Antitrust Law Daily Seattle ordinance permitting bargaining by drivers-for-hire survives antitrust challenge
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Wednesday, August 2, 2017

Seattle ordinance permitting bargaining by drivers-for-hire survives antitrust challenge

By Ronald Miller, J.D.

After first finding that the Chamber of Commerce had standing to challenge a Seattle ordinance that provides a mechanism through which for-hire drivers can collectively bargain, a federal district court in Washington granted the city’s motion to dismiss all claims brought by the Chamber. Finding that the city enacted Ordinance 124968 under a clearly articulated and affirmatively expressed state policy that allowed it to displace competition in the regulation of privately operated for-hire transportation services, the court found that the city was immune from antitrust liability. However, a preliminary injunction prohibiting enforcement of the ordinance will remain in effect until the court resolves a motion to dismiss pending in a companion case (Chamber of Commerce of the United States v. City of Seattle, August 1, 2017, Lasnik, R.).

In January 2016, City of Seattle Ordinance 124968 came into effect. The ordinance provides a mechanism through which for-hire drivers in Seattle, such as Lyft or Uber drivers, can collectively bargain with the companies that hire them, contract with and/or partner with them. The ordinance applies only to for-hire drivers who are independent contractors, not employees.

Pursuant to the procedures set forth in the ordinance, a Teamsters local union notified three Chamber of Commerce members (Eastside For Hire, Lyft, Inc., and Uber Technologies) that it would like to represent their drivers in collective bargaining. The Chamber filed this action arguing that the ordinance violates and is preempted by the Sherman Antitrust Act, is preempted by the NLRA, violates 42 U.S.C. §1983, is not authorized by state law, violates the Washington Consumer Protection Act, and violates the Washington Public Records Act.

On April 4, 2017, the court temporarily enjoined enforcement of the ordinance because the Chamber had raised serious questions regarding its antitrust claim. Before the court issued the injunction, the city filed this motion seeking dismissal of the Chamber’s claims.

Standing to assert antitrust claim. As an initial matter, the court was asked to determine whether the Chamber had standing to assert the antitrust claims. An association, such as the Chamber, can sometimes bring suit on behalf of its members even if it has not itself suffered an injury in fact. As set out in Hunt v. Wash. State Apple Advertising Comm’n, associational standing exists "when: (a) the association’s members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit."

Section 16 of the Clayton Act governs claims for injunctive relief. By its terms, Section 16 authorizes suits by associations, but the association must have standing. That is, it must prove a threatened "injury of the type the antitrust laws were intended to prevent and that flows from that which makes the defendants’ acts unlawful." The question is whether the "personal injury" language from the Supreme Court’s ruling in Cargill, Inc. v. Monfort of Colo., Inc., precludes an association from seeking an injunction against actions that cause antitrust injury to its members.

Here, the court found that Cargill did not resolve this issue because it did not discuss whether an association has standing to seek injunctive relief on behalf of its members. The court was not persuaded that the Supreme Court expressly or by implication overruled decades of jurisprudence when it determined in Cargill that a plaintiff seeking injunctive relief under Section 16 must show antitrust injury. Rather, it concluded that an association may seek an injunction under Section 16 on behalf of its members as long as it satisfies the test for associational standing set forth in Hunt.

Participation of individual members. In the context of the Hunt analysis, the city did not dispute that Uber, Lyft and Eastside for Hire had standing to bring an antitrust action in their own right, or that the Chamber’s interest in this litigation was germane to the organization’s purpose. Rather, it argued that the claim for injunctive relief could not be pursued without the participation of individual members because the relief would have to be narrowly tailored to address the threatened loss or damage each was experiencing.

The court disagreed. The plaintiffs claimed the ordinance permits independent economic actors to collude on the prices they will accept for their services. They further alleged that the city’s enactment and enforcement of the ordinance constituted antitrust violations. Here, the court concluded that the anticompetitive potential of the ordinance can be shown and an appropriate remedy fashioned without the need for Uber, Lyft, or Eastside to be a party to the litigation.

State action immunity. The court next overruled the city’s ripeness objection after finding that the plaintiffs should not be required to wait until they actually suffered an antitrust injury to raise the legal challenges at issue here. It next turned to consider state action immunity from federal antitrust claims. Assuming that collusion between independent economic actors to set prices was a per se antitrust violation, the court pointed out that neither the language nor the history of the Sherman Act suggested that "it was intended to restrain state action or official action directed by the state."

A municipality may restrict competition if its regulation is "an authorized implementation of state policy." The challenged regulation must "be one clearly articulated and affirmatively expressed as state policy" and "the policy must be actively supervised by the State itself."

State authorization. Seattle Ordinance 124968 was enacted under the authority of RCW 46.72.001 and RCW 81.72.200. RCW 46.72.001 provides for the regulation of privately operated for-hire transportation services. RCW 46.72.160 and RCW 81.72.200 authorize local regulation of for-hire vehicles and taxicabs with regards to license requirements, fees for service, route and operations, safety and equipment requirements and any other requirements to ensure safety and reliable service. The Seattle ordinance was an attempt to exercise the authority granted by these state statutes. Moreover, when an entity accused of anticompetitive conduct is a municipality, the active state supervision requirement does not apply: all the municipality has to show is that it is acting pursuant to a clearly articulated and affirmatively expressed state policy allowing displacement of competition in a certain field. Thus, to the extent plaintiffs alleged that the city violated the Sherman Act when it enacted the ordinance, the city was immune from antitrust liability.

The case is No. C17-0370RSL.

Attorneys: Christian G. Vergonis (Jones Day) for Chamber of Commerce of the United States of America. Robert J. Maguire (Davis Wright Tremaine) for Rasier, LLC. P. Casey Pitts (Altshuler Berzon) for City of Seattle and Seattle Department of Finance and Administrative Services.

Companies: Chamber of Commerce of the United States of America; Rasier, LLC; City of Seattle; Seattle Department of Finance and Administrative Services

MainStory: TopStory Antitrust WashingtonNews

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