Antitrust Law Daily Wrap Up, ANTITRUST—S.D.N.Y.: Uber joined in price fixing class action over pricing algorithm, (Jun 21, 2016)

By Jeffrey May, J.D.

Uber Technologies, Inc. was a necessary party to litigation alleging that the ride-sharing service’s scheme for setting prices, as well as the terms of its contracts with drivers, violated antitrust laws. Therefore, the federal district court in New York City granted, pursuant to Federal Rule of Civil Procedure 19(a), a motion by Uber’s CEO and co-founder—the only defendant named in the suit—to join Uber to the putative class action brought on behalf of Uber customers (Meyer v. Kalanick, June 20, 2016, Rakoff, J.).

Joinder was mandatory because in Uber’s absence, "complete relief" would not be made available. The court said that the plaintiff "pretends" to seek no relief whatsoever against Uber, but such an assertion was at odds with any fair reading of the claim. In the court’s view, the plaintiff was seeking declaratory and injunctive relief against the company’s pricing algorithm for setting fares and contract terms with drivers.

The plaintiff had claimed that Uber CEO and co-founder Travis Kalanick was the "mastermind of the Uber pricing conspiracy." Uber purportedly calculates a fare using a base amount, ride distance, and time spent in transit, which may be multiplied during "surge" periods based on driver supply and demand, and then processes a transaction on behalf of the driver. The "surge pricing" is a component of the price fixing conspiracy, according to the plaintiff.

"Any antitrust violation that defendant Kalanick is claimed to have committed could only have resulted from his orchestration of, and participation in, an alleged conspiracy facilitated by the Uber app and Uber’s contracts with drivers," the court explained. Moreover, Uber had an interest in defending the legality and continued use of its pricing algorithm and its contracts with drivers against the claim that these instruments violated the antitrust laws.

Arbitration. The court will next take on the issue of arbitration. The user agreement between Uber and the plaintiff called for arbitration of disputes. The court suggested that the plaintiff, an Uber customer who claimed to have paid surge pricing to drivers using the uberX car service, might not have named Uber in its original complaint to avoid arbitration.

In granting the defendant’s motion to join Uber, the court did not consider the merits of any motion to compel arbitration. The court denied as moot Uber’s motion to intervene, which was made "for the limited purpose of compelling arbitration." Defendant Kalanick also moved for arbitration. The court pointed out that Uber would be a part of the case regardless of whether it succeeded in compelling arbitration.

The case is No. 1:15-cv-09796-JSR.

Attorneys: Brian Marc Feldman (Harter, Secrest & Emery, LLP) for Spencer Meyer. Peter M. Skinner (Boies, Schiller & Flexner LLP) for Travis Kalanick.

Companies: Uber Technologies, Inc.

Cases: Antitrust NewYorkNews