Antitrust Law Daily Wrap Up, TOP STORY—NDTex: Dallas-Area Taxi Fleet Operators' "Stand Fees" Not Illegal Predatory Pricing or Price Fixing, (Nov 30, 2012)

By E. Darius Sturmer, J.D.

Two companies holding permits to operate taxicabs in the Dallas/Fort Worth area of Texas, along with a corporate parent of numerous defending permit holders, were entitled to summary judgment on various federal antitrust claims asserted by competing taxicab decal holders, licensed drivers, and a trade association of taxicab operators, the federal district court in Dallas has determined (Assn. of Taxicab Operators, USA v. Yellow Checker Cab Company of Dallas/Fort Worth, Inc., November 28, 2012, Godbey, D.)

Accordingly, motions by the two defending permit holders (Yellow Checker Cab Company of Dallas/Fort Worth, Inc. and Jet Taxi, Inc.) and their corporate parent (Irving Holdings, Inc.) for partial summary judgment were granted. A third defending permit holder (Freedom Cab Company), seeking summary judgment as to all of the claims against it on state action immunity grounds, was denied the relief it sought.

The plaintiffs in the action asserted that the defending permit holders charged “stand fees” to their associated taxicabs—government-required fees giving a driver several items and services needed to operate their taxicabs, including a decal, insurance, branding, dispatch services, and trade name rights—that were not only lower than the plaintiffs’ stand fees, but below the defendants’ average operational costs. They also alleged that the defendants conspired to monopolize the taxicab industry by using these lower stand fees in violation of the Clayton Act, and that they engaged in price fixing and predatory pricing in violation of the Sherman Act.

Yellow Checker Cab

The plaintiffs’ Sherman Act, Sec. 1 price fixing claims and predatory pricing claims against Yellow failed, the court decided, because the company was incapable of illegally conspiring with its co-defendant sister companies or with its parent Irving to violate the statute. All of the entities “had ‘a unity of purpose or a common design’,” the court explained, quoting the Supreme Court’s decision in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), 1984-2 CCH Trade Cases ¶66,065.

The plaintiffs’ claims that Yellow attempted to monopolize and conspired to monopolize the Dallas-Fort Worth area taxicab market in violation of Sec. 2 were also fatally flawed or lacking sufficient evidentiary support, the court found. No proof was offered that the defendants had the specific intent to monopolize, a shortcoming without which they could not maintain an attempt claim. In addition, the evidence in the record supported neither predatory pricing nor price fixing, leaving the plaintiffs unable to raise a fact issue as to whether the defendants had engaged in predatory or exclusionary conduct, as Sec. 2 required, the court said. The plaintiffs did not show that the defendants’ prices were below an appropriate measure of their costs or that they had a reasonable chance of recouping any losses through below-cost pricing. The plaintiffs could offer no evidence to support either a vertical or horizontal price fixing scheme, largely because they had claimed that all of the defendants were controlled by the same two people.

The plaintiffs’ failure to show that they suffered any antitrust injury from the alleged conduct precluded recovery under the Clayton Act either, the court added.

Jet Taxi

Claims that Jet engaged in predatory pricing based on its $99 stand fee were also unproven, according to the court. The evidence in the summary judgment record—testimony by Irving’s controller that Jet had made a profit on its affiliated taxicabs whose operators paid that fee from 2007 through 2010—demonstrated that this price was not below Jet’s variable costs. Therefore, the defendants were entitled to summary judgment as to all claims based on the theory that Jet engaged in predatory pricing, the court decided.

Irving Holdings

A request by Irving Holdings for partial summary judgment on all claims that it violated the Clayton Act also was granted by the court. Because the plaintiffs did not show that Irving caused them an antitrust injury, their claims against it failed as a matter of law just as they had against Yellow.

Freedom Cab

Finally, however, the court rejected an argument by Freedom Cab that it was protected from all of the antitrust claims under the doctrine of state action immunity. The company did not establish either of the two prongs of the test enunciated by the Supreme Court in California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97 (1980), 1980-1 CCH Trade Cases ¶63,201, for private actors seeking state action immunity from the antitrust laws.

First, Freedom and the other defendants’ alleged restraints on competition were not conducted pursuant to a clearly articulated and affirmatively expressed state policy. A Texas statute cited by Freedom as expressing a state policy in favor of allowing municipalities—rather than the market—to regulate competition did not go further authorize private taxicab companies to create monopolies or fix their own stand fees without municipal approval. Though Freedom also pointed to other regulations of the taxicab business from various Dallas-Fort Worth area municipalities, none of these compelled or permitted the alleged anticompetitive practices.

Second, Freedom offered no evidence that any municipality actively supervised its pricing or its merging with the other defendants. Its argument that the relevant state statutes and municipal laws authorizing cab permits and establishing safety and insurance requirements constituted active supervision was unavailing, in the court’s view. “This amount of authorization and regulation,” the court said, “[did] not rise to the level of active supervision.”

The case is Civil Action No. 3:10-CV-1638-N.

Kelly D. Hollingsworth (K Hollingsworth & Associates PC) for Assn. of Taxicab Operators USA. M. Forest Nelson (Burt Barr & Associates) for Yellow Checker Cab Co. of Dallas/Ft. Worth, Inc.

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