3:18-cv-07440
N.D. Cal.May 1, 2020Background
- Sidecar (SC Innovations) sued Uber and subsidiaries alleging Section 2 Sherman Act monopolization and attempted monopolization based on predatory pricing, price discrimination, and tortious interference; Sidecar previously lost an Unfair Practices Act (UPA) claim with prejudice and amended its antitrust claims.
- Sidecar alleges Uber grew dominant (60–75% market share in relevant cities), used below-cost fares and large driver incentives to drive competitors out, then began recouping via higher fares and larger commissions, and employed covert campaigns (e.g., fake ride requests, driver recruitment) to disrupt rivals.
- The complaint emphasizes two-sided network effects (drivers and riders) that allegedly create barriers to entry/expansion and prevent Lyft (the only significant remaining rival) from restoring competitive output.
- Sidecar exited the market in December 2015; Uber later became EBITDA-positive and increased commissions/fares in some markets.
- Uber moved to dismiss the SAC arguing (inter alia) Sidecar still failed to plead unilateral market power, a dangerous probability of recoupment, and harm to competition from alleged tortious conduct; Uber also sought to strike the repleaded UPA claim.
- The court denied Uber’s motion to dismiss the Sherman Act claims (monopolization and attempted monopolization) but granted the motion to strike the UPA claim previously dismissed with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Market power / monopoly power | Sidecar: Uber’s large share, two-sided network effects, barriers to entry/expansion, and allegations that Lyft cannot increase output plausibly imply Uber can raise supracompetitive prices. | Uber: Sidecar still alleges only a "disciplined oligopoly" with Lyft; plaintiff fails to plead unilateral ability to raise prices by restricting output. | Court: Denied dismissal — allegations of network effects plus market-share disparity make market-power inference plausible at pleading stage. |
| Predatory pricing / probability of recoupment | Sidecar: below-cost fares and high driver incentives, plus ability to extract higher commissions and fares later, make recoupment plausible. | Uber: No cognizable recoupment theory if plaintiff rests on oligopoly; Matsushita/Brooke Group standard unmet. | Court: Denied dismissal — plausible mechanism (fares/commissions) and market insulation make recoupment sufficiently pled for now. |
| Two-sided market analysis (American Express) | Sidecar: Pleads harms on both sides (passenger fares and driver payments/commissions); network effects explain cross-side leverage. | Uber: Complaint focuses on passenger-side pricing and fails to treat two-sided market as required by American Express. | Court: Sidecar adequately pleads both sides; Amex does not foreclose pleading market power in two-sided markets. |
| Tortious interference / clandestine campaigns | Sidecar: Alleged fake ride requests and driver-targeting campaigns harmed competition by degrading rivals’ matching efficiency and triggering network effects that reduced output. | Uber: Such tactics either have legitimate business purposes (driver recruitment) or, at minimum, a de minimis effect on competition. | Court: Denied dismissal — allegations of targeted, sustained campaigns plus network effects are enough to plausibly allege competitive harm at pleading stage. |
| Repleading of California Unfair Practices Act | Sidecar: Repled UPA to preserve appellate rights. | Uber: Claim was previously dismissed with prejudice and should be struck. | Court: Granted — UPA claim stricken as previously dismissed with prejudice (Lacey controls). |
Key Cases Cited
- Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421 (9th Cir. 1995) (disciplined oligopoly theory insufficient to show monopoly power absent ability to restrict output)
- Ohio v. Am. Express Co., 138 S. Ct. 2274 (2018) (analysis of market power in two-sided platforms requires considering both sides together)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) (standard for showing dangerous probability of success/recoupment in predatory-pricing claims)
- Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) (requirement to show below-cost pricing and dangerous probability of recoupment for predatory-pricing liability)
- Pac. Bell Tel. Co. v. Linkline Commc’ns, Inc., 555 U.S. 438 (2009) (monopoly power must be willfully acquired or maintained; cutting prices can be procompetitive)
- United States v. Grinnell Corp., 384 U.S. 563 (1966) (monopoly defined as power to control prices or exclude competition)
- SmileCare Dental Grp. v. Delta Dental Plan of Cal., 88 F.3d 780 (9th Cir. 1996) (elements of monopolization and attempted monopolization claims)
- Lacey v. Maricopa Cty., 693 F.3d 896 (9th Cir. 2012) (no need to replead claims previously dismissed with prejudice to preserve appellate rights)