Attorneys spar over antitrust law in suit against Uber

SAN FRANCISCO — Uber Technologies Inc. could not have violated antitrust laws because it does not have a monopoly, a lawyer for the ride-hailing giant argued Friday to a federal magistrate, who did not appear entirely convinced.

The standard to hold Uber liable for anticompetitive practices is not whether it intended to corner the market but rather if “having market power suppressed output and raised prices,” defense attorney Cynthia Richman said in a bid to dismiss the lawsuit.

Plaintiffs’ lawyers representing SC Innovations Inc. — successor to now-defunct ride-hailing pioneer Sidecar — disputed the claim, maintaining Uber successfully monopolized the ride-hailing industry despite the presence of Lyft Inc.

Magistrate Judge Joseph Spero largely discussed how courts have interpreted “market power” in similar antitrust cases. He said “one way or the other, [the courts] say there needs to be a showing of monopoly power.”

“At every point, whatever period of time it is, Lyft is always there, and Lyft is still there,” he said.

Higher courts have “been very clear that that sort of oligopolistic behavior doesn’t fall into the Sherman act,” Spero continued. He called it a “loophole” in the signature antitrust law.

Lewis LeClair of McKool Smith, PC, representing SC Innovations, disagreed with Spero over what constitutes a monopoly. There are “many cases that don’t involve 100% market share,” he said, pointing to when Atlantic Richfield Corp.-owned Arco was sued over antitrust violations despite having “at best a 45% share of the market.”

While that may be true, Lyft’s presence as a major competitor prevents Uber from being the sole decision-maker in the industry, according to Spero. The standard is whether Uber “has the ability to restrict market output,” he said.

LeClair responded that “Lyft has the theoretical ability but not the practical ability [to compete] because Uber will engage in a further price war that will put them out of business.” He argued plaintiffs shouldn’t have to prove every competitor in the industry was eliminated for Uber to have market power.

Referring to the Arco lawsuit that was ultimately dismissed by the 9th U.S. Circuit Court of Appeals in 1998 and set a high standard for plaintiffs trying to prove predatory pricing, Spero said the panel, in a 3-0 decision, “reject[ed] the notion that a disciplined oligopoly satisfies the market power element of the Sherman Act.”

“This smells like that too,” he said.

But in a concession for plaintiffs, Spero agreed a company can have monopoly power in a market dominated by more than one entity. The standard will be “what you can do with that power,” he said.

Uber commands 70% of the U.S. ride-hailing market and Lyft has the other 30%, according to the complaint filed in the Northern District of California. SC Innovations, Inc. v. Uber Technologies, Inc., 18-CV07440 (N.D. Cal., filed Dec. 11, 2018).

Gibson, Dunn & Crutcher LLP partner Daniel Swanson, representing Uber, argued higher courts have disfavored theories relying on the existence of monopoly power when it is unclear whether there is a monopoly or not.

Since it does not have a monopoly, Uber’s choice to charge low prices cannot be considered anticompetitive, according to Richman, also a partner at Gibson, Dunn & Crutcher LLP. Spero responded “I’m not buying it’s such a fine line.”

Sidecar co-founder and SC Innovations CEO Suhil Paul wrote in a 2018 blog post that Uber’s anticompetitive prices have left drivers and passengers with “higher prices and few choices today.”

Spero did not issue a ruling Friday and indicated he will most likely allow plaintiffs’ attorneys the opportunity to amend their lawsuit to add claims about how Uber’s “attempted monopolization fits in” to the claims.