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St. Louis Taxi Commission Not Immune From Uber’s Antitrust Suit

As we’ve written, Uber, the popular app-based car service, has been on the antitrust defensive, facing allegations that its algorithm for calculating prices restricts price competition.  In Wallen v. St. Louis Metropolitan Taxicab Commission, No. 15-cv-01432 (E.D. Mo.), however, it’s on offense, joining forces with some of its riders and drivers in a claim that the St. Louis Metropolitan Taxicab Commission’s refusal to allow it and other ridesharing companies to operate in St. Louis is an antitrust violation.  The plaintiffs allege that the Commission, composed of active market participants, is precluding competition by denying ridesharing services the ability to operate.  The complaint also names as defendants the cab companies with which the Commission’s members are affiliated.  The Commission and its members moved to dismiss on the basis that they are immune from antitrust liability, and the cab companies moved to dismiss for failure to state a claim.  On October 7, 2016, the court denied the Commission defendants’ motion to dismiss and granted the cab companies motion to dismiss, with leave to replead.

To receive antitrust immunity, the Commission, as a local or “sub-state” governmental entity, had to show that the challenged regulations were undertaken pursuant to a “clearly articulated and affirmatively expressed state policy to displace competition” under FTC v. Phoebe Putney Health System, Inc., 133 S. Ct. 1003 (2013).  The Commission relied on provisions of Missouri state law that empower it to “exercis[e] primary authority over the provision of licensing, control and regulations of taxicab services” and to “[a]dopt a taxicab code to license and regulate taxicab companies and individual taxicabs.”  It argued that these broad recitations of its powers and authority to regulate the industry amounted to a clear state policy to allow it to make decisions that regulate competition.

The court disagreed, finding that the statutory framework permitted the Commission to “regulate and oversee vehicles for hire to ensure public safety standards and maintain the integrity of the public transportation system,” not to exclude competitors from the taxicab market.  The Court did dismiss claims against cab companies, holding that the business entities are not liable for the actions of their owners and managers who are members of the Commission, but granted leave to amend the complaint to more fully set forth allegations of agency or vicarious liability.

This case highlights the differing approaches that courts have recently taken in applying the “clear articulation” test to state policies that permit broad regulation of a given industry.  For example, In re Processed Egg Products, No. 08-md-2002 (E.D. Pa. Sept. 12, 2016), found that a broad regulation of the health standards for raising hens amounted to a clear articulation of a state policy to allow a state agency to reduce competition.  And, taking another approach, the court in SolarCity Corp. v. Salt River Project Agricultural Improvement & Power District, No. 15-cv-00374 (D. Ariz. Oct. 27, 2015), found that the question  whether Arizona had clearly articulated a policy permitting local agencies to engage in anticompetitive conduct was a question of fact, not law.  Courts will continue to face this question as antitrust challenges to state and local regulatory regimes mount.