By Stephanie K. Mann, J.D.
The Federal Trade Commission and the Department of Justice have filed an amicus brief urging the U.S. Court of Appeals in San Francisco to reverse a decision by a federal district court in Seattle that granted a motion to dismiss finding that the State of Washington clearly and affirmatively expressed a legislative decision to allow Seattle to displace competition in the for-hire driver service market (Chamber of Commerce of the United States v. City of Seattle, November 3, 2017).
The case involves an ordinance enacted by the city of Seattle that permits independent for-hire drivers to collectively negotiate their contracts with taxicab associations, and transportation network companies such as Uber and Lyft. The Chamber of Commerce sued the city in federal district court, alleging that the ordinance violates the Sherman Act by authorizing price fixing. The Seattle district court dismissed the Sherman Act claim on the basis of the state action doctrine, and the Chamber of Commerce appealed.
State action doctrine. Under the state action doctrine, a state must clearly articulate its intention to displace competition in a particular field with a regulatory structure. According to the brief, a municipality may displace competition under the state’s antitrust exemption only if that anticompetitive restraint is the inherent, logical, or ordinary result of the exercise of authority delegated by the state. And to ensure that the state “truly intends to displace the national policy of free-market competition, the state’s intent to displace competition must be ‘clearly articulated and affirmatively expressed’.”
The FTC and DOJ argued that this standard has not been satisfied in this case because the delegation of authority to regulate the for-hire transportation market does not imply authority to displace competition among drivers for their services provided to transport companies.
Specifically, the amicus brief argues that the district court:
|failed to require that the City’s restraint on competition be a foreseeable consequence—”the inherent, logical, or ordinary result”—of the state’s general grant of authority to regulate “for hire vehicles” and “for hire vehicle [and taxicab] transportation services;”|
|interpreted the state legislative language “to ensure safe and reliable for hire vehicle transportation service” so loosely as to nullify limits on the state action defense; and|
|contrary to established precedent, read a general antitrust exemption clause to negate the requirement that a state must clearly articulate and affirmatively express state policy to displace competition in a particular field.|
By interpreting the delegation of authority to regulate as intent to displace competition, significant adverse consequences will occur, argued the brief. Therefore, the district court’s interpretation of the Washington code provisions should be reversed for reaching beyond the strict bounds of the state action defense, the FTC argued.
Press release. In the FTC’s press release, Acting Chairman Maureen K. Ohlhausen explained that “[c]ompetition is the lynchpin of the U.S. economy. Although states can displace competition with regulation, they must clearly articulate their intent to do so.” She then argued that because Seattle’s action, “exceeded its authority from the state, the state action defense should be rejected.”
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