dr ive r -pa r tne r s . See Driver Terms; Memorandum of
Law
in
Opposi t ion
to
Defendant
Travis Kalanick ' s
Motion
to
Dismiss
( Pl .
Opp.
Br. )
a t
4.
Pl a i n t i f f poin t s
out ,
however, t ha t
the Driver
Terms a l so r equ i r e
dr iver s
to
agree t ha t
the
Fare provided under the
Fare Calcu la t ion i s
the
only
payment
Customer wil l rece ive in
connect ion
with
the
pr ov i s ion
of
Transpor ta t ion
Serv ices , Driver e r m s ~ 4.1, and t ha t more impor tant ly ,
the re i s no
mechanism by
which dr iver s can charge
anything but
the App
d i c t a t e d f a r e . Memorandum
of Law in Opposi t ion
to Defendant
Travis
Kalan ick ' s Motion to
Dismiss ( Pl . Opp.
Br . ) ,
Dkt. 33,
a t 4. For
the
purposes of
eva lua t ing de f endan t ' s motion
to d i smiss ,
the Court
wi l l assume
tha t
d r iver s have no p r a c t i c a l mechanism by which
to
depar t from the
fa res
8
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 8 of 27
-
8/18/2019 SDNY Class action suit against Uber
9/27
compet i t ion in which they would otherwise
have
engaged
because
they are
guaran teed
t ha t other Uber d r i v e r s wil l not undercut
them on p r i c e . See id . II 72; Memorandum of
Law
in Opposi t ion to
Defendant Trav is Kalanick 's Motion to Dismiss ( Pl .
Opp.
Br . ) ,
Dkt. 33,
a t
11. Without the assurance t ha t a l l dr ive rs wil l
charge the pr i ce
s e t
by
Uber, p l a i n t i f f contends , adopt ing
Uber ' s
pr i c ing a lgor i thm would o f t en not be in an
i nd iv idua l
dr ive r ' s bes t
i n t e r e s t ,
s ince
not competing with o t h e r Uber
dr ive rs
on
pr i ce may
r e su l t in
l o s t
bus iness
o p p o r t u n i t i e s .
See
Am
Compl.
II
72.
The
capac i ty
to genera te
supra-compet i t ive
pr i ce s
through
agreement
to
the Uber pr i c ing a lgor i thm t hus
prov ides , according to p l a i n t i f f ,
a
common motive to consp i re
on
the
par t
of
Uber dr iver s .
See
Amended Complaint 'II 90.
P l a i n t i f f
a lso
draws on
i t s a l l eg a t i o n s
about meetings
among
Uber
dr ive rs
and
the
September
2014
consp i racy , in
which
Uber
agreed to
r e i n s t i t u t e
higher fa res a f t e r nego t i a t ions with
dr ive rs , to b o l s t e r i t s c la im of
a
hor i zon ta l consp i racy . See
Pl .
Opp. Br. a t
14-15;
Am
Compl. ' ' 41, 87, 92. In
p l a i n t i f f ' s
view, defendant Kalanick
i s l i a b l e as the o rgan izer
of the
p r i ce - f i x in g consp i racy ,
Am
Compl.
' ' 76,
88; Pl . Opp. Br. a t
9,
and as an Uber d r i v e r
himsel f ,
see id . ' ' 80-85.
se t
by
Uber ' s
a lgor i thm.
Defendant acknowledges t h a t
any
d i s c r e t i o n
dr iver s
may have to charge a lower fa re i s not
mate r i a l
to t h i s
mot ion ,
Def. Reply
Br.
a t n . l ,
and
o r a l argument
proceeded on
the
assumption
t h a t
Uber
s e t s
mandatory
pr ices fo r dr iver s to charge. See
T r ansc r ip t of
Oral Argument dated
March 9, 2016 a t
4:12-16.
9
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 9 of 27
-
8/18/2019 SDNY Class action suit against Uber
10/27
Defendant Kalanick argues,
however,
t h a t the d r iv e r s '
agreement to
Uber ' s
Driver Terms
ev inces no
hor i zon ta l agreement
among dr ive rs themselves , as d i s t i n c t
from
ve r t i c a l agreements
between each
dr ive r and
Uber. See
Memorandum
of
aw in Support
of Defendant Trav is
Kalan ick ' s
Motion to Dismiss
( Def.
Br . ) ,
Dkt. 28, a t 9,
12-13;
T ran s c r i p t
of
Oral Argument dated March 9,
2016 ( Tr . ) 3:19-22. According to
Mr. Kalanick,
d r iv e r s '
ind iv idua l dec i s ions to en te r i n to con t rac tua l ar rangements wi th
Uber
co n s t i t u t e mere independent ac t i o n
t h a t
i s i n su f f i c i e n t to
suppor t p l a i n t i f f ' s cla im of
a
consp i racy . See
Def.
Br.
a t 9.
Defendant
a s se r t s
t h a t the
most na tu ra l exp lana t ion fo r
d r iv e r s ' conduct i s
t h a t
each d r i v e r independen t ly decided t
was in h i s
or he r
b es t i n t e r e s t to en te r a ve r t i c a l agreement
with Uber ,
and
doing so
could
be
in a
d r i v e r ' s
bes t
i n t e r e s t
because ,
fo r
example,
Uber
matches
r i d e r s
with
d r i v e r s
and
processes payment. See
Def.
Br. a t 12-13. In d e fen d an t ' s view,
the
fac t
t h a t
a co n d i t i o n
of
[ the agreement with Uber] was
t h a t
the dr iver -par tne r agree to use Uber ' s pr i c ing a lgor i thm
does
not dimin i sh the independence of d r iv e r s ' d ec i s i o n s .
See id .
a t
13.
I t fo l lows ,
defendant contends,
t h a t such
ve r t i c a l
ar rangements
do not suppor t
a hor i zon ta l consp i racy
cla im.
See
Def. Br. a t 13-14, c i t i n g , e .g . , Leegin, 551 U.S. a t
885
(manufac tu rer ' s agreements r eq u i r i n g r e t a i l e r s to charge
ce r t a in
10
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 10 of 27
-
8/18/2019 SDNY Class action suit against Uber
11/27
minimum pr i ce s ,
a
form
of
v e r t i c a l minimum r esa le pr i ce
main tenance ,
were
to be judged by the
ru l e
of
r easo n ) ; United
St a t e s v. Colgate
Co., 250 U.S.
300, 307
(1919) (a
manufac turer with no purpose to c rea t e
a monopoly
may ex e rc i s e
h i s
own
independent d i s c r e t i o n
as
to p a r t i e s
with whom he
w i l l
deal and announce
in
advance the c i rcumstances
under which
he
w i l l re fuse
to
s e l l ) .
The
Cour t , however, i s not persuaded to dismiss p l a i n t i f f ' s
h o r i zo n t a l consp i racy c la im. In In t e r s t a t e C i r cu i t
v.
United
Sta t e s ,
306
U.S. 208
(1939) ,
the Supreme Court held
t h a t
compet ing
movie d i s t r i b u t o r s had unlawfu l ly r e s t r a in ed
t r ade
when t hey each
agreed
to
a
t h ea t e r o p e r a to r ' s te rms, i n c lu d in g
pr i ce
r e s t r i c t i ons , as
i nd ica t ed in a
l e t t e r
addressed
to
a l l
the
d i s t r i b u t o r s .
For an i l l e g a l consp i racy to
e x i s t ,
the
Supreme
Court
s ta ted :
I t was enough t ha t , knowing
t h a t
concer ted ac t i o n was
contempla ted and i nv i t ed , the d i s t r i b u t o r s gave t h e i r
adherence to the scheme and p a r t i c ip a t ed in it
Acceptance by compet i to rs ,
without
prev ious agreement,
of
an i n v i t a t i o n to p a r t i c i p a t e in
a
plan , the necessary
consequence
of which,
if ca r r i ed out , i s r e s t r a i n t
of
i n t e r s t a t e commerce, i s su f f i c i e n t to
e s t a b l i s h
an
unlawful consp i racy under the Sherman Act.
I n t e r s t a t e Circu i t , 306 U.S.
a t
226-27.
uch
more
recen t ly , the
Second Circu i t s ta ted :
[C]our ts have long recognized the ex i s tence
of
hub-and
spoke
consp i rac ies in which an e n t i t y a t
one
l eve l
of
the market s t r u c tu r e , the hub ,
coord ina tes
an
agreement
among compet i to rs
a t
a
d i f f e r e n t l ev e l , the
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 11 of 27
-
8/18/2019 SDNY Class action suit against Uber
12/27
spokes . These ar rangements
cons i s t
of
both
v e r t i c a l
agreements
between the hub
and
each spoke
and a
h o r i zo n t a l agreement among the spokes to adhere to the
[hub 's]
te rms,
o f t en because the spokes
would not
have
gone a long wi th [ the v e r t i c a l agreements] except on the
unders t and ing t h a t
the other [spokes] were agree ing to
the same th ing .
United Sta t e s
v. Apple,
Inc . , 791
F.3d
290, 314
(2d
Cir .
2015),
c e r t . denied, Mar.
7, 2016
( in t e rna l c i t a t i o n and quota t ion
marks
omi t ted) ;
see
a l s o Laumann
v.
N at ' l Hockey League,
907
F.
Supp. 2d 465,
486-87 (S.D.N.Y.
2012) ( where p a r t i e s
to
v e r t i c a l
agreements have
knowledge
t h a t other market
p a r t i c ip an t s
are
bound by
i d en t i c a l agreements , and t h e i r p a r t i c i p a t i o n i s
con t ingen t upon
t h a t
knowledge,
t hey
may be cons idered
p a r t i c ip an t s
in a
h o r i zo n t a l agreement
in
r e s t r a i n t of
t r a de . ) .
In
t h i s
case,
p l a i n t i f f has a l l eg ed t h a t
d r i v e r s agree
with
Uber
to charge ce r t a in fa res with the c l ea r unders t and ing t h a t
a l l
other
Uber
dr ive rs
are
agree ing
to
charge
the
same fa re s .
See Amended
Complaint
70-71. These agreements are
organ ized
and
f a c i l i t a t e d by
defendant
Kalanick,
who
as
a t
l e a s t an
occas ional
Uber dr ive r ,
i s
a l so a
member of the
hor i zon ta l
consp i racy . See id . 76, 84.
n a
motion to dismiss , the Court i s requ i red to draw a l l
reasonab le
in fe rences in p l a i n t i f f ' s favor . See own
of Babylon,
699 F.3d a t
227. Given
t h i s s tandard , the Court f inds t h a t
p l a i n t i f f s
have
plaus ib ly a l l eg ed a consp i racy in
which
dr ive rs
s ign up
fo r
Uber p r ec i s e ly
on the unders t and ing t h a t the
other
12
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 12 of 27
-
8/18/2019 SDNY Class action suit against Uber
13/27
[dr ivers] were
agree ing
to
the same p r i c i n g a lgor i thm, and in
which
d r iv e r s '
agreements with Uber would
be
aga ins t t h e i r own
i n t e r e s t s were they
ac t ing
independent ly . Apple, 791 F.3d a t
314, 320.
Fur ther , d r iv e r s '
a b i l i t y to benef i t from reduced
pr i ce compet i t ion
with
other dr ive rs
by
agree ing
to
Uber ' s
Driver Terms plaus ib ly
co n s t i t u t e s
a
common
motive to
consp i re .
Apex
Oil Co. v. DiMauro,
822
F.2d 246,
254
(2d Cir .
1987) .
The
fac t t ha t dr ive rs may
a lso ,
in
s igning
up fo r Uber,
seek to b e n e f i t
from
other
se rv ice s t ha t
Uber prov ides , such as
connect ing
r i d e r s to
dr ive rs and process ing
payment,
i s not
to
the con t ra ry . Of course, whether p l a i n t i f f ' s a l l eg a t i o n s are in
fac t accura te
i s a
d i f f e r e n t mat te r , to be l e f t to
the
f a c t -
f ind ing
process .
The
Court ' s
conclus ion
t ha t
p l a i n t i f f has
a l l eged a
plaus ib l e hor i zon ta l
conspiracy
i s
bol s t e red
by
p l a i n t i f f ' s
other a l l eg a t i o n s concerning agreement among dr iver s . P l a i n t i f f ,
as noted supra,
contends
t ha t Uber organ izes even ts
for
dr ive rs
to get
toge ther , see Am
Compl. 41, and, more important ly ,
t h a t
Mr.
Kalanick
agreed to ra i se fa res
fo l lowing d r iv e r s '
e f f o r t s to
negot ia te
higher r a t e s
in September
2014.
See
id .
87.
While
it
i s t rue
t h a t
these
a l l eg a t i o n s about agreements
Though
de f endan t ' s
counsel argued a t o r a l
argument
t ha t i these even t s were
an an t i t r u s t
v io la t ion ,
Mr. Kalanick
would
be a vic t im and not a par t i c ipan t
in
the
conspi racy,
s ince he a l leged ly i n i t i a l l y opposed the h igher r a t es ,
Tr.
37:8-9, the
f ac t
remains t ha t , i p l a i n t i f f ' s a l l ega t ions are taken as
13
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 13 of 27
-
8/18/2019 SDNY Class action suit against Uber
14/27
among
dr ive rs
reach ing even
beyond
accep tance o f Uber s Dr iver
Terms
are not
ex ten s iv e , see Def. Reply Br . a t 7 n .8 ,
nonethe less , they provide
add i t iona l
suppor t fo r
a
h o r i zo n t a l
consp i racy ,
and p l a i n t i f f need not p res en t
a
d i r e c t , smoking
gun ev idence
of a consp i racy , p a r t i c u l a r l y a t the p l e a d i ng
s t ag e . Mayor Ci t y Counci l of
Bal t imore ,
Md. v. Ci t ig ro u p ,
Inc . , 709 F.3d 129,
136 (2d
Cir . 2013).
More
b a s i c a l l y , it
i s
wel l
to
remember t h a t a Sherman
Act
consp i racy
i s
but
one form of
consp i racy , a
concept
t h a t
i s
as
an c ien t
as
it i s broad. I t i s fundamental to the law
of
consp i racy t h a t
the
agreements t h a t
form the essence o f
t he
misconduct
are not to
be judged
by
t e ch n i ca l n i c e t i e s
but by
p r a c t i c a l r e a l i t i e s .
So p h i s t i ca t ed
co n s p i r a t o r s o f t en r each
t h e i r agreements as
much
by
the wink and the nod as
by
e x p l i c i t
agreement ,
and
the
i m p l i c i t
agreement
may
be
f a r
more
poten t ,
and
s i n i s t e r ,
j u s t
by v i r t u e
of
be ing imp l i c i t . Recent ly , fo r
example, in United St a t e s v. U lb r i ch t , t he Government
a l l eg ed
t h a t defendant U lb r i ch t
had
organ ized an o n l in e marke tp lace fo r
illi it goods
and s e rv i ces c a l l e d S i l k
Road. See
United
St a t e s
v. U lb r i ch t , 31 F. Supp. 3d 540, 546-47 (S.D.N.Y. 2014). In
ru l i n g on motions
in
l imine
in
U lb r i ch t , Judge Fo r re s t r e j e c t e d
t he
d e f e n s e s argument t h a t
t r a n s a c t i o n s among S i l k
Road 's
users
t r ue , Mr. Kalan ick agreed
to a f a r e
r a i s e t h a t s e t
higher fa res fo r a l l
Uber
dr ive r s i n
the
r e l evan t groups .
14
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 14 of 27
-
8/18/2019 SDNY Class action suit against Uber
15/27
gave
r i s e to on ly
buy-se l l
r e l a t i o n sh i p s
and
not c o n sp i r a t o r i a l
behav io r or ,
a t most ,
to a m u l t i t u d e o f d i sc r e t e
c o n s p i r a c i e s .
United
Sta t es
v.
Ulbr ich t ,
79 F.
Supp. 3d 466,
481 (S.D.N.Y.
2015). Ins tead , Judge For r e s t noted
t h a t
the
Government
charged the defendant wi th s i t t i n g a top an
overarch ing
s ing l e
consp i racy , which
inc luded
a l l vendors
who
so ld
any
type
o f
narco t i cs
on
Si lk
Road a t any
t im e .
Id . a t
490.
In the i n s t a n t case , Uber ' s
d i g i t a l l y decen t ra l i zed
n a tu re
does
not
preven t the App
from
c o n s t i t u t i n g marketp lace
through
which
Mr. Kalanick
organ ized
hor i zon ta l consp i racy
among d r i v e r s .
Defendant argues ,
however,
t h a t
p l a i n t i f f ' s a l l eged
consp i racy i s wild ly implaus ib le
and phys i ca l l y im poss ib le ,
s ince
t invo lves
agreement among hundreds o f
thousands
of
independent
t r a n s p o r t a t i o n
p ro v id e r s
a l l
across the
United
S t a t e s . Def.
Br.
a t
1.
Yet as
p l a i n t i f f ' s
counse l po in ted
out
a t
o r a l
argument ,
the capac i ty to o r c h e s t r a t e
such an agreement
i s the gen ius o f Mr.
Kalanick and
h i s company, which,
th rough
t he
magic
o f smartphone t echnology, can
i nv i t e
hundreds o f
thousands o f
dr ive r s in f a r - f l ung loca t ions to
agree
to
Uber ' s
terms.
See
Tr. 12:15-16 . The advancement of t e chno log ica l means
fo r
the o r c h e s t r a t i o n
o f l a r g e - sc a l e p r i c e - f i x i n g
consp i r ac ie s
need not
l eave a n t i t r u s t
law behind.
Cf.
Ulbr ich t , 31 F. Supp.
3d a t
559 ( i f t he r e were
an
automated
t e l ephone
l i ne
t h a t
15
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 15 of 27
-
8/18/2019 SDNY Class action suit against Uber
16/27
o f fe red o t h e r s the oppor tun i ty to g a th e r t o g e t h e r t o engage
in
na rco t i c s
t r a f f i c k i n g by press ing l ,
t h i s would
s u re l y be
powerful
evidence of
the
b u t t o n -p u s h e r ' s agreement
t o en te r
the
consp i racy . Automation i s
e f fec t ed
th rough
a
human des ign ; he re ,
U lb r i ch t i s a l l eg ed
to
have been t h e d es ig n e r o f
S i l k
Road
. ) . The
fac t
t h a t
Uber
goes
to
such l en g th s
t o por t ray
i t s e l f
one
might
even say disgu i se
i t s e l f as
the mere purveyor
of
an
app cannot s h i e l d it from the
consequences of its o p era t in g as
much
more.
Recent j u r i sp ru d en ce on v e r t i c a l
r e s a l e p r i c e
maintenance
agreements does
not ,
as defendant would have
it
undermine
p l a i n t i f f ' s cla im
of
an i l l e g a l h o r i zo n t a l agreement . See Def.
Br. a t 15.
In Leegin ,
the Supreme Court held
t h a t
r e s a l e
pr i ce
maintenance agreements
~ a r e t a i l e r ' s agreement with a
manufacturer
not
to
discount th e man u fac tu re r ' s
goods
beneath
a
ce r t a in
pr i ce are to be
judged
by
the
ru l e
of reason, unl ike
h o r i zo n t a l
agreements
to f ix p r i ce s , which a re p e r se i l l e g a l .
See
Leegin ,
551 U.S. a t 886, 907. The Court
c i t e d
var ious
procompe t i t ive
j u s t i f i c a t i o n s
fo r
a
man u fac tu re r ' s use of
re sa l e p r i ce
main tenance , id . a t 889,
and concluded
t h a t
al though
t h i s
p ra c t i c e may a l so have an t i co mp e t i t i v e e f f e c t s ,
the
ru l e
of reason i s
the
b es t
approach
t o d i s t in g u i s h i n g r e s a l e
pr i ce
maintenance agreements t h a t v io l a t e the a n t i t r u s t laws
from t hose t h a t do not . See
id .
a t 897-900.
16
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 16 of 27
-
8/18/2019 SDNY Class action suit against Uber
17/27
Here
unl ike in Leegin Uber i s not se l l i n g anyth ing to
dr ive rs t ha t
i s
then reso ld to r i d e r s . s
Moreover
the
j u s t i f i c a t i o n s fo r ru l e of reason t rea tment of
r e s a l e
pr i ce
maintenance
agreements
o f fe red i n
Leegin are not
d i r e c t l y
app l icab le to
the
i n s t an t case . See Pl . Opp. Br. a t 15-16; Tr .
20-21. In p a r t i c u l a r ,
the Cour t ' s a t t e n t i o n
has
not been
drawn
to concerns about
f r ee - r i d in g
Uber
dr iver s ,
or to e f fo r t s t ha t
Uber dr ive rs could make to
promote
the App t h a t
w i l l
be under-
provided if Uber does
not
s e t
a
p r i c i n g a lgor i thm. See Leegin
551
U.S.
a t 890-91. While
Mr.
Kalanick a s se r t s t h a t Uber ' s
pr i c ing a lgor i thm f a c i l i t a t e s i t s
market
en t ry as
a
new brand
see Def.
Br. a t
16-17 t h i s observa t ion which i s f a i r l y
conclusory does not ru l e out
a
hor i zon ta l consp i racy among
Uber dr iver s ,
f a c i l i t a t e d
by Mr. Kalanick both as Uber ' s
EO
and
as
a
dr ive r
himsel f .
The
Court
t he re fo re
f inds
t h a t
p l a i n t i f f
has adequate ly pleaded
a hor i zon ta l a n t i t r u s t
consp i racy
under
Sect ion
1 of
the Sherman
Act.
As
to p l a i n t i f f ' s c la im of
a
ve r t i c a l consp i racy ,
a
th resho ld ques t ion i s whether p l a i n t i f f has
a l l eged a
ve r t i c a l
L e e g i n ' s
s ta tement
t h a t
[ t ] o
the ex ten t
a
v e r t i c a l agreement
se t t i n g
minimum r esa le
p r i c e s
i s
en t e red
upon to
f a c i l i t a t e
e i t h e r type o f
c a r t e l ,
it
too, would
need to
be
h e ld unlawfu l
under
the
ru le
of r ea son , 551 U.S.
a t 893 thus does not c l e a r l y apply to t h e i n s t a n t
case ,
s i n ce Uber i s
se t t i n g no minimum r e s a l e p r i c e s . Moreover Leegin
did
not
purpor t to
o v e r ru l e
I n t e r s t a t e
Circu i t , which fo r
t h e
reasons d es c r i b ed
supra , permi ts
a f ind ing of a consp i racy
among
compet i to r s
in
ci rcumstances
such as
those o f
the i n s t a n t
case .
See
I n t e r s t a t e
C i r c u i t , 306
U.S.
a t
226-27.
17
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 17 of 27
-
8/18/2019 SDNY Class action suit against Uber
18/27
consp i racy
in the Amended Complaint , which defendant den ies . See
Def. Reply
Br.
a t 8; Def.
L e t t e r
a t 1.
Al though
p l a i n t i f f ' s
a l l e g a t i o n s o f a v e r t i c a l consp i racy are
much
more sparse t han
his con ten t ions
about
a h o r i zo n t a l
consp i racy ,
the
Cour t
f inds
t h a t
the Amended
Complaint adequa te ly
pleads a
v e r t i c a l
consp i racy
between
each
d r i v e r and Mr.
Kalanick .6
In p a r t i c u l a r ,
p l a i n t i f f a l l eges
t h a t [ a ] l l of
the independent d r i v e r -p a r t n e r s
have agreed to
charge
the f a r e s
s e t by Uber ' s
p r i c i n g
a lgor i thm, Am
Compl. Jl 68, and t h a t Mr.
Kalanick
designed t h i s
bus iness model,
see
id . Jl Jl 76, 78. The Amended
Complaint
a l so
inc ludes s ev e ra l a l l e g a t i o n s t h a t would be p e r t i n en t to a ru l e
of
reason,
v e r t i c a l p r i ce - f i x in g
theory .
See
id . Jl Jl
94-108.
Under the Sherman
Act
count , p l a i n t i f f s t a t e s t h a t the unlawful
arrangement
cons i s t s
of
a
s e r i e s of agreements between
Kalanick
and
each
of
the
Uber
d r i v e r -p a r t n e r s ,
as
wel l
as
a
conscious
commitment among the Uber d r i v e r -p a r t n e r s
to
the common scheme
of adopt ing
the
Uber
pr i c ing a lgor i thm
. Am . Compl. Jl 124.
P l a i n t i f f c la ims
t h a t Mr.
Kalanick i s per se
l i a b l e
as
o rg an ize r
of
the
consp i racy
and as an occas ional
Uber
d r i v e r , q q
128-29,
and t hen s t a t e s
t h a t
[ i ] n the a l t e rn a t i v e , Kalanick i s a l s o
l i a b l e
under
Sect ion 1
of
the Sherman Act under a ' qu ick look '
6 Indeed , defendant
himsel f r e f e r r e d
in
the
b r i e f i n g
to
a
v e r t i c a l
pr i ce
arrangement
l i k e
t h a t
descr ibed
in
the
Amended
Complain t . Def. Br.
a t
17.
But see Def. Reply Br. a t
8
( The Amended Complaint does not a l l ege
a
v e r t i c a l r e s t r a i n t
in
v i o l a t i o n o f the a n t i t r u s t
l aws . ) .
18
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 18 of 27
-
8/18/2019 SDNY Class action suit against Uber
19/27
or ' r u l e of reason ' an a ly s i s . Id . 130. In the Co u r t ' s view,
these a l l e g a t i o n s
of
l ega l theory , when coupled
wi th
the
a l l e g a t i o n s
of per t inen t f ac t s ,
are
s u f f i c i e n t
to
plead
a
v e r t i c a l consp i racy theory .
The
ques t ion , then, i s whether t h i s theory
i s plaus ib l e
under
a
ru l e of reason
ana lys i s .
Under
t h i s ana lys i s ,
p l a i n t i f f bears the
i n i t i a l burden of
showing
t h a t
the
cha l l enged ac t i o n
has had
an
ac tua l
adverse
e f f e c t
on
compe t i t ion
as a whole
in the r e l ev an t market . Capi ta l Imaging,
996 F.2d a t
543.
To
surv ive a Rule
12(b)
(6)
motion
to
dismiss ,
an a l l eged product market must bear a
r a t i o n a l
r e l a t i o n
to
the
methodology
cour t s
pre sc r ibe
to def ine a
market
fo r a n t i t r u s t
purposes an a l y s i s of
the i n t e r c h a n g e a b i l i t y
of
use
or the
c r o s s - e l a s t i c i t y
of demand, and t
must be
p lau s ib l e . Todd v.
Exxon
Corp. ,
275
F.3d
191,
200
(2d
Cir .
2001)
( i n t e rn a l
c i t a t i o n
and quota t ion marks
o mi t t ed ) .
As to
market d e f in i t i o n , p l a i n t i f f
def ines the re l evan t
market
as
the mobi le app-genera ted
r ide -sha re se rv ice
market .
Am.
Compl.
94.
P l a i n t i f f
a l l eges
t h a t Uber has an
approximate ly 80 market
sha re
in the United Sta t e s in t h i s
market ; Uber ' s
ch ie f
compe t i to r
Lyft
has near ly a 20 market
share ;
and a
t h i rd
compet i to r ,
S idecar , l e f t the market a t
the
end
of 2015.
Id . 95-97. P l a i n t i f f then
exp la ins
t h a t
t r a d i t i o n a l t ax i
s e rv i ce i s
not
a reasonab le su b s t i t u t e
fo r
19
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 19 of 27
-
8/18/2019 SDNY Class action suit against Uber
20/27
Uber, s ince , fo r
example,
r ide s genera ted by mobile app can be
a r ranged
a t
the push of but ton
and t racked
on
r i de r s '
mobi le
phones; r i d e r s need not ca r ry cash o r c re d i t card , o r ,
upon
a r r i v a l ,
spend
t ime paying fo r the r ide ; and
r i d e r s
can r a t e
dr ive rs and
see
some in fo rmat ion on them b efo re
en te r ing
the
veh ic le .
Id .
104. Indeed, p l a i n t i f f claims, Uber has i t s e l f
s t a t ed t h a t t does
not view
t ax i s
as r ide -sha r ing compet i t ion .
Id .
105.
P l a i n t i f f a l s o a l l eges
t h a t
t r a d i t i o n a l cars fo r h i r e are
not
reasonab le su b s t i t u t e s ,
s in ce t hey
gene ra l ly
need
to be
scheduled in
advance fo r
prear ranged l oca t ions .
Id . 106.
However,
p l a i n t i f f never the less
contends t h a t
Uber has obta ined
s ig n i f i c an t
share
of
bus iness in the combined markets
of
t ax i s ,
cars fo r h i re , and mobile-app genera ted r ide -sha re
s e r v i ce s ,
and
t h a t
Uber ' s
own
exper t s
have
sugges ted
t h a t
in
some
U.S.
c i t i e s , Uber
has
50 to 70
of bus iness cus tomers
among
a l l t ypes o f
r i d e s , which seems to r e f e r to these
combined markets .
Id .
107.
Defendant con te s t s p l a i n t i f f ' s proposed
market d e f in i t i o n ,
arguing t h a t p l a i n t i f f prov ides inadequa te j u s t i f i c a t i o n fo r
the
exclus ion not j u s t
of t ax i s
and car se rv ice s ,
but
a l s o
of
publ ic
t r a n s i t
such
as
subways
and
buses , p erso n a l
veh ic le
use ,
and
walking. See
Def.
Br. a t 18;
Def.
Reply Br. a t
8.
In d e fen d an t ' s
20
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 20 of 27
-
8/18/2019 SDNY Class action suit against Uber
21/27
view, [ e ] ach
of
these
a l t e r n a t i v e s
i s a
c l ea r
su b s t i t u t e fo r
the s e rv i ces prov ided by d r iv e r - p a r tn e r s . Def. Br. a t 18.
One could argue
t h i s
e i t h e r way (and d e fen d an t ' s a t t o rn ey s
are encouraged to h e r e in a f t e r walk from t h e i r o f f i c e s to the
cour thouse
to put t h e i r theory to the t e s t ) . But fo r presen t
purposes , p l a i n t i f f has provided p l a u s i b l e ex p lan a t io n s fo r i t s
proposed market d e f in i t i o n , and the accuracy of
these
exp lana t ions may be t e s t ed th rough discovery
and,
i necessary ,
t r i a l . Market d e f in i t i o n i s
a
deeply f ac t - i n t en s iv e
inqu i ry
[and] cour t s [ therefo re] h e s i t a t e
to
gran t motions
to
di smiss
fo r
f a i l u r e
to plead a
r e l ev an t produc t market . Chapman v.
New
York
Sta t e Div.
fo r
Youth,
546 F.3d
230,
238. P l a i n t i f f ' s
a l l eg a t i o n t h a t Uber an i n d u s t ry member
recognizes
t h a t it
does not
compete
with t ax i s ,
see Am Compl.
105,
a l s o
dese rves
cons idera t ion .
See
Todd
v.
Exxon
Corp. ,
275
F.3d
191,
206 (2d
Cir . 2001) (dec l in ing to exclude
evidence
o f
i ndus t ry
recogn i t ion from the an a l y s i s
of
market d e f i n i t i o n ) .
The
Court
f inds t h a t p l a i n t i f f has pleaded
a plaus ib l e re l evan t
produc t
market .
See Capi ta l
Imaging
Associa tes ,
996
F.2d a t 546.
The Court
fu r t h e r
f inds t h a t p l a i n t i f f has
adequate ly
pleaded
adverse e f f e c t s in
the r e l ev an t
market .
S p ec i f i c a l l y ,
p l a i n t i f f pleads
t h a t
Kalan ick ' s ac t ions
have
fu r t h e r
r es t r a ined
compe t i t ion by
decreas ing outpu t ,
Am
Compl. 110
(c i t i ng independent s tud ies ) ; Uber ' s
market
p o s i t i o n
has
21
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 21 of 27
-
8/18/2019 SDNY Class action suit against Uber
22/27
a l ready helped fo rce S idecar out of the marke tp lace , id .
r
102;
Uber ' s
dominant
p o s i t i o n and cons iderab le name recogn i t ion has
a l so
made it
d i f f i c u l t for
p o ten t i a l compet i to rs to
en te r the
mark e tp l ace ,
id .
r
103.
7
Defendant counters
t ha t Uber prov ides
many
pro-compet i t ive
benef i t s , see Def.
Reply Br.
a t 9, and
a lso
dispu tes the
conclusions t ha t p l a i n t i f f purpor t s to draw from
the
c i t ed
s tud ie s .
See
Def. Let te r . Defendant ' s coun te r -as se r t ions , while
ce r t a in ly
wel l worth
a
f a c t - f i nde r ' s
cons idera t ion ,
do
not
persuade the Court to
grant a
motion to
dismiss .
The
Court hence
determines t ha t p l a i n t i f f has plaus ib ly pleaded
adverse
e f f e c t s
in the
re levant
market . Consequent ly , the Court f inds t ha t
p l a i n t i f f
has
presen ted a plaus ib l e cla im of a ve r t i c a l
consp i racy under Sect ion
1
of the Sherman Act.
Fina l ly ,
the
Court
addresses
p l a i n t i f f ' s
s t a t e
law
Donnelly
Act c la im.
The
Second Circu i t has held t ha t t h i s ew
York
a n t i t r u s t
s t a tu t e
was modeled on the Sherman Act and has
g en e ra l l y been cons t rued in accordance
with fede ra l p receden t s .
Williams v. Cit igroup
Inc . ,
659 F.3d 208, 211 n.2
(2d
Cir .
2011) Though p l a i n t i f f
contends t ha t hi s
Donnelly
Act cla im
surv ives even i his Sherman Act cla im f a i l s , see Pl . Opp. Br.
a t 21, the
Court
has no
occas ion
to assess t h i s con ten t ion , fo r
7
In p l a i n t i f f ' s l e t t e r
submi t ted a f t e r
o r a l argument , p l a i n t i f f f u r t h e r
descr ibed the
i ndependent
s tud ie s quoted
anonymously
in Amended Complaint II
110 t h a t supposed ly suppor t
these
a s s e r t i o n s .
See Pl .
Le t t e r .
22
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 22 of 27
-
8/18/2019 SDNY Class action suit against Uber
23/27
it holds t h a t p l a i n t i f f ' s Sherman
Act
cla im withs tands
defendan t ' s motion to
di smiss and,
fo r the
same
reasons , the
Court
dec l ines
to di smiss
p l a i n t i f f ' s
Donnelly
Act cla im.a
For these
reasons ,
the Court
denies
defendant
K alan ick ' s
motion to dismiss . Concomitant ly , the Court lifts the s t ay
of
d i scovery p rev io u s ly imposed pending the Co u r t ' s d ec i s i o n
on
t h i s motion . Counsel are
d i r e c t e d to
submit
to
the Cour t , by no
l a t e r than Apri l 7, 2016, a case management plan in the Co u r t ' s
Form
D t h a t
wi l l
have t h i s
case
ready fo r
tri l by
November 1,
2016.
The
Clerk
o f Court
i s di rec t ed to
c lo se docket e n t r i e s 22
and 27.
Dated:
New York,
March
31,
Y
2016
OS
RAKOF U.S.D.J .
8
Defendant argues t ha t p l a i n t i f f i s
equ i t ab ly
es topped from avoiding the
c las s
ac t ion
waiver
in the user agreement t ha t p l a i n t i f f made
with
Uber.
See
Def.
Br. a t
21;
Colman Declara t ion ,
Dkt. 29,
Exhib i t
1
(User Agreement), a t
8-9.
The
r e l evan t p r ov i s ion
of the
User
Agreement reads :
Dispute Resolut ion: You and
Company
agree t ha t
any di spu te ,
claim
or con t roversy a r i s i n g out of or r e l a t i n g
to
t h i s Agreement
wil l
be
s e t t l e d by binding a r b i t r a t i o n You
acknowledge
and
agree t ha t you and
Company
are each waiving the r igh t to a
t r i a l
by
j u r y
or
to p a r t i c i p a t e as
a
p l a i n t i f f or c las s User in
any
purpor ted
c las s
ac t ion
or
r ep resen ta t ive
proceeding.
User Agreement a t 8-9. Although p l a i n t i f f has sued Mr. Kalanick
pe r sona l ly
and
not
Uber, defendant claims
tha t
p l a i n t i f f ' s
claims aga ins t Mr.
Kalanick
are
in t imate ly founded in and i n t e r tw ined with the under ly ing agreement
with
Uber.
See Def.
Br. a t
23, quot ing Kramer
v. Toyota
Motor
Corp. , 705 F.3d
1122,
1128 (9th Cir . 2013) . The Court f inds , however, t ha t s ince
defendant
i s
not
seeking to compel a r b i t r a t i o n , and p l a i n t i f f i s not seeking
to
enforce
the User Agreement
aga ins t
defendant, p l a i n t i f f
i s not equ i t ab ly
es topped
from pursuing a c las s
ac t ion
s u i t
aga ins t
Mr. Kalanick, nor has p l a i n t i f f
waived the r igh t to proceed through t h i s mechanism.
23
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 23 of 27
-
8/18/2019 SDNY Class action suit against Uber
24/27
BY ELECTRONIC MAIL
Hon. Jed S. Rakoff
United States District Judge
United States Courthouse
500 Pearl Street, Room 1340
New York, New York 10007
e
Harter Secrest Emery LLP
ATTORNEYS
AND
C OU N S E L O R S
WWW.HSELAW.COM
March 11, 2016
Re: Meyer v. Kalanick, 5 Civ. 9796 (JSR)
Dear Judge Rakoff:
We write in response to the Court's request that Plaintiff identify the studies referenced in
Paragraph 110 of the First Amended Complaint. That paragraph alleges that Defendant's
actions have further restrained competition by decreasing output, and that independent studies
have shown [that] the result of
Kalanick's
collusive surge pricing is not, as he claims, to
perfectly match supply with demand, but instead to remove
some
demand so that prices stay
artificially high and Kalanick reaps artificially high profits. This letter cites two independent
studies supporting these allegations.
The first is a Northeastern University study by researchers Le Chen, Alan Mislove, and
Christo Wilson, published in October 2015 (the
Northeastern
University Study ). See
L.
Chen,
A. Mislove, & C. Wilson, Peeking Beneath the Hood of Uber, October
2015,
available at
http://www.ccs.neu.edu/home/cbw/pdf/chen-imc
5 .pdf
(last visited Mar. 10, 2016).
The
Northeastern University Study concluded that surge pricing
seem[s]
to have a small effect on
attracting
new
cars, but
appears
to have a larger, negative effect on
demand,
which causes cars
to either become idle or leave the surge area. Id.
at
12. Significantly, although the study used
the term demand, it actually measured output, defining demand as
fulfilled demand,
i.e.
the
number
of rides supplied by Uber driver-partners. Id. at 4. That
is
the equivalent of output.
See e.g. General Leaseways
Inc. v.
Nat l Truck Leasing ss
n, 744 F .2d 588, 594 (7th Cir.
1984) (Posner, J.) (equating amount supplied to ''output ). Thus, the study concluded that
surge pricing had
' 'a
large, negative effect on
demand,
see
Northeastern
University Study at
12, by measuring a large, negative effect on output.
The second study supporting the allegations in paragraph 110 was conducted by Nicholas
Diakopoulos of the University of Maryland (the
University
of
Maryland
Study ). See N.
Diakopoulos,
How
Uber surge pricing really works, Washington Post,
available at
1600
BAUSCH LOMB PLACE
ROCHESTER NY
1 4 6 4 ~ 2 7 1 I PHONE: 585 . 232 . 6500
FAX:
585 . 232 . 2152
ROCHESTER
NY , BUFFALO
NY
• ALBANY NY , CORNING NY , NEW YORK NY
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 24 of 27
-
8/18/2019 SDNY Class action suit against Uber
25/27
Hon. Jed S. Rakoff
March 11, 2016
Page 2
Harter Secrest
Emery
LLP
TTORNEYS ND COUNSELORS
https:llwww.washingtonpost.com1newslwonklwpl2015104117 how-uber-surge-pricing-really
worksl (last visited Mar. 10, 2016). The University
of
Maryland Study suggested "that rather
than motivating a fresh supply of drivers, surge pricing instead re-distributes drivers already on
the road."
Id
"[I] t appears that rather than getting more drivers on the road in the short-term,
Uber's surge pricing instead depletes drivers in adjacent areas. A price hike in one area means
drivers move there, but away from another, leaving it underserved .... At the end of the day the
Uber systems appears to
be
more about
re-allocation
of existing supply." Id
These studies support the allegation
in
paragraph 110 that Defendant's actions, including
his implementation of an agreement among all driver-partner competitors to surge prices, have
decreased output. In particular, these studies suggest that drivers' commitments to Defendants'
surge pricing have artificially lowered output during periods of high demand by decreasing
output-either by decreasing output in absolute terms
i.e.,
decreasing the number of fulfilled
sales), see Northeastern University Study at
12
or by decreasing output in relative terms i.e.,
preventing supply from increasing as expected during periods of heightened demand), see
University
of
Maryland Study.
Paragraph 110
of
the First Amended Complaint thus alleges that Defendant has
orchestrated a surge pricing conspiracy among competing drivers to maintain "prices artificially
high and reap[] artificially high profits." First Amended Complaint i 110. That conclusion
reflects the economic reality that price-fixing agreements, like the one orchestrated by
Defendant, are the equivalent to restrictions on output:
If
firms raise price, the
market's
demand for their product will fall, so the amount supplied will fall
too-in
other words, output
will be restricted. If instead the firms restrict output directly, price will as mentioned rise in
order to limit demand to the reduced supply. Thus raising price [and] reducing output
have the same anticompetitive effects." General Leaseways, Inc., 744 F.2d at 594-95.
Thank you for your consideration of this submission. If Plaintiff can provide any further
assistance to the Court, please do not hesitate to contact us.
Respectfully submitted,
Harter
Secrest
Emery P
Isl Brian M. Feldman
Brian M. Feldman
DIRECTDIAL 5852311201
EMAIL BFELD:v AN@HSELAW COM
cc: Peter M. Skinner (via electronic mail)
Lead Counsel for Defendant
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 25 of 27
-
8/18/2019 SDNY Class action suit against Uber
26/27
BOIES SCHILLER FLEXNER P
5301 Wisconsin Avenue N.W.
*Washington,
DC 20015-2015
*PH
202.237.2727 *FAX 202.237.6131
VIA E MAIL
Hon Jed
S Rakoff
500 Pearl Street, Room 1340
New York, NY I 0007
March 15, 2016
Re:
Meyer v Kalanick 15
Civ. 9796 (JSR)
Dear Judge Rakoff:
We write in
response to Plaintiffs letter brief dated March 11, 2016,
in
which Plaint iff purports to identify the
"studies" he relies on for his allegation that surge pricing "restrain[s] competition by decreasing output." Am.
Comp .
i
110.
As an initial matter, even if Plaintiff is correct about these "studies," he has still failed to state a claim for a
vertical restraint
in
violation
of
the rule
of
reason. As we noted at oral argument, the Amended Complaint
alleges only a horizontal price-fixing conspiracy
among driver-partners in
which Mr. Kalanick allegedly
participated.
Id i
126 (alleging a single claim under the Sherman Act based on a conspiracy, combination, or
agreement between all driver-partners to charge the same price"). The Amended Complaint nowhere contains
a claim based on a
vertical
restraint
in
violation
of
the rule
of
reason (or the quick look doctrine).
Plaintiffs
allegations
of
a horizontal conspiracy, whether examined under per se, quick look or the rule
of
reason, fail
because the Amended Complaint describes an implausible horizontal agreement based exclusively on legal
vertical conduct
in
which individual driver-partners agree with Uber to the Driver Terms.
Id
i 38. Any
allegations that Plaintiff now relies on to argue for a claim
of
a vertical restraint
in
violation
of
the rule
of
reason are irrelevant because the Complaint does not make such a claim.
Notwithstanding this threshold pleading defect, Plaintiffs self-styled "studies"
in
fact disprove the very
proposition he cites them for: that surge pricing reduces output. The Chen
Paper-which
has never been
accepted for publication
in
any academic journal (or non-academic journal for that
matter)-finds
that surge
pricing operates only "during times
of
strained supply" and modestly expands the supply
of
driver-partners
in
the short-term by providing an immediate financial incentive to offer rides. Chen Paper at l 0-11. The
Diakopoulos Blog
Post-which
was written by a journalism professor and was not subjected to any peer
review-concludes
that surge pricing,
in
the short term, reallocates supply from low demand areas to high
demand areas-meaning it increases efficiency at no cost to output. More broadly, Diakopoulos observes that
surge pricing greatly expands supply
in
the
long-term: The
benefit
of
surge pricing on overall driver supply
appears to stem from the long term effects of communicating to drivers when they should
in
general get on
the road for periods of expected high demand."
See
Am. Comp .
i
58 (Uber informs drivers
of
"recent
busy periods" and expected periods
of
high future demand). To expand supply when supply is strained
expands output-it does not "decrease" it, as Plaintiff alleges. See United Air Lines Inc v C.A.B. 766 F.2d
1107, 1115 (7th Cir. 1985) (Posner, J.).
1
The "studies" also squarely refute
Plaintiffs
allegation in Paragraph 110 that surge pricing
is
used to maintain
"artificially high" prices beyond that necessary to equalize supply and demand. The Chen Paper finds that
"the vast majority of surges are short-lived" (less than l 0 minutes) and that surge pr icing occurs only when
supply is constrained. Chen Paper at 10 They further show that, contrary to
Plaintiffs
allegation, surge
pricing is rarely applied and is eliminated as soon as supply and demand equalize.
See
id at 8 (in New York
The Chen Study finds that surge pricing correlates with low numbers of fulfilled rides, and somehow concludes that surge
pricing is causing
low output. But
in
acknowledging that surge pricing only arises when supply is constrained, the Chen Study
itsel f proves that low output drives surge pricing rather than the other way around. For example, when a Yankees game
concludes, demand may outstrip supply in the Bronx, leading both to fewer fulfilled rides and to surge pricing taking effect.
But in no way could surge pricing be deemed the cause of the low output.
WWW.BSFLLP COM
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 26 of 27
-
8/18/2019 SDNY Class action suit against Uber
27/27
City, surge pricing is in effect only 14% of the time); Diakopoulos Blog Post (surge "prices tend to tick down
in bigger steps than they move up" and "change every three or five minutes," which is "great for riders").
Even if surge pricing reduced output, which it does not,
Plaintiffs
own "studies" expose why he cannot state a
rule
of
reason claim under any antitrust theory. First, both "studies" confirm that Plaintiff's relevant market
definition-which Plaintiff defines as the "mobile app-generated ride-share service, with a relevant sub
market
of
Uber car service -utterly fails as a matter
of
law. Am. Comp . 121. As the "studies" explain,
Uber competes
in
a broad transportation marketplace that includes an array
of
local transport options,
including taxis and public transportation. By its own terms, the Chen Paper' s methodology is only valid if one
assumes the relevant market includes taxis. Because Uber driver-partners "compete with traditional taxis," the
Chen Paper purports to use publicly available taxi data as the control group to "validate[] the accuracy
of
our
Uber measurement methodology." Chen Paper at 2-3. Plaintiffs allegation of a "proposed relevant market
that clearly does not encompass all interchangeable substitutes" alone requires granting the motion to dismiss.
Bookhouse o Stuyvesant Plaza, Inc v Amazon.com, Inc., 985 F. Supp. 2d 612,
621
(S.D.N.Y. 2013).
Chen's paper also observes that "[t]axis are much denser than Ubers"
in
Manhattan-with 43 Uber driver
partners competing in the same space as 172 taxis in midtown-and states that the "dearth of Ubers in
Manhattan may be due to greater availability
of
taxis and better public transport." Id. at 3,
7.
According to
Chen, "Uber accounted for 29%
of
all rides in NYC during 2014." Id at
3.
Even if the relevant market were
limited
just
to car services, therefore, Uber would not have market power
in
New
York City, the only specified
place that Plaint iff has used Uber's services. Am.
C o m p . ~
7; see Bookhouse, 985 F. Supp. 2d at 622 ("courts
have rejected market shares between 30 percent and 40 percent as inadequate to demonstrate market power").
Second, the "studies" confirm that Uber has benefited consumers by lowering prices and improving service. A
study relied on by Chen found that the average cost of a ride with an Uber
driver-partner-including
rides
subject to surge pricing-is more than 10% cheaper than the average taxi fare.
In addition, both studies
observe that surge pricing is an essential component of Uber' s goal to provide consumers the ability to "push a
button and get a ride within minutes." Am. Comp . 52. The Chen Paper states that "Uber offers expedient
service" with average wait times
of
approximately 3 minutes
in
New York City, and concludes that the
"complex interplay between supply and demand supports
Uber's
case for implementing dynamic pricing" to
reduce wait times for consumers. Chen Paper at 7-8; see Diakopoulos Blog Post ("surge pricing works to
maintain or improve service quality" by "reduc[ing] estimated times"). Surge pricing is therefore a classic
example of what the Supreme Court concluded was legal
in
Leegin:
a new market entrant using resale price
maintenance to offer enhanced services. Leegin Creative Leather Products, Inc. v PSKS, Inc., 551 U.S. 877,
891 (2007). Surge pricing must therefore survive the rule of reason as a pro-competitive action.
Finally, Plaintiffs assertion
of
reduced output attributable to surge pricing assumes that Uber driver-partners
do not compete with any other transportation service. Yet
Plaintiffs
"studies" show the exact opposite: when
surge pricing is
in
effect, riders react by switching to reasonably substitutable services, such as taxis and
public transport. Unless one assumes that consumers react to surge pricing by deciding to cancel their social
plans or not go to work, options which are not suggested
in
either "study," the price-sensitivity
of
riders proves
that Uber driver-partners have a positive cross-elasticity
of
demand with competing services-and therefore
that Plaintiffs market definition fails
as
a matter
of
law. This not only accords with common sense, but also
the facts as presented by Plaintiff's "studies."
If
a consumer facing surge pricing is
in
midtown surrounded by
172 taxis,
43
Uber driver-partners, the crosstown 7 subway line, several bus lines, and
is
wearing comfortable
walking shoes, she will naturally, and economically rationally, survey the range of her local transportation
options and perhaps choose a competing
service--or just
walk. Output in the relevant market
is
not reduced.
Sincerely,
Isl William A. Isaacson
Brad Stone, Uber Is Winning Over Americans Expense Accounts, Bloomberg, April 7, 2015, available at
http://www. bloomber_g,_com/n ews/ arti cl es/20 I 5-04:Q7Lh QS:J:j§.
7
wi
nn in g-over-am eri cans-expeQ_ e - a c c o . h 1 J ~ .
Case 1:15-cv-09796-JSR Document 37 Filed 03/31/16 Page 27 of 27